<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ROCK OF AGES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 3281 030153200
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
772 GRANITEVILLE ROAD
GRANITEVILLE, VERMONT 05654
(802) 476-3121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KURT M. SWENSON
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS
ROCK OF AGES CORPORATION
772 GRANITEVILLE ROAD
GRANITEVILLE, VERMONT 05654
(802) 476-3121
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies of Communications to:
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<S> <C>
KENT A. COIT, ESQ. JORGE L. FREELAND, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & QUENTEL,
ONE BEACON STREET P.A.
BOSTON, MASSACHUSETTS 02108 1221 BRICKELL AVENUE
(617) 573-4800 MIAMI, FLORIDA 33131
(617) 573-4822 (FAX) (305) 579-0500
(305) 579-0717 (FAX)
</TABLE>
------------------------
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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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============================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, par value $.01 per share............ $57,000,000 $17,273.00
============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended, and
includes shares of Class A Common Stock that may be purchased by the
Underwriters pursuant to an overallotment option.
------------------------
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> 2
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, DATED AUGUST 15, 1997
PROSPECTUS
Shares
ROCK OF AGES CORPORATION
Class A Common Stock
------------------------
Of the shares of Class A Common Stock, par value $.01 per share,
of Rock of Ages Corporation, a Delaware corporation ("Rock of Ages" or the
"Company"), offered hereby, shares are being sold by the Company and
shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any of the proceeds from
the sale of Class A Common Stock by the Selling Stockholders. See "Principal and
Selling Stockholders."
The capital stock of the Company consists of Class A Common Stock and Class
B Common Stock (collectively, the "Common Stock"). The two classes are
substantially identical, except that the Class A Common Stock is entitled to one
vote per share and the Class B Common Stock is entitled to ten votes per share
on all matters, including the election of directors, and the Class B Common
Stock is convertible into Class A Common Stock and converts automatically upon a
transfer to any person other than a permitted transferee. Upon consummation of
this offering, holders of Class B Common Stock will hold approximately % of
the voting power of the outstanding shares of Common Stock. See "Description of
Capital Stock."
Prior to this offering, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
of the Class A Common Stock will be between $ and $ per share.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price of the Class A Common Stock.
Application has been made for listing of the Class A Common Stock on the Nasdaq
National Market under the symbol "ROAC."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN INFORMATION 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.
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===========================================================================================================
PROCEEDS TO
PROCEEDS TO SELLING
PRICE TO PUBLIC UNDERWRITING COMPANY(2) STOCKHOLDERS
DISCOUNTS AND
COMMISSIONS(1)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Per Share.............................. $ $ $ $
- -----------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $ $
===========================================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
additional shares of Class A Common Stock on the same terms and
conditions as the Class A Common Stock offered hereby solely to cover
overallotments, if any. If the option is exercised in full, the total Price
to Public, total Underwriting Discounts and Commissions and total Proceeds
to Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Class A Common Stock are offered by the Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
other conditions, including the right of the Underwriters to withdraw, cancel,
modify or reject any order in whole or in part. It is expected that delivery of
the shares will be made on or about , 1997 at the offices of
Raymond James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida.
RAYMOND JAMES & ASSOCIATES, INC.
The date of this Prospectus is , 1997
<PAGE> 3
[MAP WITH LOCATIONS OF QUARRIES ETC. AND AUTHORIZED RETAILERS AND OTHER
GRAPHICS]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING BIDS AND PURCHASES,
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and historical and pro forma financial statements and notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that (i) the Underwriters' over-allotment
option has not been exercised and (ii) the Reorganization and the Acquisitions
(as such terms are defined herein) have occurred. As used in this Prospectus,
unless the context indicates otherwise, the term the "Company" or "Rock of Ages"
refers to Rock of Ages Corporation after giving effect to the Reorganization and
the Acquisitions, and its consolidated subsidiaries and their respective
predecessors.
THE COMPANY
Rock of Ages, founded in 1885, is an integrated granite quarrier,
manufacturer and distributor whose principal product is granite memorials used
primarily in cemeteries. The Company believes that it is the largest quarrier,
manufacturer and distributor of finished granite memorials and granite blocks
for memorial use in North America, based on revenues. The Company owns and
operates 13 active quarry properties and 12 manufacturing and sawing facilities
in North America, principally in Vermont, Georgia and the Province of Quebec.
The Company markets and distributes its memorials on a wholesale basis to
approximately 1,835 independent memorial retailers in the United States and
Canada, including approximately 495 independent authorized Rock of Ages
retailers that are the primary outlet for the Company's branded memorials. The
Company recently entered into a definitive agreement to acquire one of the
largest of its authorized independent retailers, which will provide the Company
with 17 owned retail outlets and mark the Company's first significant entry into
retailing. The Company's memorials are marketed under the names Rock of Ages
Sealmark and Colorcraft, as well as several private labels. The Company believes
the Rock of Ages trademark is one of the oldest and best known brand names in
the granite memorialization industry.
THE DEATH CARE INDUSTRY AND GRANITE MEMORIALIZATION
The death care industry has traditionally been comprised of three principal
segments: (i) ceremony and tribute, generally in the form of a funeral or
memorial service; (ii) disposition of remains, either through burial or
cremation; and (iii) memorialization, generally through monuments, markers or
inscriptions. A majority of death care industry operators consist of small,
family-owned businesses. The International Cemetery and Funeral Association
estimates that in the United States there are approximately 23,000 active
cemeteries, 9,600 of which are commercial (as opposed to religious, family,
fraternal, military or municipal) cemeteries. At the end of 1996, publicly held
death care companies ("consolidators") owned less than 5% of such active
cemeteries, approximately 890, or less than 10%, of such commercial cemeteries
and less than 12% of the estimated 22,800 funeral homes, in the United States.
The death care industry has certain attractive fundamental characteristics,
including highly fragmented ownership, significant barriers to entry created by
local heritage, community presence and tradition, and stable, predictable
demand. Generally, the granite memorial industry shares certain of these
characteristics. However, the granite memorial industry and its principal areas
(i.e., quarrying, manufacturing and retailing) have certain distinguishing
characteristics that the Company believes create attractive opportunities. These
characteristics include: (i) different times and points of sale than most other
death care products or services, with sales of granite memorials traditionally
taking place some time after the funeral service and at an independent retailer
rather than at a funeral home or cemetery; (ii) fragmented groups of both
manufacturers of granite memorials (approximately 140 mostly family-owned firms)
and independent memorial retailers (according to Monument Builders of North
America, approximately 3,000 of such retailers are located outside funeral homes
and cemeteries) in North America; (iii) concentration of memorial grade granite
deposits and granite memorial manufacturers in limited geographic areas in North
America; (iv) significant barriers to entry to quarrying memorial grade granite,
including the limited number of known commercially exploitable memorial grade
granite deposits, high capital costs and stringent environmental and other
permitting requirements; (v) significant barriers to entry to the manufacturing
of granite memorials, including the high capital cost to establish and operate a
memorial grade granite manufacturing facility and the difficulty of
3
<PAGE> 5
attracting the requisite highly skilled work force; and (vi) the
personalization, permanence and visibility of upright granite memorials, which
distinguish them from most other death care products and services.
The Company believes the North American memorialization industry, excluding
communal interments such as community mausoleums and columbariums, had
approximately $1.5 billion in annual retail sales in 1996, approximately
two-thirds of which were sales of granite memorials and approximately one-third
of which were sales of bronze memorials (including granite bases under bronze),
with a nominal percentage of marble and other products. In 1996, on a pro forma
basis giving effect to the Acquisitions as if they occurred on January 1, 1996,
wholesale sales of the Company's granite memorials were approximately $41.4
million, which the Company believes accounted for approximately 12% of total
wholesale sales of granite memorials in North America.
BUSINESS STRATEGY
Rock of Ages believes it is well-positioned to capitalize on the industry
characteristics described above, and seeks to establish a dominant position in
the granite memorialization industry. The Company intends both to improve the
efficiency of its existing operations and to expand its business significantly.
The principal elements of the Company's operating and growth strategies are
summarized below.
Operating Strategy. The Company pursues an operating strategy that
includes the following key elements:
- Providing, primarily through its own quarrying and manufacturing
operations, a complete line of high quality granite memorials covering
all price points and major color varieties. The Company believes it is
the only industry participant with both quarrying and manufacturing
operations in three of the four principal granite memorial producing
regions of North America.
- Enhancing operational efficiencies through the continued integration of
acquired quarriers and manufacturers and the rationalization of its sales
and distribution efforts.
- Increasing advertising and promotion of the Rock of Ages brands,
including the flagship Rock of Ages Sealmark and Colorcraft brands, in
order to heighten consumer awareness and increase sales of the Company's
products.
Growth Strategy. The Company seeks to expand the scope and profitability
of its operations by implementing a growth strategy that includes forward
vertical integration into retailing, thereby enabling the Company to move closer
to the ultimate customer. The principal elements of this strategy include the
following:
- Acquiring independent granite memorial retailers in selected markets in
order to develop an integrated network of owned Rock of Ages retailers
and thereby capture the higher margins that have historically existed at
the retail level.
- Increasing sales to independent retailers that are current customers and
expanding its independent retailer customer base. During the last two
years, principally through acquisitions of quarriers and manufacturers,
the Company has increased the number of independent retailers to which it
sells its products from approximately 495 in 1995 to approximately 1,835
in 1997.
- Pursuing strategic alliances with funeral home and cemetery owners,
including consolidators, to supply granite memorials to or through them,
in order to increase both pre-need and at-need sales of granite
memorials.
4
<PAGE> 6
RECENT AND CONCURRENT ACQUISITIONS
The Company's primary means of implementing its growth strategy to date has
been through acquisitions, beginning with the acquisition on December 31, 1995
of Lawson Granite Company and Anderson-Friberg Company, each based in Barre,
Vermont. These acquisitions helped expand the Company's manufacturing capacity
and distribution base, while also broadening its granite memorial product line
to include more non-branded granite memorials at lower price points than the
Company's then-existing product line. The Company has recently taken further
steps to implement its growth strategy by acquiring one, and entering into a
definitive agreement to acquire another, significant granite quarrier and
memorial manufacturer in Elberton, Georgia, which is the largest of the four
principal granite producing regions in North America. The Company has also
entered into a definitive agreement to acquire a major memorial retailer that
the Company believes is one of the largest independent memorial retailers in the
United States. The Company believes that these acquisitions and the continued
implementation of the other elements of its operating and growth strategies will
enable it to: (i) expand overall industry sales of granite memorials, which
heretofore have been actively marketed to consumers primarily only on an at-need
basis and in a limited manner; (ii) increase its share of the granite memorial
market by offering a complete product line with strong brand names through
distribution channels that more directly reach the consumer; and (iii) increase
both its relative and total profitability both by enhancing operational
efficiencies and by capturing some of the higher margins that have historically
existed at the retail level. The Company's recent acquisitions are briefly
described below.
Keystone. In June 1997, the Company acquired the successor to Keystone
Memorials, Inc. ("Keystone"), the largest granite memorial manufacturer in
Elberton, Georgia (the "Keystone Acquisition"), which included Keystone's 50%
ownership interest in (i) Southern Mausoleums, Inc., a manufacturer of granite
mausoleums in Elberton, Georgia ("SMI"); and (ii) three granite quarrying
companies operating six granite quarries located in Georgia, Pennsylvania, North
Carolina, South Carolina and Oklahoma (collectively, the "Quarry Companies").
C&C. In June 1997, the Company entered into a definitive agreement to
acquire Childs & Childs Granite Company, Inc. and a related company ("C&C," and,
together with the Quarry Companies, SMI and Keystone, the "Elberton Companies"),
which the Company believes is the second largest manufacturer of granite
memorials in Elberton, Georgia, and the remaining 50% of the Quarry Companies
and SMI owned by the stockholders of C&C (the "C&C Acquisition" and, together
with the Keystone Acquisition, the "Elberton Acquisitions"). It is currently
anticipated that the C&C Acquisition will close concurrently with the
consummation of this offering. The Elberton Acquisitions will establish the
Company as the largest granite memorial manufacturer in Elberton, Georgia, which
is the largest granite producing area in North America, and will give the
Company a substantially broader product line and enhanced distribution
capabilities in the southern United States. See "Business -- Recent and
Concurrent Acquisitions."
Keith. The Company's first significant entry into memorial retailing was
initiated in July 1997, when the Company entered into a definitive agreement to
acquire (the "Keith Acquisition", and, together with the Elberton Acquisitions,
the "Acquisitions") substantially all of the assets and liabilities of Keith
Monument Co. and its affiliated companies (collectively, "Keith Monument"). It
is currently anticipated that the Keith Acquisition will close concurrently with
the consummation of this offering. Keith Monument, founded in 1867, has been an
authorized Rock of Ages retailer for more than 50 years. The Company believes
that Keith Monument is one of the largest retailers of granite memorials in the
United States. Upon the closing of the Keith Acquisition, John E. Keith, a
principal owner and the president of Keith Monument with over thirty years of
experience in granite memorial retailing, will head the Company's retailing
operations. Mr. Keith will oversee the implementation of the Company's strategy
to significantly expand its retail operations both through other acquisitions of
retailers and by pursuing strategic alliances with funeral home and cemetery
owners, including consolidators. See "Business -- Recent and Concurrent
Acquisitions" and "Business -- Marketing and Distribution; Retailing."
The Company's principal executive offices are located at 772 Graniteville
Road, Graniteville, Vermont 05654 and its telephone number is (802) 476-3121.
5
<PAGE> 7
THE OFFERING
Class A Common Stock offered..... shares, of which shares
are being offered by the Company and
shares are being offered by the
Selling Stockholders.
Common Stock to be outstanding
after the offering(1)............ shares of Class A Common Stock
shares of Class B Common Stock
Use of proceeds.................. The net proceeds to the Company of this
offering will be used to fund the C&C
Acquisition and the Keith Acquisition, and
to repay indebtedness under the Company's
existing credit facilities, including
indebtedness assumed in connection with the
Keystone Acquisition. See "Use of
Proceeds."
Proposed Nasdaq National Market
symbol........................... "ROAC"
- ---------------
(1) Excludes 862,500 shares of Class B Common Stock issuable upon the exercise
of outstanding stock options (with a weighted average exercise price of
$3.31 per share) granted under the Company's 1994 Amended and Restated Stock
Plan (the "1994 Plan") and 383,252 shares of Class A Common Stock issuable
upon the exercise of options to be granted in connection with the
Acquisitions and to two non-employee directors who will assume their
positions upon consummation of the offering (with an exercise price equal to
the initial public offering price). See "Certain Relationships and Related
Transactions." The rights of holders of the two classes of Common Stock are
substantially identical, except that (a) the Class A Common Stock is
entitled to one vote per share and the Class B Common Stock is entitled to
ten votes per share on all matters, including the election of directors; and
(b) the Class B Common Stock is convertible into Class A Common Stock at the
option of the holder and automatically upon a transfer to any person other
than a Permitted Transferee, as defined herein. See "Description of Capital
Stock."
6
<PAGE> 8
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents (i) summary historical consolidated financial
data of the Company as of the dates and for the periods indicated and (ii)
summary pro forma combined and condensed financial data of the Company as of the
dates and for the periods indicated giving effect to the events described in the
"Unaudited Pro Forma Combined and Condensed Financial Data" included elsewhere
herein as though they had occurred on the dates indicated therein. The summary
pro forma combined and condensed financial data are not necessarily indicative
of operating results or financial position that would have been achieved had
these events been consummated on the date indicated and should not be construed
as representative of future operating results or financial position. The summary
historical consolidated and pro forma combined and condensed financial data
should be read in conjunction with the historical consolidated financial
statements and related notes thereto of the Company and the historical financial
statements and related notes thereto of Keystone, C&C, the Quarry Companies, SMI
and Keith Monument, with the "Unaudited Pro Forma Combined and Condensed
Financial Statements" and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," included elsewhere in this
Prospectus.
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PRO FORMA(1)
HISTORICAL ----------------------------------
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
----------------------------- ------------------ ------------ ------------------
1994 1995 1996 1996 1997(2) 1996 1996 1997
------- ------- ------- ------- ------- ------------ ------- -------
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STATEMENT OF OPERATIONS DATA:
Net revenues..................... $34,188 $33,088 $44,669 $19,943 $20,767 73,774 33,710 35,253
Gross profit..................... 10,094 10,449 13,406 5,256 5,205 22,294 9,016 9,853
Selling, general and
administrative expenses........ 6,049 6,453 9,131 4,649 4,328 15,254 7,338 7,352
------- ------- ------- ------- ------- ------------ ------- -------
Income from operations........... 4,045 3,996 4,275 607 877 7,040 1,678 2,501
Interest expense................. 1,653 1,678 1,723 934 866 219 121 113
Other expenses................... 0 564 0 0 0 0 0 0
Income (loss) before provision
(benefit) for income taxes..... 2,392 1,754 2,552 (327) 11 6,821 1,557 2,388
Provision (benefit) for income
taxes.......................... 577 358 643 (82) 3 1,855 424 650
------- ------- ------- ------- ------- ------------ ------- -------
Net income (loss)................ 1,815 1,396 1,909 (245) 8 4,966 1,133 1,738
======= ======= ======= ======= ======= ============ ======= =======
Net income (loss) per share...... .45 .35 .45 (.06) .00 .73 .17 .26
Weighted average number of shares
outstanding(3)................. 4,030 4,030 4,217 4,212 4,217 6,812 6,629 6,812
</TABLE>
<TABLE>
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AS OF JUNE 30, 1997
--------------------------
PRO FORMA AS
ACTUAL ADJUSTED(4)
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BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 192 2,833
Working capital.......................................................................... 13,232 18,545
Total assets............................................................................. 57,501 86,675
Long-term debt, less current maturities.................................................. 13,897 687
Total stockholders' equity............................................................... 20,043 62,357
</TABLE>
- ---------------
(1) For information regarding the pro forma adjustments made to the Company's
historical financial data, see "Unaudited Pro Forma Combined and Condensed
Financial Data."
(2) Does not include the results of operations of Keystone which was acquired as
of June 30, 1997.
(3) Includes shares of Common Stock issuable upon the exercise of outstanding
stock options granted under the 1994 Plan, as described in Note 1(n) to the
Company's audited financial statements included elsewhere in this
Prospectus, and excludes 263,441 shares of Class B Common Stock issued on
June 30, 1997 pursuant to the Keystone Acquisition.
(4) Gives effect to the Reorganization and the consummation of the C&C
Acquisition and the Keith Acquisition as if they had occurred on June 30,
1997, as adjusted to reflect the sale of shares of Class A Common
Stock offered hereby by the Company (at an initial public offering price of
$ per share and after deducting underwriting discounts and commissions
and estimated offering expenses payable by the Company), the receipt of the
net proceeds therefrom and the application of such net proceeds as described
in "Use of Proceeds." See "Business -- Recent and Concurrent Acquisitions,"
"Certain Relationships and Related Transactions" and "Use of Proceeds."
7
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RISK FACTORS
Prospective investors should carefully consider all of the information set
forth in this Prospectus, including the risk factors set forth below.
RISKS RELATING TO ACQUISITIONS
The Company's growth will depend in large part on its ability to acquire
additional retailers, manage expansion, control costs in its operations and
consolidate acquisitions into existing operations. The Company will have to
review acquired operations, management infrastructure and systems and financial
controls, and make any appropriate adjustments or complete reorganizations.
Unforeseen capital and operating expenses, or other difficulties, complications
and delays frequently encountered in connection with the expansion and
integration of acquired operations could inhibit the Company's growth. The full
benefits of a significant acquisition will require the integration of
operational, administrative, finance, sales and marketing organizations, as well
as the coordination of common sales and marketing efforts and the implementation
of appropriate operational, financial and management systems and controls. This
will require substantial attention from the Company's senior management team.
The diversion of management attention required by the acquisition and
integration of multiple companies, as in the case of the Acquisitions, as well
as other difficulties which may be encountered in the transition and integration
process, could have an adverse effect on the revenue and operating results of
the Company. There can be no assurance that the Company will identify suitable
acquisition candidates, that acquisitions will be consummated on acceptable
terms or that the Company will be able to successfully integrate the operations
of any acquisition.
The Company's ability to continue to grow through the acquisition of
additional companies will also be dependent upon the availability of suitable
candidates, the Company's ability to attract and retain competent management,
and the availability of capital to complete the acquisitions. See
"Business -- Business Strategy." The Company intends to finance acquisitions
through a combination of its available cash resources, bank borrowings and, in
appropriate circumstances, the issuance of equity and/or debt securities.
Acquiring additional companies will have a significant effect on the Company's
financial position, and could cause substantial fluctuations in the Company's
quarterly and yearly operating results. Also, acquisitions are likely to result
in the recording of significant goodwill and intangible assets on the Company's
financial statements, the amortization of which would reduce reported earnings
in subsequent years. In connection with the Acquisitions, for example, the
Company expects to record an annual non-cash amortization charge to pre-tax
earnings of approximately $300,000 in each of the next forty years.
In addition, in connection with the Acquisitions, the Company has executed
acquisition agreements that have limitations on indemnification and no security
for indemnification obligations. Moreover, the former owners of the businesses
sold to the Company pursuant to the Acquisitions have or will become executive
officers of the Company upon the consummation of the Acquisitions. Consequently,
the Company may have little or no recourse against the prior owners of the
companies acquired in the Acquisitions in the event a breach of a representation
or warranty or covenant in such acquisition agreements. Any material
misrepresentations, omissions or breaches of covenants could have a material
adverse effect on the Company's business, financial condition or results of
operations.
RELATIONSHIPS WITH RETAILERS
The Company's granite memorials have historically been sold to consumers by
independent retailers. Accordingly, the Company is dependent on its independent
retailers for the successful distribution of its products to the ultimate
customer. The Company has no control over the independent retailers' operations,
including such matters as retail price, advertising and marketing. A key
component of the Company's growth strategy is to acquire retailers and pursue
strategic alliances with funeral homes and cemetery owners, including
consolidators. Implementation of this strategy may be construed by the Company's
existing independent retailers as an effort to compete with them, which could
adversely affect their relationship with the Company and cause them to decrease
or cease their purchases of the Company's products. In addition, the granite
memorial retail industry is characterized by significant barriers to entry
created by local heritage,
8
<PAGE> 10
community presence and tradition. Consequently, the Company could experience
difficulty replacing a retailer or entering the retail market itself in the
event of a loss of a retailer. There can be no assurance that the Company will
be able to maintain its existing relationships or establish new relationships
with its independent retailers as it enters the retail market. Disruption in the
Company's relationships with independent retailers would have a material adverse
effect on the Company's business, financial condition or results of operations.
NO RETAIL EXPERIENCE
A key component of the Company's growth strategy and the purpose of the
Keith Acquisition is for the Company to enter the retail market for granite
memorials. The Company has no prior significant retail experience, and,
accordingly, is subject to the numerous risks of entering a new business. Such
risks include, among others, unanticipated operating problems, lack of
experience and significant competition from existing and new retailers. There
can be no assurance that the Company will be able to conduct retail operations
profitably.
RELIANCE ON KEY PERSONNEL
The Company's operations and the implementation of its operating and growth
strategies, such as integration of the Acquisitions, are management intensive.
The Company is substantially dependent upon the abilities and continued efforts
of Kurt M. Swenson, the Company's Chairman, President and Chief Executive
Officer, and the Company's other senior management. The Company's implementation
of its retail operating and growth strategies will be substantially dependent on
the abilities and efforts of John E. Keith, who will head the Company's retail
operations. The Company's business is also dependent on its ability to continue
to attract and retain a highly skilled quarrying and manufacturing workforce,
including stone cutters, sand blasters, sculptors and other skilled artisans.
The loss of the services of Mr. Swenson or Mr. Keith, other members of the
Company's senior management or other highly skilled personnel could have a
material adverse effect on the Company's business, financial condition or
results of operations. The Company will enter into employment agreements with
its principal executive officers prior to consummation of the offering. See
"Management -- Employment Agreements."
COMPETITION
The granite memorial industry is highly competitive. The Company competes
with other granite quarriers and manufacturers in the sale of granite blocks on
the basis of price, color, quality, geographic proximity, service, design
availability and availability of supply. All of the Company's colors of granite
are subject to competition from granite blocks of similar color supplied by
quarriers located throughout the world.
There are approximately 140 manufacturers of granite memorials in North
America. There are also manufacturers of granite memorials in India, South
Africa, China and Portugal who sell finished memorials in North America. The
Company competes based upon price, breadth of product line and design
availability as well as production capabilities and delivery options. The
Company's quarrying and manufacturing competitors include both domestic and
international companies, some of which may have greater financial, technical,
manufacturing, marketing and other resources than the Company. Additionally,
foreign competitors of the Company may have access to lower cost labor and
better commercial deposits of memorial grade granite, and may be subject to less
restrictive regulatory requirements than the Company. Companies in South Africa,
India, China and Portugal manufacture and export finished granite memorials into
North America.
The competition for retail sales of granite memorials is also intense and
is based on price, quality, service, design availability and breadth of product
line. Competitors include funeral home and cemetery owners, including
consolidators, which have greater financial resources than the Company as well
as approximately 3,000 independent retailers of granite memorials located
outside of cemeteries and funeral homes. No assurance can be given that domestic
or foreign competition will not have a material adverse effect on the Company's
business, financial condition or results of operations. See
"Business -- Competition."
9
<PAGE> 11
SEASONALITY; VARIABILITY OF QUARTERLY RESULTS
Historically, the Company's operations have experienced certain seasonal
patterns. Generally, the Company's net sales are highest in the third quarter
and lowest in the first quarter of each year due primarily to weather.
Cemeteries in northern regions generally do not accept granite memorials during
winter months when the ground is frozen because they cannot be properly set. The
Company typically closes certain of its Vermont and Canadian quarries during
these months because of increased operating costs attributable to adverse
weather conditions. The Company has historically incurred an aggregate net loss
during the first six months of each calendar year. The Company's operating
results may vary materially from quarter to quarter due to, among other things,
acquisitions, changes in product mix and limitations on the timing of price
increases, making quarterly year-to-year comparisons less meaningful. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality."
CREMATION TRENDS
There is an increasing trend toward cremation in the United States.
According to the Cremation Association of North America ("CANA"), cremation was
used in approximately 22% of the deaths in the United States in 1996, compared
to approximately 10% in 1980, and CANA expects this rate to rise to 29% by 2010.
To the extent increases in cremation rates result in decreases in
memorialization rates, this decrease could have a material adverse effect on the
Company's business, financial condition or results of operations.
MEMORIALIZATION TRENDS
The Company's business is subject to the risk that memorialization rates
may decline over time. Certain cemeteries have in the past and may in the future
limit the use of granite memorials as a memorialization option. To the extent
that general memorialization rates or the willingness of cemeteries to accept
granite memorials declines, this decline could have a material adverse effect on
the Company's business, financial condition or results of operations.
EFFECT OF CONSUMER SPENDING
The success of the Company's operations depends to a significant extent
upon a number of factors relating to discretionary consumer spending, including
economic conditions affecting disposable consumer income such as employment,
business conditions, taxation and interest rates. There can be no assurance that
consumer spending will not be affected by adverse economic conditions, thereby
adversely affecting the Company's business, financial condition or results of
operations.
OPERATING RISKS
The Company's quarry and manufacturing operations are subject to numerous
risks and hazards inherent in those industries, including among others,
unanticipated surface or underground conditions, varying memorial grade granite
recovery rates due to natural cracks and other imperfections in granite
quarries, equipment failures, accidents and worker injuries, labor issues,
weather conditions and events, unanticipated transportation costs and price
fluctuations. As a result, actual costs and expenditures, production quantities
and delivery dates, as well as revenues, may differ materially from those
anticipated, which could have a material adverse effect on the Company's
business, financial condition or results of operations.
RISK OF INTERNATIONAL OPERATIONS
The Company derived approximately 28.9% of its revenues in fiscal 1996 from
sales outside the United States, with approximately 15.9% of revenues in fiscal
1996 from sales in Canada by the Company's Canadian subsidiaries. In prior years
such percentage represented by international sales has been higher. Foreign
sales are subject to numerous risks, including currency conversion risks,
limitations (including taxes) on the repatriation of earnings, slower and more
difficult accounts receivable collection and greater complication and expense in
complying with foreign laws.
10
<PAGE> 12
CYCLICAL NATURE OF ANCILLARY PRODUCT SALES
The markets for the Company's industrial precision products, which include
machine base and surface plates that are utilized in the automotive, aeronautic,
computer, machine tool, optical, precision grinding and inspection industries,
and granite press rolls used in the manufacture of paper, are subject to
substantial cyclical variations. Accordingly, sales of these products may
decline significantly upon a downturn in, or as a result of uncertainties
regarding future economic conditions that generally affect, such industries. No
assurance can be given that changes in the industries to which the Company sells
its precision products will not adversely affect the Company's business,
financial condition or results of operations.
CONTROL BY CERTAIN STOCKHOLDERS
Upon consummation of this offering and the Acquisitions, the families of
Kurt M. Swenson and his brother, Kevin C. Swenson, will collectively have
approximately % of the total voting power of all outstanding shares of Common
Stock, and will therefore be in a position to control the outcome of most
corporate actions requiring stockholder approval, including the election of
directors and the approval of transactions involving a change in control of the
Company. See "Principal and Selling Stockholders" and "Description of Capital
Stock."
REGULATORY MATTERS
The Company's quarry and manufacturing operations are subject to
substantial regulation by federal and state governmental statutes and agencies,
including the federal Occupational Safety and Health Act ("OSHA"), the Mine
Safety and Health Administration and similar state and Canadian authorities. The
Company's operations are also subject to extensive laws, and regulations
administered by the United States Environmental Protection Agency (the "EPA")
and similar state and Canadian authorities, for the protection of the
environment, including but not limited to those relating to air and water
quality, solid and hazardous waste handling and disposal. These laws and
regulations may require parties to fund remedial action or to pay damages
regardless of fault. Environmental laws and regulations may also impose
liability with respect to divested or terminated operations even if the
operations were divested or terminated many years ago. In addition, current and
future environmental or occupational health and safety laws, regulations or
regulatory interpretations may require significant expenditures for compliance,
which could require the Company to modify or curtail its operations. The Company
cannot predict the effect of such laws, regulations or regulatory
interpretations on its business, financial condition or results of operations.
While the Company expects to be able to continue to comply with existing
environmental and occupational health and safety laws and regulations, any
material non-compliance could have a material adverse affect on the Company's
business, financial condition or results of operations. See
"Business -- Regulation."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial amount of Class A Common Stock in the public market
following this offering could adversely affect the market price of the Class A
Common Stock. Upon completion of this offering and the C&C Acquisition and the
Keith Acquisition, the Company will have shares of Common Stock (
shares if the Underwriter's over-allotment option is exercised in full)
outstanding. In addition, an aggregate of 1,500,000 shares of Common Stock will
be reserved for issuance to employees and directors of the Company under the
1994 Plan 1,245,752 of which shares are currently, or will upon consummation of
this offering be, subject to outstanding options. See "Shares Eligible for
Future Sale." Such options will be vested and immediately exercisable with
regard to shares of Common Stock, all of which shares issued upon
such exercise would be eligible for resale subject to compliance with Rule 701
and to the "lock-up" agreements with Raymond James & Associates, Inc. described
below, if applicable. The shares of Class A Common Stock ( shares if
the Underwriter's over-allotment option is exercised in full) offered hereby
will be freely tradable in the United States without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless purchased or held by "affiliates" (as such term is defined under
the Securities Act) of the Company. All shares of Class B Common Stock
outstanding upon completion of the offering will be "restricted securities"
within the meaning of Rule 144 under the
11
<PAGE> 13
Securities Act ("Rule 144") and will be eligible for resale subject to
compliance with Rule 144 and to the "lock-up" agreements with Raymond James &
Associates, Inc. described below, if applicable.
The Company, its executive officers and directors, and holders of more than
2% of the Common Stock prior to the consummation of the offering, have agreed
not to sell, offer to sell, contract to sell, pledge or otherwise dispose of or
transfer any shares of Common Stock, or any securities convertible into or
exchangeable or exercisable for, or any rights to purchase or acquire, Common
Stock for a period of 180 days following the date of this Prospectus without the
prior written consent of Raymond James & Associates, Inc., other than, in the
case of the Company, the issuance of options to purchase Common Stock or shares
of Common Stock issuable upon the exercise thereof, issuances of Common Stock in
connection with the C&C Acquisition and the Keith Acquisition and other
issuances of capital stock of the Company in connection with other acquisitions,
provided such shares of Common Stock issued upon the exercise of options and
such shares of capital stock issued in connection with any such other
acquisitions shall not be transferable prior to the end of the aforesaid 180-day
period. Raymond James & Associates, Inc. may, in its sole discretion and at any
time without notice, release all or any portion of the shares subject to such
lock-up agreements. See "Shares Eligible for Future Sale" and "Underwriting."
NO PRIOR MARKET FOR CLASS A COMMON STOCK; OFFERING PRICE
Prior to this offering, there has been no public market for the Class A
Common Stock, and there can be no assurance that an active trading market will
develop or, if developed, that such market will be sustained. The initial public
offering price of the Class A Common Stock will be determined through
negotiations between the Company and the representative of the Underwriters. In
addition, the Company believes that factors such as quarterly fluctuations in
the financial results of the Company, as well as developments that affect the
Company's industry in general, the overall economy and the financial markets
could cause the price of the Class A Common Stock to fluctuate substantially.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and By-laws contain certain
provisions that may have the effect of discouraging, delaying or preventing a
change in control of the Company or unsolicited acquisition proposals that a
stockholder might consider favorable. Certain of these provisions: (i) grant ten
votes per share to each share of Class B Common Stock; (ii) divide the Board of
Directors into three classes, each of which will have a different three-year
term; (iii) provide that the stockholders may remove directors from office only
for cause and by a supermajority vote; (iv) provide that special meetings of the
stockholders may be called only by the Board of Directors or certain Company
officers and not by stockholders; (v) establish certain advance notice
procedures for nomination of candidates for election as directors and for
stockholder proposals to be considered at annual stockholders' meetings; and
(vi) authorize the issuance of preferred stock with such designation, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other
rights that could materially adversely affect the voting power or other rights
of the holders of the Company's Common Stock. Certain of these provisions, as
well as certain provisions of Delaware corporation law, may have the effect of
discouraging, delaying or preventing a change in control of the Company or
unsolicited acquisition proposals. See "Description of Capital Stock --
Antitakeover Effects of Provisions of the Charter and By-Laws and of Delaware
Law."
DILUTION
Investors purchasing shares of Class A Common Stock in this offering will
experience immediate and substantial dilution in net tangible book value per
share of $ (assuming an initial public offering price of $ per
share). See "Dilution."
DIVIDENDS
The Company intends to retain its cash for the continued development of its
business and currently does not intend to pay cash dividends on the Common Stock
in the foreseeable future. See "Dividend Policy."
12
<PAGE> 14
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements relating to,
among other things, future results of operations, growth plans, sales, capital
requirements and general industry and business conditions applicable to the
Company. These forward-looking statements are based largely on the Company's
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from those implied by these
forward-looking statements. Important factors to consider in evaluating such
forward-looking statements include changes in external competitive market
factors, changes in the Company's business strategy or an inability to execute
its strategy due to unanticipated changes in the Company's industry or the
economy in general and various competitive factors that may prevent the Company
from competing successfully in existing or new markets. In light of these risks
and uncertainties, many of which are described in further detail above, there
can be no assurance that the forward-looking statements contained in this
Prospectus will in fact be realized.
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Class A Common
Stock offered by the Company hereby are estimated to be approximately $
million (approximately $ million if the Underwriters' over-allotment option
is exercised in full), assuming an initial public offering price of $
per share, after deducting estimated underwriting discounts and commissions and
offering expenses.
Of the net proceeds to the Company from this offering, (i) approximately
$7.4 million will be used to fund the C&C Acquisition, consisting of $6.6
million in cash purchase price and approximately $780,000 to repay outstanding
indebtedness of C&C; (ii) approximately $5.4 million will be used to repay
outstanding indebtedness of the Quarry Companies and SMI; (iii) $14.9 million
will be used to fund the Keith Acquisition, consisting of $13.1 million in cash
purchase price and $1.8 million to repay outstanding indebtedness of Keith
Monument assumed by the Company; and (iv) approximately $16.7 million will be
used to repay indebtedness outstanding under certain of the Company's existing
credit facilities, consisting of $2.6 million assumed or incurred in connection
with the Keystone Acquisition and the balance of which was incurred for prior
acquisitions, plant improvement and working capital. Such indebtedness under
such existing credit facilities matures on various dates in 1998 and 1999, and
bears interest at various rates per annum ranging from prime plus .25% to prime
plus 1.25%. See "Business -- Recent and Concurrent Acquisitions."
The Company has received a commitment letter for a new $50 million credit
facility, subject to the consummation of the offering. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company intends to use its
increased borrowing capacity resulting from the intended debt repayment to
finance the Company's expansion, including possible acquisitions, and for
working capital and general corporate purposes. Although management regularly
reviews acquisition prospects that would augment or complement the Company's
existing operations, including the Company's retailing operations, the Company
does not presently have any agreement with respect to any acquisition, other
than the C&C Acquisition and the Keith Acquisition.
The Company will not receive any proceeds from the sale of Class A Common
Stock offered by the Selling Stockholders.
DIVIDEND POLICY
The Company does not anticipate paying cash dividends in the foreseeable
future, but intends to retain any future earnings for reinvestment in its
business. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operations, restrictions contained in credit
agreements, capital requirements and such other factors as the Board of
Directors deems relevant.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth the borrowings under lines of credit,
current portion of long-term debt and capitalization of the Company at June 30,
1997, (i) on a historical basis and (ii) pro forma as adjusted to give effect to
the Reorganization, the C&C Acquisition and Keith Acquisition as if they had
occurred on June 30, 1997, as adjusted to reflect the sale by the Company of
shares of Class A Common Stock offered hereby (at an assumed public
offering price of $ per share and after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company) and the
application of the estimated net proceeds thereof as described in "Use of
Proceeds." This table should be read in conjunction with the historical
financial statements and pro forma combined and condensed financial data and the
notes thereto included elsewhere in this Prospectus. See also "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------------------
PRO FORMA
AS ADJUSTED
--------------
ACTUAL (IN THOUSANDS)
--------------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under lines of credit................................... $ 8,668 $
Current portion of long-term debt.................................. 2,844
========== ==========
Long-term debt, net of current portion............................. $ 13,897 $
Stockholders' equity:
Preferred Stock, par value $.01 per share; 2,500,000 shares
authorized, none outstanding; none outstanding pro forma as
adjusted......................................................
Class A Common Stock, par value $.01 per share; 30,000,000 shares
authorized, none outstanding; shares outstanding pro
forma as adjusted(1)(2).......................................
Class B Common Stock, par value $.01 per share; 15,000,000 shares
authorized, 3,763,441 shares outstanding; shares
outstanding pro forma as adjusted(3).......................... 38
Additional paid-in capital....................................... 9,385
Retained earnings................................................ 10,675
Other............................................................ (55)
Total stockholders' equity.................................... 20,043
---------- -------- --
Total capitalization..................................... $ 33,940 $
========== ==========
</TABLE>
- ---------------
(1) Does not include an aggregate of 862,500 shares of Class B Common Stock
(which are convertible on a share-for-share basis into Class A Common Stock)
issuable upon the exercise of outstanding options outstanding under the 1994
Plan and an aggregate of 383,252 shares of Class A Common Stock issuable
upon the exercise of options to be granted under the 1994 Plan in connection
with the Acquisitions and to two non-employee directors who will assume
their positions upon consummation of the offering.
(2) The pro forma as adjusted number includes the concurrent conversion of
shares of Class B Common Stock into Class A Common Stock and sale
thereof by the Selling Stockholders. See "Principal and Selling
Stockholders."
(3) Does not include an aggregate of 862,500 shares of Class B Common Stock
(which are convertible on a share-for-share basis into Class A Common Stock)
issuable upon the exercise of outstanding options outstanding under the 1994
Plan. See "Management -- Incentive Plans."
14
<PAGE> 16
DILUTION
The net tangible book value of the Company as of June 30, 1997 was
$ , or $ per share of Common Stock. Net tangible book value
per share is determined by dividing total tangible assets less total liabilities
of the Company by the total number of outstanding shares of Common Stock. After
giving effect to the sale of the shares of Class A Common Stock
offered by the Company hereby (assuming an initial public offering price of
$ per share), after deducting the estimated underwriting discount and
estimated expenses to be paid by the Company and the application of the
estimated net proceeds as set forth in "Use of Proceeds," the pro forma net
tangible book value of the Company at June 30, 1997 would have been $18.4
million or $4.89 per share. This represents an immediate increase in net
tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors. The following table
illustrates this dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Net tangible book value per share as of June 30, 1997.............. $
Increase in net tangible book value per share attributable to new
investors.......................................................
Pro forma net tangible book value per share after the offering.......
------
Dilution per share to new investors.................................. $
======
</TABLE>
15
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated historical financial data presented below under
the captions "Statement of Operations Data" and "Balance Sheet Data" for and as
of the end of each of the years in the five-year period ended December 31, 1996
are derived from the consolidated financial statements of the Company, which
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The selected consolidated historical financial
data for and as of the end of the six month periods ended June 30, 1996 and 1997
have been derived from unaudited consolidated financial statements which, in the
opinion of management, reflect all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial information for such
periods and as of such dates. The consolidated historical results for the six
months ended June 30, 1996 and 1997 are not necessarily indicative of results
for a full fiscal year. The consolidated financial statements as of December 31,
1995 and 1996 and for each of the years in the three-year period ended December
31, 1996, and the auditors' report thereon and as of June 30, 1997 and for the
six months ended June 30, 1996 and 1997, are included elsewhere in this
Prospectus. The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements of the Company, including
the notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," appearing elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997(2)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Manufacturing....................................... $18,383 $17,485 $17,299 $17,793 $32,586 $14,827 $15,278
Quarrying........................................... 15,457 13,522 16,889 15,295 12,083 5,116 5,489
------- ------- ------- ------- ------- ------- -------
Total net revenues................................ 33,840 31,007 34,188 33,088 44,669 19,943 20,767
Gross profit:
Manufacturing....................................... 4,008 2,489 4,050 4,345 8,248 3,603 3,640
Quarrying........................................... 6,474 4,294 6,044 6,104 5,158 1,653 1,565
------- ------- ------- ------- ------- ------- -------
Total gross profit................................ 10,482 6,783 10,094 10,449 13,406 5,256 5,205
Selling, general and administrative expenses.......... 7,377 6,851 6,049 6,453 9,131 4,649 4,328
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations......................... 3,105 (68) 4,045 3,996 4,275 607 877
Interest expense...................................... 1,622 1,505 1,653 1,678 1,723 934 866
Other expenses........................................ -- 2,376 -- 564 -- -- --
Income (loss) before provision (benefit) for income
taxes............................................... 1,483 (3,949) 2,392 1,754 2,552 (327) 11
Provision (benefit) for income taxes.................. 58 (31) 577 358 643 (82) 3
------- ------- ------- ------- ------- ------- -------
Net income (loss)..................................... $ 1,425 $(3,638) $ 1,815 $ 1,396 $ 1,909 $ (245) $ 8
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share........................... .35 (.90) .45 .35 .45 (.06) .00
Weighted average number of shares outstanding(3)...... 4,030 4,030 4,030 4,030 4,217 4,212 4,212
PRO FORMA STATEMENT OF OPERATIONS DATA(1):
Income before provision for income taxes.............. 6,821 1,557 2,388
Provision for income taxes............................ 1,855 424 650
------- ------- -------
Net income............................................ 4,966 1,133 1,738
======= ======= =======
Net income per share.................................. .73 .17 .26
Weighted average number of shares outstanding(3)...... 6,812 6,629 6,812
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
----------------------------------------------- --------------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 95 $ 92 $ 394 $ 1,995 $ 763 $ 192
Working capital........................................... 8,478 7,605 13,668 13,691 13,286 13,232
Total assets.............................................. 40,810 37,179 42,529 47,623 47,517 57,501
Total long-term debt, net of current maturities........... 13,067 13,162 16,655 14,657 13,054 13,897
Total stockholders' equity................................ 12,528 8,849 10,686 15,479 17,371 20,043
</TABLE>
- ---------------
(1) For information regarding the pro forma adjustments made to the Company's
historical financial data, see "Unaudited Pro Forma Combined and Condensed
Financial Data."
(2) Does not include the results of operations of Keystone which was acquired as
of June 30, 1997.
(3) Includes shares of Common Stock issuable upon the exercise of outstanding
stock options granted under the 1994 Plan, as described in Note 1(n) to the
Company's audited financial statements included elsewhere in this
Prospectus, and excludes 263,441 shares of Class B Common Stock issued on
June 30, 1997 pursuant to the Keystone Acquisition.
16
<PAGE> 18
UNAUDITED PRO FORMA COMBINED AND CONDENSED FINANCIAL DATA
The following unaudited pro forma combined and condensed statements of
operations for the year ended December 31, 1996 and for the six months ended
June 30, 1997 and 1996 reflect the consolidated historical accounts of the
Company for those periods, adjusted to give pro forma effect to the
Reorganization, the Acquisitions and this offering, as if such transactions had
occurred on January 1, 1996. The following unaudited pro forma combined and
condensed balance sheet as of June 30, 1997 reflects the consolidated historical
accounts of the Company as of that date, adjusted to give pro forma effect to
the Reorganization, the C&C Acquisition and the Keith Acquisition and this
offering, as if such transactions had occurred on June 30, 1997.
The unaudited pro forma financial data and accompanying notes should be
read in conjunction with the Consolidated Financial Statements of the Company
and the related notes as well as the financial statements and related notes of
Keystone, C&C, the Quarry Companies, SMI and Keith Monument, all of which are
included elsewhere in this Prospectus. The Company believes that the assumptions
used in the following statements provide a reasonable basis on which to present
the pro forma financial data. The pro forma financial data is provided for
informational purposes only and should not be construed to be indicative of the
Company's financial condition or results of operations had the transactions and
events described above been consummated on the dates assumed and are not
intended to project the Company's financial condition on any future date or
results of operations for any future period.
17
<PAGE> 19
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARRY OFFERING
KEITH COMPANIES & ADJUSTMENTS PRO FORMA PRO FORMA
COMPANY C&C MONUMENT SMI (A) ADJUSTMENTS AS ADJUSTED
------- ------ -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents.......... $ 192 $ 160 $1,783 $ 838 $ 44,442 $ (44,582)(A),(E) $ 2,833
Trade receivables, net............. 11,249 753 1,003 1,149 14,154
Due from affiliates................ 5,375 192 49 (192) (3,690)(E),(F),(G) 1,734
Inventories........................ 13,374 1,141 1,192 611 202(E) 16,520
Current portion of notes
receivable-related party......... 90 (90)(E)
Current portion of notes
receivable-other................. 29 29
Deferred tax assets................ 467 10 477
Other current assets............... 837 21 98 174 1,130
------- ------ -------- ----------- ----------- ----------- -----------
Total current assets............. 31,494 2,267 4,254 2,580 44,442 (48,160) 36,877
------- ------ -------- ----------- ----------- ----------- -----------
Net property, plant and equipment.... 21,230 989 1,393 4,784 6,027(E),(F) 34,423
Other assets:
Cash surrender value of life
insurance, net................... 959 4 164 1,127
Notes receivable-related party,
excluding current portion........ 401 (401)(E)
Notes receivable-other, excluding
current portion.................. 16 16
Goodwill, net...................... 1,253 825 1,806 9,349(E),(F) 13,233
Covenant not-to-compete............ 388 (388)(E)
Debt issuance costs, net........... 89 (89)(B)
Organization costs, net............ 190 (89)(C) 101
Deferred tax assets................ 543 (369) 174
Intangible pension asset........... 93 93
Investments in and advances to
affiliated company............... 1,619 824 (2,244)(F) 199
Other investments.................. 31 319 350
Other.............................. 209 (127)(E) 82
------- ------ -------- ----------- ----------- ----------- -----------
Total other assets............... 4,777 828 2,322 1,437 6,011 15,375
------- ------ -------- ----------- ----------- ----------- -----------
Total assets................. $57,501 $4,084 $7,969 $ 8,801 $ 44,442 $ (36,122) $86,675
======== ====== ========== ============ =========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Borrowings under lines of credit... 8,668 8,668
Current installments of long-term
debt............................. 2,844 278 648 (3,415)(A),(E) 355
Accounts payable................... 2,066 148 96 656 (301)(F) 2,665
Accrued expenses................... 2,358 85 629 12 (72)(E) 3,012
Dividends payable.................. 86 86
Income taxes payable............... 131 (16) 115
Current portion of deferred
income........................... 400 400
Customer deposits.................. 1,795 845 391 3,031
------- ------ -------- ----------- ----------- ----------- -----------
Total current liabilities.... 18,262 233 1,918 1,707 (3,788) 18,332
------- ------ -------- ----------- ----------- ----------- -----------
Long-term debt, excluding current
installments..................... 13,897 786 1,840 5,446 (21,282)(A),(D),(G) 687
Deferred compensation.............. 3,088 3,088
Deferred income, excluding current
portion.......................... 200 200
Accrued pension cost............... 1,504 1,504
Accrued postretirement benefit
cost............................. 507 507
------- ------ -------- ----------- ----------- ----------- -----------
Total liabilities............ 37,458 1,019 3,758 7,153 (25,070) 24,318
------- ------ -------- ----------- ----------- ----------- -----------
Stockholders' equity:
Common stock....................... 38 21 180 5,502 44,442 (4,003)(D),(F) 46,180
Additional paid-in capital......... 9,385 9,385
Retained earnings.................. 10,675 3,044 4,037 (3,854) (7,055)(B),(C),(F) 6,847
Treasury stock..................... (6) 6(F)
Cumulative translation
adjustment....................... (55) (55)
------- ------ -------- ----------- ----------- ----------- -----------
Total stockholders' equity....... 20,043 3,065 4,211 1,648 44,442 (11,052) 62,357
------- ------ -------- ----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity....... $57,501 $4,084 $7,969 $ 8,801 $ 44,442 $ (36,122) $86,675
======== ====== ========== ============ =========== =========== ==========
</TABLE>
18
<PAGE> 20
- ---------------
The Unaudited Pro Forma Combined Balance Sheet as of June 30, 1997 gives effect
to the Reorganization and the consummation of the C&C Acquisition and the Keith
Acquisition as if they had occurred on June 30, 1997 as follows:
(A) Reflects this offering and the application of the proceeds therefrom as
follows:
<TABLE>
<S> <C>
Issuance of the stock.............................................. 49,400
Expenses for issuance of the stock................................. (4,958)
-------
Net proceeds....................................................... 44,442
Cash paid to sellers............................................... (19,212)
Cash paid to retire sellers debt................................... (2,263)
Retirement of debt assumed......................................... (6,186)
Retirement of current installments of long-term debt............... (2,674)
Retirement of long-term debt....................................... (13,590)
-------
Remaining proceeds................................................. 517
</TABLE>
(B) Reflects the elimination of debt issuance costs. (89)
(C) Reflects the elimination of prior organization costs. (89)
(D) Represents the Acquisitions:
<TABLE>
<CAPTION>
KEITH
C&C MONUMENT TOTAL
------ -------- ------
<S> <C> <C> <C>
Cash paid to sellers........................... 6,137 13,075 19,212
Stock issued to sellers........................ 200 1,500 1,700
Cash paid to retire sellers debt............... 463 1,800 2,263
Bank debt assumed(1)........................... 6,186 -- 6,186
------ ------ ------
Total purchase price(1)................... 12,986 16,375 29,361
====== ====== ======
</TABLE>
(E) The Acquisitions are accounted for as purchases in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations".
The purchase price is allocated first to the tangible and identifiable
assets and liabilities of the acquired companies based upon preliminary
estimates of their fair market values ("FMV"), with the remainder
allocated to goodwill:
<TABLE>
<CAPTION>
KEITH
C&C MONUMENT TOTAL
------ -------- ------
<S> <C> <C> <C>
Net purchase price............................. 6,800 16,375 23,175
Book value of net assets on June 30, 1997.... 3,065 4,211 7,276
Net assets excluded or eliminated at
Acquisition............................... (929) (710) (1,639)
------ ------ ------
Book value of tangible net assets acquired..... 2,136 3,501 5,637
------ ------ ------
Increase in basis.............................. 4,664 12,874 17,538
====== ====== ======
Allocation of increase in basis:
Increase in inventory value to convert LIFO
to fair value............................. -- 202 202
Step-up basis of PP&E to FMV................... 4,342 1,014 5,356
Increase in goodwill........................... 322 11,658 11,980
------ ------ ------
4,664 12,874 17,538
====== ====== ======
</TABLE>
(F) Reflects the elimination of appropriate balances of C&C, Keith
Monument, and the Quarry Companies & SMI pursuant to purchase
accounting.
(G) Includes the elimination of $3,340,000 due from Swenson Granite
Company, Inc., an affiliate, assumed by the Company during the
Reorganization and the assumption of a $310,000 note payable that was
the obligation of Swenson Granite Company, Inc. prior to the
Reorganization.
--------------------
(1) Includes the assumption of the total debt of the Quarry Companies and
SMI of $5.4 million in conjunction with the acquisition of the
remaining 50% that was not acquired pursuant to the Keystone
Acquisition.
19
<PAGE> 21
UNAUDITED PRO FORMA COMBINED AND CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------
ELBERTON KEITH PRO FORMA PRO FORMA
COMPANY COMPANIES(F) MONUMENT ADJUSTMENTS AS ADJUSTED
------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues:
Manufacturing.................................. $32,586 16,446 (150)(A) $48,882
Quarrying...................................... 12,083 5,545 17,628
Retailing...................................... 7,264 7,264
------ ------ ----- ------ ------
Total net revenues........................... 44,669 21,991 7,264 (150) 73,774
Gross Profit:
Manufacturing.................................. 8,248 2,116 10,364
Quarrying...................................... 5,158 1,814 126(B) 7,098
Retailing...................................... 4,832 4,832
------ ------ ----- ------ ------
Total gross profit........................... 13,406 3,930 4,832 126 22,294
Selling, general and administrative expenses..... 9,131 2,868 3,713 (458)(C) 15,254
------ ------ ----- ------ ------
Income from operations........................... 4,275 1,062 1,119 584 7,040
------ ------ ----- ------ ------
Interest expense................................. 1,723 643 (2,147)(D) 219
Income before provision (benefit) for income
taxes.......................................... 2,552 419 1,119 2,731 6,821
Provision (benefit) for income taxes............. 643 156 (24) 1,080(E) 1,855
------ ------ ----- ------ ------
Net income....................................... $1,909 263 1,143 1,651 $ 4,966
====== ====== ===== ====== ======
Net income per share............................. .73
Weighted average number of shares outstanding.... 6,812
</TABLE>
- ---------------
The Unaudited Pro Forma Combined and Condensed Statement of Operations for the
year ended December 31, 1996 gives effect to the Reorganization and the
consummation of the C&C Acquisition and the Keith Acquisition as if they had
occurred on January 1, 1996 as follows:
<TABLE>
<S> <C>
(A) To eliminate intercompany sales........................................................... (150)
(B) Reflects the closure of Caprice Quarry.................................................... 126
(C) Reflects the following:
Reversal of debt issuance costs....................................................... (70)
Reversal of organization costs........................................................ (33)
Amortization of goodwill.............................................................. 300
Reduction in salary expense........................................................... (620)
SG&A related to Caprice Quarry closure................................................ (35)
-----
(458)
(D) Reflects the elimination of interest expense.............................................. (2,147)
</TABLE>
(E) Reflects the net additional income tax provision as a result of the
above adjustments, at an effective tax rate of 27.2%, and provides for
income tax expense for companies previously taxed as Subchapter S
corporations.
(F) Following is a summary of the Elberton Companies operations for the year
ended December 31, 1996:
<TABLE>
<CAPTION>
QUARRY
COMPANIES &
SMI C&C KEYSTONE TOTAL
----------- ------ -------- -------
<S> <C> <C> <C> <C>
Net Revenues:
Manufacturing...................................... $ 1,257 $5,885 $9,304 $16,446
Quarrying.......................................... 5,545 -- -- 5,545
Retailing.......................................... -- -- -- --
------- ------- --------
-- -- --
---------
Total net revenues........................... 6,802 5,885 9,304 21,991
Gross Profit:
Manufacturing...................................... 219 1,132 765 2,116
Quarrying.......................................... 1,814 -- -- 1,814
Retailing.......................................... -- -- -- --
------- ------- --------
-- -- --
---------
Total gross profit........................... 2,033 1,132 765 3,930
Selling, general and administrative expenses......... 1,280 669 919 2,868
------- ------- --------
-- -- --
---------
Income (loss) from operations........................ 753 463 (154) 1,062
------- ------- --------
-- -- --
---------
Interest expense..................................... 462 65 116 643
Income (loss) before provision (benefit) for income
taxes.............................................. 291 398 (270) 419
Provision (benefit) for income taxes................. 156 -- -- 156
------- ------- --------
-- -- --
---------
Net income (loss).................................... $ 135 $ 398 $ (270) $ 263
========= ========= ========= ==========
</TABLE>
20
<PAGE> 22
UNAUDITED PRO FORMA COMBINED AND CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
ELBERTON KEITH PRO FORMA PRO FORMA
COMPANY COMPANIES(F) MONUMENT ADJUSTMENTS AS ADJUSTED
------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues:
Manufacturing................................ $15,278 8,365 (150)(A) $23,493
Quarrying.................................... 5,489 2,912 8,401
Retailing.................................... 3,359 3,359
------ ------ ----- ------ ------
Total net revenues......................... 20,767 11,277 3,359 (150) 35,253
Gross Profit:
Manufacturing................................ 3,640 993 4,633
Quarrying.................................... 1,565 1,209 175(B) 2,949
Retailing.................................... 2,271 2,271
------ ------ ----- ------ ------
Total gross profit......................... 5,205 2,202 2,271 175 9,853
Selling, general and administrative expenses... 4,328 1,370 1,883 (229)(C) 7,352
------ ------ ----- ------ ------
Income from operations......................... 877 832 388 404 2,501
Interest expense............................... 866 389 (1,142)(D) 113
Income before provision for income taxes....... 11 443 388 1,546 2,388
Provision for income taxes..................... 3 647(E) 650
------ ------ ----- ------ ------
Net income..................................... $ 8 443 388 899 $ 1,738
====== ====== ===== ====== ======
Net income per share........................... .26
Weighted average number of shares
outstanding.................................. 6,812
</TABLE>
- ---------------
The Unaudited Pro Forma Combined and Condensed Statement of Operations for the
six months ended June 30, 1997 gives effect to the Reorganization and the
consummation of the C&C Acquisition and the Keith Acquisition as if they had
occurred on January 1, 1997 as follows:
<TABLE>
<S> <C>
(A) To eliminate intercompany sales.............................................................. (150)
(B) Reflects the closure of Caprice Quarry....................................................... 175
(C) Reflects the following:
Reversal of debt issuance costs.............................................................. (35)
Reversal of organization costs............................................................... (17)
Amortization of goodwill..................................................................... 150
Reduction in salary expense.................................................................. (310)
SG&A related to Caprice Quarry closure....................................................... (17)
----
(229)
(D) Reflects the elimination of interest expense................................................. (1,142)
</TABLE>
(E) Reflects the net additional income tax provision as a result of the
above adjustments, at an effective tax rate of 27.2%, and provides for
income tax expense for companies previously taxed as Subchapter S
corporations.
(F) Following is a summary of the Elberton Companies operations for the six
months ended June 30 , 1997:
<TABLE>
<CAPTION>
QUARRY
COMPANIES &
SMI C&C KEYSTONE TOTAL
--------------- ------ -------- ------
<S> <C> <C> <C> <C>
Net Revenues:
Manufacturing......................................... $ 649 $3,061 $4,654 $8,365
Quarrying............................................. 2,912 -- -- 2,912
Retailing............................................. -- -- -- --
-------
--------- ---
------- -------
-- --
Total net revenues.............................. 11,277
3,561
3,061 4,654
Gross Profit:
Manufacturing......................................... 129 679 186 993
Quarrying............................................. 1,209 -- -- 1,209
Retailing............................................. -- -- -- --
-------
--------- ---
------- -------
-- --
Total gross profit.............................. 2,202
1,338
679 186
Selling, general and administrative expenses............ 1,370
634
375 361
-------
--------- ---
------- -------
-- --
Income (loss) from operations........................... 832
704
304 (175)
-------
--------- ---
------- -------
-- --
Interest expense........................................ 389
201
35 154
-------
--------- ---
------- -------
-- --
Income (loss) before provision for income taxes......... 443
503
269 (329)
Provision for income taxes.............................. --
--
-- --
-------
--------- ---
------- -------
-- --
Net income.............................................. $ 443
$ 503
$ 269 $ (329)
==========
=========
========= =========
</TABLE>
21
<PAGE> 23
UNAUDITED PRO FORMA COMBINED AND CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
ELBERTON KEITH PRO FORMA PRO FORMA
COMPANY COMPANIES(F) MONUMENT ADJUSTMENTS AS ADJUSTED
------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues:
Manufacturing.............................. $14,827 8,050 (80)(A) $22,797
Quarrying.................................. 5,116 2,985 8,101
Retailing.................................. 2,812 2,812
------ ------ ----- ------ ------
Total net revenues....................... 19,943 11,035 2,812 (80) 33,710
Gross Profit:
Manufacturing.............................. 3,603 936 4,539
Quarrying.................................. 1,653 937 64(B) 2,654
Retailing.................................. 1,823 1,823
------ ------ ----- ------ ------
Total gross profit....................... 5,256 1,873 1,823 64 9,016
Selling, general and administrative
expenses................................... 4,649 1,376 1,545 (233)(C) 7,338
------ ------ ----- ------ ------
Income from operations....................... 607 497 278 297 1,678
------ ------ ----- ------ ------
Interest expense............................. 934 340 (1,153)(D) 121
Income (loss) before provision (benefit) for
income taxes............................... (327) 157 278 1,450 1,557
Provision (benefit) for income taxes......... (82) 506(E) 424
------ ------ ----- ------ ------
Net income (loss)............................ $ (245) 157 278 944 $ 1,133
====== ====== ===== ====== ======
Net income per share......................... .17
Weighted average number of shares
outstanding................................ 6,629
</TABLE>
- ---------------
The Unaudited Pro Forma Combined and Condensed Statement of Operations for the
six months ended June 30, 1996 gives effect to the Reorganization and the
consummation of the C&C Acquisition and the Keith Acquisition as if they had
occurred on January 1, 1996 as follows:
<TABLE>
<S> <C>
(A) To eliminate intercompany sales.................................................................. (80)
(B) Reflects the closure of Caprice Quarry........................................................... 64
(C) Reflects the following:
Reversal of debt issuance costs.................................................................. (35)
Reversal of organization costs................................................................... (17)
Amortization of goodwill......................................................................... 150
Reduction in salary expense...................................................................... (310)
SG&A related to Caprice Quarry closure........................................................... (21)
------
(233)
(D) Reflects the elimination of interest expense..................................................... (1,153)
(E) Reflects the net additional income tax provision as a result of the above adjustments, at an effective tax
rate of 27.2%, and provides for income tax expense for companies previously taxed as Subchapter S
corporations.
(F) Following is a summary of the Elberton Companies operations for the six months ended June 30, 1996:
</TABLE>
<TABLE>
<CAPTION>
QUARRY
COMPANIES &
SMI C&C KEYSTONE TOTAL
--------------- ----- -------- -----------
<S> <C> <C> <C> <C>
Net Revenues:
Manufacturing...................................... 574 2,861 4,615 8,050
Quarrying.......................................... 2,985 -- -- 2,985
Retailing.......................................... -- -- -- --
------
--------- --- ------- ---
------
---
Total net revenues........................... 2,861
3,559 11,035
4,615
Gross Profit:
Manufacturing...................................... 51 599 286 936
Quarrying.......................................... 937 -- -- 937
Retailing.......................................... -- -- -- --
------
--------- --- ------- ---
------
---
Total gross profit........................... 599
988 1,873
286
Selling, general and administrative expenses......... 300
646 1,376
430
------
--------- --- ------- ---
------
---
Income (loss) from operations........................ 299
342 497
(144)
=========
========= ==========
=========
Interest expense..................................... 35
236 340
69
Income (loss) before provision for income taxes...... 264
106 157
(213)
Provision for income taxes........................... --
-- --
--
------
--------- --- ------- ---
------
---
Net income........................................... 264
106 157
(213)
=========
========= ==========
=========
</TABLE>
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Rock of Ages, founded in 1885, is an integrated quarrier, manufacturer and
distributor of granite and products manufactured from granite. The quarry
division sells granite both to the manufacturing division and to outside
manufacturers, as well as to distributors in Europe and Japan. The manufacturing
division's principal product is granite memorials used primarily in cemeteries,
although it also manufactures some specialized granite products for industrial
applications. The Company owns and operates 13 active quarry properties and 12
manufacturing and sawing facilities in North America, principally in Vermont,
Georgia, and the Province of Quebec. The Company markets and distributes its
memorials on a wholesale basis to approximately 1,835 independent memorial
retailers in the United States and Canada, including approximately 495
independent authorized Rock of Ages retailers that are the primary outlet for
the Company's branded memorials. The Company recently entered into a definitive
agreement to acquire one of the largest of its authorized independent retailers,
which will provide the Company with 17 owned retail outlets and mark the
Company's first significant entry into retailing. The Company's memorials are
marketed under the names of Rock of Ages Sealmark and Colorcraft, as well as
several private labels. The Company believes that the Rock of Ages trademark is
one of the oldest and best known brand names in the granite memorialization
industry.
Prior to 1996, the Company's quarrying and manufacturing operations were
concentrated in Vermont and Quebec, and its manufacturing division produced
primarily high-end branded memorials that were distributed to a relatively small
percentage of the independent memorial retailers in North America. During the
past twenty months, the Company has begun to implement a strategy that involves:
(i) significantly expanding the breadth of its product offerings to include
memorials covering all price points and major color varieties; (ii) increasing
its distribution base; and (iii) vertically integrating forward into the retail
distribution channel in order to move closer to the ultimate memorial customer.
The steps taken by the Company so far in this regard have enabled it to increase
manufacturing revenues from $17.8 million in 1995 to $32.6 million in 1996
($48.9 million in 1996 on a pro forma basis), and to increase its distribution
base from 495 independent retailers in 1995 to approximately 1,835 in 1997
including 17 Company-owned outlets. More importantly, these steps have
positioned the Company favorably to capitalize on the opportunities to
significantly expand its sales and profitability in the granite memorialization
industry.
The Company's primary means of implementing its growth strategy to date has
been through acquisitions, beginning with the acquisitions on December 31, 1995
of Lawson Granite Company and Anderson-Friberg Company, each based in Barre,
Vermont. These acquisitions helped expand the Company's manufacturing capacity
and distribution base, while also broadening its granite memorial product line
to include more non-branded granite memorials at lower price points than the
Company's then-existing product line. In addition, the Company has recently
taken further steps to implement its growth strategy through (i) the Keystone
Acquisition, pursuant to which the Company acquired on June 30, 1997 the largest
granite memorial manufacturer in Elberton, Georgia, and (ii) the execution of
agreements to consummate the C&C Acquisition, pursuant to which the Company will
acquire C&C, which the Company believes is the second-largest granite memorial
manufacturer in Elberton. The Elberton Acquisitions will establish the Company
as the largest granite memorial manufacturer in Elberton, Georgia, which is the
largest granite producing area in North America and will give the Company a
substantially broader product line, greater manufacturing capacity and enhanced
distribution capabilities in the southern United States.
The Company's first significant entry into memorial retailing was initiated
in July 1997, when the Company entered into a definitive agreement to acquire
Keith Monument. It is currently anticipated that the Keith Acquisition will
close concurrently with the consummation of this offering. Keith Monument,
founded in 1867, has been an authorized Rock of Ages retailer for more than 50
years. The Company believes that Keith Monument is one of the largest retailers
of granite memorials in the United States. Upon the closing of the Keith
Acquisition, John E. Keith, a principal owner and the president of Keith
Monument with over thirty years of experience in granite memorial retailing,
will head the Company's retailing operations. Mr. Keith will
23
<PAGE> 25
oversee the implementation of the Company's strategy to significantly expand its
retail operations both through other acquisitions of retailers and by pursuing
strategic alliances with funeral home and cemetery owners, including
consolidators.
The Company records revenues from both manufacturing and quarrying.
Manufacturing revenues are recorded when the finished product is shipped from
Company facilities to an outside customer. The granite quarried by the Company
is sold both to outside customers and used by the Company's manufacturing
division. During 1996, 68.6% of the granite quarried by the Company was sold to
outside customers. The Company records revenue and gross profit related to the
sale of granite sold to an outside customer when the granite is shipped from the
Company's quarry. The Company does not record a sale, nor does the Company
record gross profit, at the time granite is transferred to the Company's
manufacturing division. The Company records revenue and gross profit related to
internally transferred granite only after the granite is manufactured into a
finished product and sold to an outside customer.
The following table sets forth certain historical statement of operations
data as a percentage of revenues with the exception of Manufacturing Gross
Profit and Quarrying Gross Profit, which are shown as a percentage of
Manufacturing Revenues and Quarrying Revenues, respectively.
<TABLE>
<CAPTION>
SIX MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Manufacturing.................................. 50.6 53.8 72.9 74.4 73.6
Quarrying...................................... 49.4 46.2 27.1 25.6 26.4
----- ----- ----- ----- -----
Total....................................... 100.0 100.0 100.0 100.0 100.0
Gross Profit
Manufacturing.................................. 23.4 24.4 23.8 24.3 23.9
Quarrying...................................... 35.8 39.9 42.7 32.3 28.5
Combined Gross Profit.......................... 29.5 31.6 30.0 26.4 25.1
Selling, general and administrative expenses..... 17.7 19.5 20.4 23.3 20.8
Income from operations........................... 11.8 12.1 9.6 3.0 4.2
Interest expense................................. 4.8 5.1 3.9 4.7 4.2
Income (loss) before income taxes and
extraordinary items............................ 7.0 5.3 5.7 (1.6) 0.0
Provision for income taxes....................... 1.7 1.1 1.4 (0.4) 0.0
Net income (loss)................................ 5.3 4.2 4.3 (1.2) 0.0
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenue for the six months ended June 30, 1997 increased 4.1% to $20.8
million from $19.9 million for the six months ended June 30, 1996. This increase
was partly attributable to an increase in manufacturing revenues of $500,000 due
to a greater number of memorial units sold. Although quarry revenues from the
North American market experienced a slight decline during the period ended June
30, 1997, quarry revenues increased by a net $400,000 as a result of increased
exports to Asia.
Gross profit for the six months ended June 30, 1997 remained unchanged at
$5.2 million compared to gross profit for the six months ended June 30, 1996.
The gross profit percentage fell slightly to 25.1% for the six months ended June
30, 1997 from 26.4% for the six months ended June 30, 1996 but was offset by
higher sales volumes during the most recent period. The gross profit margin in
manufacturing declined during the six months ended June 30, 1997 as a result of
a slight shift in the product mix toward lower margin products. The decrease in
the quarry gross profit margin for the six months ended June 30, 1997 was a
result of a shift in product mix toward lower-margin exports.
Selling, general and administrative expenses for the six months ended June
30, 1997 decreased 6.9% to $4.4 million from $4.6 million for the six months
ended June 30, 1996. As a percentage of sales, selling,
24
<PAGE> 26
general and administrative expenses decreased to 20.8% from 23.3% for the prior
six month period. This decrease during the most recent period compared to the
prior period resulted from cost savings as a result of the integration of
acquisitions consummated during 1996.
Interest expense for the six month period ended June 30, 1997 decreased to
$866,000 from $934,000 for the six month period ended June 30, 1996. The
reduction in interest expense was the result of reduced borrowing levels during
the most recent period.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995.
Revenue for the fiscal year ended December 31, 1996 increased 35.8% to
$44.7 million from $33.1 million for the year ended December 31, 1995. This
growth was attributable to an increase of $3.9 million in revenues from existing
operations and an increase of $10.9 million in revenues from acquired
manufacturing operations. This increase was offset by a decrease in quarry
revenues as a result of the Company's acquisition of two manufacturers that had
previously been significant customers and a $1.7 million decrease in quarry
sales due to reduced exports to Japan and other Asian markets.
Gross profit for 1996 compared to 1995 increased 28.3% to $13.4 million
from $10.4 million in 1995. The higher total gross profit reflects an increase
of $2.5 million from acquired manufacturing operations and an increase of $1.4
million from existing manufacturing operations. This increase was partly offset
by reduced gross profit of $900,000 from quarrying operations due to lower
revenue. The gross profit percentage fell slightly to 30% in 1996 from 31.6% in
1995 as a result of sales from the lower margin products of the acquired
manufacturing operations. The lower gross margin in 1996 compared to 1995 was
offset slightly by higher margins in the quarry operations due to a price
increase that went into effect during 1996. Although gross profit margins in
both manufacturing and quarrying increased for 1996 compared to 1995, the total
gross profit margin declined as a result of the lower margin manufacturing
business accounting for a higher percentage of total Company revenues.
Selling, general and administrative expenses for 1996 increased 41.5% to
$9.2 million from $6.5 million in 1995. As a percentage of net sales, selling,
general and administrative expenses for 1996 increased to 20.4% from 19.5% in
1995. This increase resulted primarily from increased personnel expense
necessary to support a higher rate of growth in memorial manufacturing and
increased acquisition activity.
Interest expense for 1996 remained unchanged from 1995 at $1.7 million.
Income taxes as a percent of earnings before taxes increased from 20.4% to
25.2% in 1996. Although the Company was in an alternative minimum tax position
for Federal tax purposes, the Company paid higher state taxes as a result of its
income level exceeding the Company's depletion allowances. In 1995, the Company
was in an alternative minimum tax position for Federal taxes and paid only a
nominal amount of state taxes as a result of the magnitude of its depletion
allowances.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.
Revenue for 1995 decreased 3.2% to $33.1 million from $34.2 million for the
fiscal year ended December 31, 1994. The decrease was attributable to a $1.6
million reduction in quarry sales from reduced exports to Japan and other Asian
markets. This decrease was slightly offset by a $500,000 increase in
manufacturing sales.
Gross profit for 1995 increased 3.5% to $10.4 million from $10.1 million in
1994. The increase was the result of an improvement in the gross profit
percentage to 31.6% in 1995 from 29.5% in 1994. The improved gross margin was in
part a reflection of manufacturing volume increases and changes in the Company's
marketing and pricing strategies to deemphasize lower margin customers.
Additionally, gross profit margins increased as a result of unit cost reductions
in the Company's quarry operations.
Selling, general and administrative expenses for 1995 increased 6.7% to
$6.5 million from $6.0 million in 1994. As a percentage of net revenue, selling,
general and administrative expenses for 1995 increased to 19.5%
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from 17.7% in 1994. This increase resulted primarily from expenses related to
the employee savings and profit sharing plan which was established during fiscal
1995.
Interest expense, net for 1995 remained unchanged at $1.7 million from
1994.
Income taxes as a percent of earnings before taxes decreased from 24.1% in
1994 to 20.4% in 1995. The decrease was the result of a lower level of taxable
income in 1995 which resulted in the Company being in an alternative minimum tax
position for Federal income tax purposes. During 1994, the Company was still in
an alternative minimum tax position but had a higher level of taxable income
which exceeded its depletion allowance for state income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company considers liquidity to be its ability to meet its
long and short-term cash requirements. Historically the Company has met these
requirements primarily from cash generated by operating activities and periodic
borrowings under commercial credit facilities. The Company's recent and pending
acquisitions have increased its requirements for external sources of liquidity,
and the Company anticipates that this trend will continue as it further
implements its growth strategy.
Six Months Ended June 30, 1997. For the six months ended June 30, 1997 net
cash used in operating activities was $3.0 million. The six month period results
were primarily attributable to increases in trade receivables and amounts due
from affiliates. Net cash used in investing activities was $1.7 million for the
six month period. The results were primarily attributable to purchase of
property, plant and equipment. Net cash provided by financing activities was
$4.1 million for the six month period. The results were primarily attributable
to borrowings under lines of credit that were partially offset by principal
payments on long-term debt.
Year Ended December 31, 1996. For 1996, net cash provided by operating
activities was $3.9 million. 1996 results were driven primarily by cash provided
by a decrease in trade receivables which were partially offset by an increase in
inventories and receivables due from affiliates. Net cash used in investing
activities was $1.8 million primarily for the purchase of property, plant and
equipment. Net cash used in financing activities was $3.3 million used primarily
for principal repayments on long-term debt, offset by increased borrowings under
lines of credit.
Capital Resources. As of June 30, 1997, the Company had $6.6 million
outstanding and approximately $2.9 million available under its revolving credit
facility with CIT Group -- Business Credit Inc. ("CIT"). The interest rate on
this facility as of such date was 9.5%, based on a formula of prime plus 1%. In
addition, the Company had outstanding a term loan payable to CIT in the
principal amount of $13.6 million, bearing interest at 9.75% based on prime plus
1.25%. The term loan has a final maturity of January 1, 1999, with amortization
requirements of $500,000 per quarter. As of June 30, 1997, the Company had
approximately $1.8 million of indebtedness outstanding under credit facilities
assumed in connection with the Keystone Acquisition, with maturities in 1997,
1998 and 1999 and interest of up to 9.75% per annum (the "Keystone
Indebtedness"). The Company intends to apply a portion of the net proceeds of
the offering toward repayment of outstanding amounts under its credit facility
and term loan with CIT and the Keystone Indebtedness, and has received a
commitment letter for a new $50 million credit facility subject to consummation
of the offering, borrowings under which will be used to repay all remaining
amounts outstanding under the revolving credit facility with CIT. As of June 30,
1997, the Company also had $2.1 million outstanding and no availability under a
demand revolving line of credit with the Royal Bank of Canada. The interest rate
on this facility as of such date was 6.25% based on a formula of Canadian prime
plus .75%. The Company's primary need for capital will be to maintain and
improve its manufacturing and quarrying facilities and to finance acquisitions
as part of its growth strategy. The Company has $3.7 million budgeted for
capital expenditures in 1997, of which it had spent $1.6 million through June
30, 1997. The Company believes that the combination of cash flow from
operations, its existing credit facilities, the proceeds of this offering, and
the new credit facility it expects to put in place will be sufficient to fund
its operations for at least the next twelve months.
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SEASONALITY
Historically, the Company's operations have experienced certain seasonal
patterns. Generally the Company's net sales have been highest in the third
quarter and lowest in the first quarter of each year due primarily to weather.
Cemeteries in northern areas generally do not accept granite memorials during
winter months when the ground is frozen because they cannot be properly set. The
Company typically closes certain of its Vermont and Canadian quarries during
these months because of increased operating costs attributable to adverse
weather conditions. The Company has historically incurred a net loss during the
first six months of each calendar year. However, the Company believes that the
variability of its operating results on a quarterly basis will be lessened as
its operations become more geographically dispersed.
INFLATION
The Company believes that the relatively moderate rates of inflation
experienced in recent years have not had a significant impact on its results of
operations.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 128, Earnings Per Share, will require a different calculation of
earnings per share and will require a restatement in all prior periods. This
will be effective for periods ending after December 15, 1997.
SFAS No. 130, Reporting Comprehensive Income, will be effective for periods
beginning after December 15, 1997.
SFAS No. 131, Disclosure About Segments of an Enterprise and Related
Information, will be effective for periods beginning after December 15, 1997.
Management does not believe that the above pronouncements will have a
material impact on the Company's financial statements.
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THE DEATH CARE INDUSTRY AND GRANITE MEMORIALIZATION
DEATH CARE INDUSTRY OVERVIEW
The death care industry has traditionally been comprised of three principal
segments: (i) ceremony and tribute, generally in the form of a funeral or
memorial service; (ii) disposition of remains, either through burial or
cremation; and (iii) memorialization, generally through monuments, markers or
inscriptions. The death care industry is relatively stable due to predictable
death rates and demographics relating to aging and wealth. Certain
characteristics generally applicable to the death care industry are summarized
below.
Fragmented nature. Ownership in the death care industry is generally
highly fragmented. With the exception of bronze memorial suppliers (two
companies with an estimated market share of in excess of 80%) and casket
manufacturers (three companies with an estimated 60% market share), the majority
of death care operators are small, privately-owned family companies. At the end
of 1996, consolidators owned less than 12% of the estimated 22,800 funeral
homes, approximately 890, or less than 10%, of the estimated 9,600 commercial
cemeteries, and less than 5% of the total estimated 23,000 active cemeteries, in
the United States.
Barriers to entry. Death care businesses have traditionally been
transferred to successive generations within a family and in most cases have a
heritage, community presence and tradition that act as formidable barriers for
new entrants into existing markets. Presence and tradition afford established
industry operators an important local franchise and provide the opportunity for
significant referral business.
Stability. Death rates in the United States and Canada are fairly
predictable and are expected to rise approximately 1% per year between 1996 and
2010. The general death care industry is therefore relatively stable and fairly
predictable. Business failures are generally uncommon among retailers of death
care products and services, with ownership traditionally passing from generation
to generation.
Consolidation. Consolidators are actively consolidating the funeral home
and cemetery segments of the death care industry; the Company believes this
consolidation will occur in all areas of the death care industry.
Pre-need marketing and selling. An increasing number of general death care
products and services, especially funeral products and services and cemetery
lots controlled by consolidators, are being sold prior to the time of death
("pre-need") rather than at the time of death ("at-need").
Trend toward cremation. In recent years, there has been a steady, gradual
growth in the number of families that have chosen cremation as an alternative to
traditional methods of burial. According to CANA, cremations represented
approximately 22% of the United States burial market in 1996 compared to
approximately 10% in 1980, and CANA expects this rate to rise to 29% by 2010.
Cremation rates vary dramatically by state for religious, cultural and other
reasons. Cremation is generally marketed as a less costly alternative to
interment; in addition, it is increasingly being marketed as a part of a death
care program that incorporates a traditional service and memorialization.
THE GRANITE MEMORIAL INDUSTRY
General. In 1995, there were approximately 1.8 million interments in the
United States. Of these, the Company believes approximately 50% were
memorialized in some sort of permanent manner. These memorializations take a
number of forms, depending on the type of interment. Individual cemetery lots
typically have granite or bronze memorials, while communal interments such as
community mausoleums, cremation niches and columbariums have a range of stone,
masonry and wood construction. The Company believes the North American
memorialization industry, excluding communal interments such as community
mausoleums and columbariums, is approximately $1.5 billion in annual retail
sales in 1996, approximately two-thirds of which were sales of granite memorials
and approximately one-third of which were sales of bronze memorials (including
granite bases under bronze), with a nominal percentage of marble and other
products.
Granite memorials are manufactured in a wide variety of sizes, designs and
colors, depending on the degree of personalization desired by the customer. The
Company believes the largest selling colors, in order of magnitude, are Elberton
Gray, Barre Gray, Black, Dakota Mahogany, Pink and Red. While there are a
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number of standard types of memorials, including flush grass markers and various
types of upright granite memorials, their size varies slightly from region to
region.
The granite memorialization industry is comprised of three principal areas:
(i) quarrying of the granite; (ii) manufacture and wholesale distribution of the
memorials; and (iii) retail sales of the memorials. The granite memorialization
industry shares some of the fundamental characteristics of the death care
industry, including barriers to entry created by local heritage, community
presence and tradition, structural fragmentation and stable, predictable demand.
However, the granite memorial industry and its three principal areas have
certain distinguishing characteristics that the Company believes create
attractive opportunities. These characteristics include the following:
Timing and point of sale. Unlike most death care products and services,
the purchase of granite memorials by consumers is typically separated both
physically and chronologically from the funeral planning and service process.
Granite memorials have traditionally been sold primarily through independent
monument retailers rather than at or through funeral homes or cemeteries
(approximately 3,000 of such independent memorial retailers are located outside
funeral homes and cemeteries, according to the Monument Builders of North
America). In addition, granite memorials historically have been sold some time
after the funeral or interment service.
Additional barriers to entry. As in the death care industry generally,
local heritage, community presence and tradition deter entry into the granite
memorialization industry. However, the most significant barriers to entry to the
quarrying of granite include: (i) the limited number of known commercially
exploitable memorial grade granite deposits; (ii) stringent federal, state and
local zoning and environmental laws; and (iii) substantial capital requirements.
Barriers to entry in the manufacture of granite memorials include (a) the need
to be in reasonable proximity to granite quarries producing memorial grade
granite due to the high freight costs associated with transporting granite
blocks; (b) substantial capital costs in establishing and operating a memorial
grade granite manufacturing facility; and (c) the need for highly skilled stone
cutters, sandblasters, sculptors and other skilled artisans necessary to produce
granite memorials.
Ownership structure. The granite memorial industry is characterized by
increasing fragmentation as one moves closer to the ultimate customer. The
Company estimates that there are approximately 50 quarriers and 140
manufacturers of memorial grade granite in North America. According to the
Monument Builders of North America, there are approximately 3,000 retailers of
granite memorials in North America located outside funeral homes and cemeteries.
Most of these quarrying, manufacturing and retail businesses are privately owned
and family run.
Geographic concentration and production costs. The quarrying and
manufacture of granite memorials in North America are concentrated in four
geographic areas: Barre, Vermont; Beebe, Quebec; Elberton, Georgia; and the area
encompassing Milbank, South Dakota, Cold Spring and St. Cloud, Minnesota and
Wausau, Wisconsin (known in the trade as the "Northwest"). Generally, granite
quarriers and manufacturers in each area have the strongest market shares in the
neighboring geographic regions because of the relatively high freight costs
involved in shipping granite. The low cost and low price production area is
Elberton, while the other three regions generally have similar costs and selling
prices.
Competing products. The primary competition for granite memorialization on
individual cemetery lots comes from bronze products which currently constitute
approximately one-third of the aggregate memorialization business, measured in
retail sales dollars. Bronze markers are generally flush rather than upright and
are typically offered in a limited number of styles and designs, with relatively
little opportunity for personalization. Unlike granite memorials, bronze markers
are sold primarily through cemeteries where they have traditionally been
marketed to the consumer as a lower cost alternative to granite and to the
cemeterian as a lower cost cemetery maintenance option. To a lesser extent,
marble is also used as a substitute for granite in memorialization. See
"Business -- Competition."
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OPPORTUNITIES
The Company believes that the aforementioned industry characteristics
present it with the opportunity to:
- Serve the geographically dispersed and fragmented memorial retailers by
offering a full line of granite memorials throughout North America. The
Company is the leading quarrier and manufacturer of granite memorials in
three of the four principal granite memorial producing regions of North
America. Accordingly, the Company is well positioned to provide,
primarily through its own quarrying and manufacturing operations, a
complete line of high quality, granite memorials covering all price
points and major color varieties to North American retailers and to
cemetery and funeral home owners, including consolidators.
- Capitalize on the fragmented nature of granite memorial retailing and the
Company's existing relationships with over 1,800 independent retailers by
making strategic acquisitions of independent retailers in order to build
an integrated network of owned Rock of Ages retailers and thereby capture
the higher margins which have historically existed at the retail level.
- Capitalize on the trend toward cremation by attracting consumer dollars
otherwise spent on casket and burial vault expenses. The Company believes
that with enhanced distribution capabilities, promotion, advertising and
consumer awareness of memorialization, more consumers who have elected
cremation may opt for personalized upright granite memorials.
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BUSINESS
GENERAL
Rock of Ages, founded in 1885, is an integrated granite quarrier,
manufacturer and distributor whose principal product is granite memorials used
primarily in cemeteries. The Company believes that it is the largest quarrier,
manufacturer and distributor of finished granite memorials and granite blocks
for memorial use in North America, based on revenues. The Company owns and
operates 13 active quarry properties and 12 manufacturing and sawing facilities
in North America, principally in Vermont, Georgia and the Province of Quebec.
The Company markets and distributes its memorials on a wholesale basis to
approximately 1,835 independent memorial retailers in the United States and
Canada, including approximately 495 independent authorized Rock of Ages
retailers that are the primary outlet for the Company's branded memorials. The
Company recently entered into a definitive agreement to acquire one of the
largest of its authorized independent retailers, which will provide the Company
with 17 owned retail outlets and mark the Company's first significant entry into
retailing. The Company's memorials are marketed under the names Rock of Ages
Sealmark and Colorcraft, as well as several private labels. The Company believes
the Rock of Ages trademark is one of the oldest and best known brand names in
the granite memorialization industry.
BUSINESS STRATEGY
Rock of Ages believes it is well-positioned to capitalize on the industry
characteristics described previously, and seeks to establish a dominant position
in the granite memorialization industry. The Company intends both to improve the
efficiency of its existing operations and to expand its business significantly.
The principal elements of the Company's operating and growth strategies are
summarized below.
Operating Strategy. The Company pursues an operating strategy that
includes the following key elements:
- Providing, primarily through its own quarrying and manufacturing
operations, a complete line of high quality granite memorials covering
all price points and major color varieties. The Company believes it is
the only industry participant with both quarrying and manufacturing
operations in three of the four principal granite memorial producing
regions of North America.
- Enhancing operational efficiencies through the continued integration of
acquired quarriers and manufacturers and the rationalization of its sales
and distribution efforts.
- Increasing advertising and promotion of the Rock of Ages brands,
including the flagship Rock of Ages Sealmark and Colorcraft brands, in
order to heighten consumer awareness and increase sales of the Company's
products.
Growth Strategy. The Company seeks to expand the scope and profitability
of its operations by implementing a growth strategy that includes forward
vertical integration into retailing, thereby enabling the Company to move closer
to the ultimate customer. The principal elements of this strategy include the
following:
- Acquiring independent granite memorial retailers in selected markets in
order to develop an integrated network of owned Rock of Ages retailers
and thereby capture the higher margins which have historically existed at
the retail level.
- Increasing sales to independent retailers that are current customers and
expanding its independent retailer customer base. During the last two
years, principally through acquisitions of quarriers and manufacturers,
the Company has increased the number of independent retailers to which it
sells its products from approximately 495 in 1995 to approximately 1,835
in 1997.
- Pursuing strategic alliances with funeral home and cemetery owners,
including consolidators, to supply granite memorials to or through them,
in order to increase both pre-need and at-need sales of granite
memorials.
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RECENT AND CONCURRENT ACQUISITIONS
The Company's primary means of implementing its growth strategy to date has
been through acquisitions, beginning with the acquisition on December 31, 1995
of Lawson Granite Company and Anderson-Friberg Company, each based in Barre,
Vermont. These acquisitions helped expand the Company's manufacturing capacity
and distribution base, while also broadening its granite memorial product line
to include more non-branded granite memorials at lower price points than the
Company's then-existing product line. The Company has recently taken further
steps to implement its growth strategy through the Keystone Acquisition and the
proposed C&C Acquisition and Keith Acquisition. The Company believes that these
acquisitions and the continued implementation of the other elements of its
operating and growth strategies will enable it to: (i) expand overall industry
sales of granite memorials, which heretofore have been actively marketed to
consumers primarily only on an at-need basis and in a limited manner; (ii)
increase its share of the granite memorial market by offering a complete product
line with strong brand names through distribution channels that more directly
reach the consumer; and (iii) increase both its relative and total profitability
by capturing some of the higher margins that have historically existed at the
retail level.
Keystone. In June 1997, the Company acquired Keystone, the largest
memorial manufacturer in Elberton, Georgia, including Keystone's 50% ownership
interest in each of SMI and the Quarry Companies. Keystone had revenues of $9.3
million for the year ended December 31, 1996. The Company made the Keystone
Acquisition in order to: (i) become the largest manufacturer of granite
memorials in the largest granite producing area of North America; (ii) expand
the Company's product offering to its and Keystone's customers by combining the
product lines of the two companies and thereby offering easy "one-stop-shopping"
to retailers; (iii) obtain immediate access to an expanded customer base of
independent retailers; (iv) reduce raw material and production costs for certain
granite; and (v) reduce transportation costs and enhance transportation
capabilities. In connection with the Keystone Acquisition, the Company issued
263,441 shares of Class B Common Stock and assumed or incurred $2.6 million of
indebtedness.
C&C. In June 1997, the Company also entered into a definitive agreement to
acquire C&C, which the Company believes is the second largest manufacturer of
granite memorials in Elberton, Georgia, and the remaining 50% of each of SMI and
the Quarry Companies owned by the stockholders of C&C. It is expected that the
C&C Acquisition will close concurrently with the consummation of this offering.
C&C had revenues of $5.9 million for the year ended December 31, 1996. The
Company believes that the C&C Acquisition by itself offers many of the same
benefits that the Keystone Acquisition provides, and, in combination with the
Keystone Acquisition, solidifies the Company's position as the largest granite
memorial manufacturer in the Elberton region. The purchase price payable for C&C
is $6.6 million in cash and $200,000 in shares of Class A Common Stock (valued
at the initial public offering price) and approximately $780,000 to repay
outstanding indebtedness of C&C.
Quarry Companies and SMI. As part of the Keystone Acquisition and the C&C
Acquisition, the Company will also acquire the Quarry Companies and SMI and
assume $5.4 million of indebtedness of such companies. The Quarry Companies and
SMI had sales of $6.8 million for the year ended December 31, 1996. The Quarry
Companies own and operate six quarries located in Georgia, Pennsylvania, North
Carolina, South Carolina and Oklahoma. The Quarry Companies offer the Company an
internal source of a variety of colored granite, including American Black,
Salisbury Pink, Autumn Rose and Kershaw Pink. These colors supplement the
Company's product line for both granite memorials and mausoleums. With the
acquisition of SMI, the Company will obtain a manufacturing facility dedicated
primarily to the construction of mausoleums, which are a more expensive and
higher margin product than most other types of granite memorials.
Keith Monument. In July 1997, the Company entered into a definitive
agreement to acquire substantially all of the assets and liabilities of Keith
Monument. Keith Monument has been an authorized Rock of Ages retailer for more
than 50 years and, the Company believes, is one of the largest retailers of
granite memorials in the United States. It is expected that the Keith
Acquisition will close concurrently with the consummation of this offering.
Keith Monument had revenues of $7.8 million for the year ended June 30, 1997.
The Keith Acquisition offers the Company an immediate presence in memorial
retailing and provides the Company with management expertise in the retailing
sector. The purchase price payable for Keith
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Monument is $16.4 million, consisting of $13.1 million in cash, $1.5 million in
shares of Class A Common Stock (valued at the initial public offering price) and
$1.8 million to repay outstanding indebtedness of Keith Monument assumed by the
Company. Upon the closing of the Keith Acquisition, John E. Keith, a principal
owner and the president of Keith Monument with over thirty years of experience
in granite memorial retailing, will head the Company's retailing operations. Mr.
Keith will oversee the implementation of the Company's strategy to significantly
expand its retail operations both through other acquisitions of retailers and by
pursuing strategic alliances with funeral home and cemetery owners, including
consolidators.
QUARRYING AND MANUFACTURING OPERATIONS
Quarrying. The Company owns and operates 13 active quarries producing, or
has supply agreements to obtain, each of the largest selling granite memorial
colors in North America (Elberton Gray, Barre Gray, Black, Dakota Mahogany, Pink
and Red, in that order). In 1996, on a pro forma basis assuming the Acquisitions
occurred on January 1, 1996, the Company quarried in excess of 1,500,000 cubic
feet of saleable granite from its quarries in Georgia, Vermont, Pennsylvania,
North Carolina, South Carolina, Oklahoma and the Province of Quebec. The Company
estimates that its U.S. production represents approximately 19% of the total
U.S. output of dimension granite for all uses and approximately 25% of the U.S.
output for memorial use.
The Company owns a large quarry complex in Barre, Vermont and is currently
the only quarrier of Barre, Vermont gray granite. The Company's Barre, Vermont
quarry complex is generally considered to be one of the largest granite quarry
complexes in the world. In 1996, on a pro forma basis assuming the Acquisitions
occurred on January 1, 1996, over 50% of the Company's U.S. output came from its
Barre quarries.
The Company also owns four quarries in the Elberton, Georgia area. While
most black granite for memorial use comes from Africa and India, the Company
owns a quarry in Pennsylvania that produces the largest selling black granite
for memorial use quarried in North America. The Company also owns quarries in
North Carolina and Canada that produce pink granite, and a quarry in Bethel,
Vermont that produces Bethel white granite used primarily for building purposes
outside North America.
The quarrying of granite involves three major processes. The first major
process is to prepare the granite for extraction. The initial step in this
process is to free a mass of stone from the quarry by cutting deep vertical
channels in the stone with jet channeling torches, pneumatic slot-drills or
diamond-wire saws. Next, a series of horizontal "lift" holes are drilled in the
mass. Several of the lift holes are then filled with primer cord explosives
which, after detonation, cause the granite mass to crack along the line where
the holes have been drilled and to lift the mass free from the granite below it.
Occasionally, these horizontal cuts are made with diamond wire saws. After the
granite mass has been separated, pneumatic drills are used to drill a series of
vertical holes to break the mass into large vertical pieces. Horizontal holes
are then drilled to break these pieces into standard size saw blocks, known as
"dimensioned blocks," which are typically ten feet by five feet by five feet and
weigh approximately twenty-five tons.
The second major process in quarrying granite is to extract the dimensioned
block from the quarry. Extraction involves removing the dimensioned blocks from
the quarry with very large forklifts or, in deeper quarries, with cinching
notched wire cable around the block and then hoisting the blocks with very large
derricks, or fixed cranes, or mobile cranes. These derricks range to up to 160
feet in height and up to 250 tons in lifting capacity. Most of the Company's
quarries utilize forklifts for extraction or a combination of forklifts and
fixed or mobile cranes.
The third major process is to transport the dimensioned blocks. Once lifted
from the quarry, the blocks are handled and transported by heavy duty diesel
trucks and fork lifts. These vehicles transport the blocks either to an
inventory area or directly to the manufacturer.
Much of the granite quarried is not suitable for use as a finished memorial
product due to cracks, spots, discoloration and other natural imperfections. The
amount of usable granite varies markedly from quarry to quarry. Some of the
granite not used for memorials is sold to other companies for use in buildings
and other non-memorial products. Unusable stone, or "grout," is stored in areas
not expected to be quarried in the
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future. It is suitable for bridge piers, erosion control and other uses but the
market for this product is very limited.
The granite blocks sold by the Company are delivered to the Company's
manufacturing division as well as to other granite manufacturers in Vermont via
Company owned trucks. Blocks for delivery outside of the production areas are
delivered via common carrier. Barre, Vermont, Elberton, Georgia and Beebe,
Quebec all have at least two large regional or national trucking companies and a
number of independent truckers.
Manufacturing. The Company owns and operates 12 manufacturing and sawing
facilities in North America, principally in Vermont, Georgia and the Province of
Quebec. The Company is in the process of a $3.2 million expansion and
improvement program for its Barre and Canadian manufacturing facilities to add
50,000 square feet of space and manufacturing and sawing equipment and to
reconfigure production. In addition, the Company has ordered $600,000 of
polishing equipment for the manufacturing facilities in Elberton and anticipates
dedicating sawing equipment currently used for curb slabs to memorial slabs. The
Company believes that these improvements and operational changes will increase
memorial production significantly and allow the Company to meet its anticipated
production requirements for the near future.
The manufacture of memorials starts with quarried granite blocks, which are
sawed into slabs of varying thicknesses with computer operated diamond saws and
wire saws at Company saw plants. Once a block has been cut into slabs, the slabs
are transported to nearby manufacturing plants such as the Company's Craftsman
Center in Barre, Vermont. At the manufacturing plant, slabs are manufactured
into memorials and other products.
To manufacture a granite slab four to twelve inches thick into a memorial,
the slabs are first polished at the manufacturing plant by various automatic
polishing machines. Polished slabs are then inspected for flaws and defects and
dimensioned with a hydraulic guillotine machine. Granite is like wood in that it
splits uniformly along the grain. After dimensioning, the granite pieces are
taken to stations to be shaped by stonecutting wire saws, diamond saws and
carborundum wheels. Once shaped, memorials may be hand-carved into virtually any
desired shape. This hand carving is generally done by the Company. The final
step in memorial manufacturing is to sandblast the semi-finished memorial with a
silicon carbide abrasive which etches the desired design into the memorial. This
sandblasting step may be done by the Company or a retailer. Once complete, the
memorial is inspected and branded products are then sandblasted with the Rock of
Ages or other seal. Finished products are then crated and shipped to customers.
In addition to granite memorials, the Company also manufactures precision
industrial granite products, such as machine bases and surface plates, which are
utilized in the automotive, aeronautic, computer, machine tool, optical,
precision grinding and inspection industries, as well as granite press rolls
used in the manufacture of paper. These are small niche markets within the
granite industry with limited competition and limited growth prospects.
The Company's granite deposits in Georgia, Vermont, Pennsylvania, North
Carolina, South Carolina, Oklahoma and the Province of Quebec are expected to
continue to meet the Company's current and anticipated raw materials needs for
many years, and the Company believes it will continue to have access to adequate
quantities of other granite at competitive prices.
The Company has entered into a Supply and Distribution Agreement with
Missouri Red Quarries, Inc., the owner of Keystone immediately prior to the
Keystone Acquisition ("Missouri Red"), and G. Thomas Oglesby, Jr., who controls
Missouri Red (the "Missouri Red Supply Agreement"), and a Supply and
Distribution Agreement with Keystone Granite Company, Inc., an affiliate of
Missouri Red ("KGCI"), and Missouri Red (the "Keystone Supply Agreement", and,
together with the Missouri Red Supply Agreement, the "Supply Agreements"). Under
the Missouri Red Supply Agreement, Missouri Red has agreed, for a 20-year term,
to supply the Company at specified prices with the Company's requirements of
Missouri Red granite blocks for memorial use, and has appointed the Company as
its exclusive distributor to buy and sell all grades of Missouri Red granite for
memorial use in the specified territory. The Company has agreed to purchase
certain minimum annual amounts of Missouri Red granite blocks, and such supply
arrangements are exclusive for memorial use so long as the Company purchases
certain minimum amounts of Missouri Red granite blocks within specified periods
of time, provided that in any event the Company has a first priority to
34
<PAGE> 36
purchase all monumental grade Missouri Red granite quarried by Missouri Red
during the term of the Missouri Red Supply Agreement. The terms of the Keystone
Supply Agreement are substantially similar to the Missouri Red Supply Agreement,
including the 20-year term, except that the Keystone Supply Agreement applies to
KGCI granite blocks, any other granite blocks quarried at the KGCI quarries and
Topaz granite blocks (collectively, "Topaz") and the Company has agreed to
purchase all monumental grade Topaz produced by KGCI during the term of the
Keystone Supply Agreement. Should the Company fail to purchase the specified
minimum quantity of Topaz, then KGCI has the right to sell to others subject to
the Company's right to supply priority. \Pursuant to the Supply Agreements, the
Company has a right of refusal with respect to any sale of the quarries, land,
buildings or equipment, or the stock of, Missouri Red or KGCI outside the
Oglesby family. The Company also has a mutual supply agreement (the "Dakota
Agreement") with Dakota Granite Company ("Dakota Granite"), whereby Dakota
Granite has agreed to supply the Company with its requirements for Dakota
Mahogany blocks, slabs and finished monuments, and the Company has agreed to
supply Dakota Granite with its requirements for Barre Gray blocks, slabs and
finished monuments, and each party has agreed to purchase such requirements
exclusively from the other. The Dakota Agreement is terminable by either party
upon 180-days prior notice.
Other significant raw materials which the Company uses in its manufacturing
operations include industrial diamond segments for saw blades and wires and
abrasives. There are a number of sources for these raw materials and the Company
believes it will continue to have access to adequate quantities of such
materials at competitive prices.
As noted above, regional and national trucking companies are readily
available to deliver granite memorials. Also, the Company owns eight trucks for
delivery of finished memorials to customers. In addition, as a result of the
Acquisitions, the Company will be able to ship full truckload quantities of
memorials from Barre to Elberton and back via dedicated trucks, which the
Company believes will improve the efficiency of national delivery of its
products. As a result, the Company believes it will have a significant
competitive cost advantage in the transportation of memorials.
MARKETING AND DISTRIBUTION; RETAILING
The Company is best known for its granite memorials. Rock of Ages produces
each of the standard types of memorials, including flush grass markers and
various types of upright memorials, and is recognized for its ability to
manufacture highly personalized granite memorials designed to meet the specific
needs of individual customers. For example, the Company has built a full size
granite replica of a Mercedes Benz for a customer.
Rock of Ages currently sells its granite memorial products to an estimated
1,835 independent memorial retailers in North America. Its flagship brands
bearing the Rock of Ages seal are sold only to approximately 495 independent
authorized Rock of Ages retailers who have written supply agreements with the
Company. These branded Rock of Ages memorials are made of the highest quality
granite available and are guaranteed in perpetuity to the customer and the
cemetery against defects in the granite (including discoloration) or
workmanship. The Company believes its warranty is the strongest in the memorial
industry.
The Company generally limits the number of retailers authorized to sell
branded Rock of Ages products in any geographic region. The Company seeks to
select as its authorized retailers large and well-established companies that can
provide high levels of design assistance, personalization and high quality
sandblast carving and lettering, as well as the service of setting the memorial
in the cemetery.
Authorized retailer agreements may be terminated by either the Company or
the retailer upon 30 days' notice. Under these agreements, the authorized
retailer is free to purchase granite memorials from any source, but the Company
expects its authorized retailers to promote the Rock of Ages brand and purchase
reasonable quantities of its branded and unbranded granite memorials annually.
Most authorized Rock of Ages retailers purchase both branded and lower-priced
unbranded memorials from the Company. The Company also supplies private label
and unbranded granite memorials not bearing the various Rock of Ages seals to a
large number of other retailers.
The Company's growth strategy principally involves vertically integrating
forward into retailing. Pursuant to the Keith Acquisition, the Company will
acquire what it believes is one of the largest retailers of granite
35
<PAGE> 37
memorials in the United States. Upon the closing of the Keith Acquisition, John
E. Keith, a principal owner and president of Keith Monument with over 30 years
experience in granite memorial retailing, will head the Company's retailing
operations. Mr. Keith will oversee the implementation of the Company's strategy
to significantly expand its retail operations both through other acquisitions of
other independent retailers and by pursuing strategic alliances with funeral
home and cemetery owners, including consolidators.
The Company will seek to acquire well established full service granite
memorial retailers with experienced personnel and strong market share in their
marketing region, including both its existing authorized Rock of Ages retailers
and other independent retailers. All owned retailers will be positioned as Rock
of Ages retailers and will offer Rock of Ages branded products as well as other
brands provided by the Company. The Company recognizes that certain of its
customers, including both authorized Rock of Ages retailers and its other
retailers, will prefer to remain as independently owned retailers or may not be
viable acquisition targets for the Company due to price, size, location or other
reasons.
The Company believes the opportunity to become a part of an integrated
quarrier, manufacturer and retailer of granite memorials promoting Rock of Ages
branded memorials will be an attractive option for many granite memorial
retailers who are currently customers of the Company. Likewise, the Company
believes its improved knowledge of the retail market gained from owning
retailers and the presence of John E. Keith, a prominent memorial retailer, as
an officer and director will help it to better serve and be more responsive to
the needs of its customers who remain independently owned. Since most
independent retailers have competed with Rock of Ages authorized retailers for
many years, the Company believes that the establishment of an owned Rock of Ages
retail network through acquisition of existing granite memorial retail outlets
should not disrupt the market in a fashion that would occur if a new entrant to
the market entered the business or a manufacturer established new outlets
instead of acquiring existing outlets.
COMPETITION
The granite memorial industry is highly competitive. The Company competes
with other granite quarriers and manufacturers in the sale of granite blocks on
the basis of price, color, quality, geographic proximity, service, design
availability and availability of supply. All of the Company's colors of granite
are subject to competition from granite blocks of similar color supplied by
quarriers located throughout the world.
There are approximately 140 manufacturers of granite memorials in North
America. There are also manufacturers of granite memorials in India, South
Africa, China and Portugal who sell finished memorials in North America. The
Company competes based upon price, breadth of product line and design
availability as well as production capabilities and delivery options. The
Company's quarrying and manufacturing competitors include both domestic and
international companies, some of which may have greater financial, technical,
manufacturing, marketing and other resources than the Company. Additionally,
foreign competitors of the Company may have access to lower cost labor and
better commercial deposits of memorial grade granite, and may be subject to less
restrictive regulatory requirements than the Company. Companies in South Africa,
India, China and Portugal manufacture and export finished granite memorials into
North America. See "Risk Factors -- Competition."
The competition for retail sales of granite memorials is also intense and
is based on price, quality, service, design availability and breadth of product
line. Competitors include funeral home and cemetery owners, including
consolidators, which have greater financial resources than the Company as well
as approximately 3,000 independent retailers of granite memorials located
outside funeral homes and cemeteries. See "Risk Factors -- Relationships with
Retailers".
PATENTS, TRADEMARKS AND LICENSES
The Company holds a number of domestic and foreign patents, trademarks and
copyrights, including the original registered trademark "Rock of Ages" which the
Company first registered in 1914. The Company believes the loss of a single
patent, trademark or copyright, other than the "Rock of Ages" trademarks, would
not have a material adverse effect on the Company's business, financial
condition or results of operations.
36
<PAGE> 38
EMPLOYEES
As of August 7, 1997, the Company had approximately 580 employees. The
Company believes its relationship with its employees is good. A significant
number of the Company's employees in Barre and Canada are represented by one of
two labor unions. Some of the Company's employees in Elberton are also
represented by a union. The Company has recently entered into collective
bargaining agreements with its employees in Barre which are scheduled to expire
in 2000, and the Company's collective bargaining agreements with its employees
in Canada are scheduled to expire in 1999.
PROPERTIES
Following consummation of the Elberton Acquisitions, the Company will own
the following quarry and manufacturing properties:
<TABLE>
<CAPTION>
PROPERTY FUNCTION
- --------------------------------------------- ---------------------------------------------
<S> <C>
VERMONT
Barre
Quarry Properties
E. L. Smith Quarry.................... Quarrying of dimensional Barre Gray granite
blocks
Adam-Pirie Quarry..................... Quarrying of dimensional Barre Gray granite
blocks
Manufacturing Properties
Associated Saw Plant.................. Slabbing of granite blocks
Rock of Ages Manufacturing Plant...... Manufacturing of memorials
Press Roll Production Plant........... Manufacturing of granite press rolls
Rock of Ages Saw Plant #1............. Slabbing of granite blocks
Lawson Production Plant............... Slabbing of granite blocks and memorials
production facility
Bethel
Quarry Properties
Bethel Quarry......................... Quarrying of dimensional Bethel White granite
blocks
GEORGIA
Madison County
Quarry Properties
Royalty/Berkeley Quarries............. Quarrying of dimensional Royalty Blue and
Berkeley Blue granite blocks
Oglethorpe County
Caprice Quarry........................ Quarrying of dimensional Caprice Blue blocks
Millstone Quarry...................... Quarrying of dimensional Millstone Gray
Elberton
Manufacturing Properties
Southern Mausoleum Plant.............. Manufacturing of memorials
Keystone Memorials Plant.............. Manufacturing of memorials
Keywest Plant......................... Manufacturing of memorials
Childs & Childs Plant................. Manufacturing of memorials
CANADA
Stanstead, Quebec
Quarry Properties
Stanstead Quarry...................... Quarrying of dimensional Stanstead Gray
granite blocks
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
PROPERTY FUNCTION
- --------------------------------------------- ---------------------------------------------
<S> <C>
Guenette, Quebec
Quarry Properties
Laurentian Quarry..................... Quarrying of dimensional Laurentian Rose
granite blocks
Beebe Plain, Quebec
Manufacturing Properties
Rock of Ages Manufacturing Plant...... Manufacturing of memorials
Adru Manufacturing Plant.............. Manufacturing of memorials
PENNSYLVANIA
St. Peters
Quarry Properties
American Black Quarry................. Quarrying of dimensional black granite blocks
Manufacturing Properties
Saw Plant............................. Slabbing of granite blocks
NORTH CAROLINA
Salisbury
Quarry Properties
Salisbury Pink Quarry................. Quarrying of dimensional Salisbury Pink
granite blocks
Manufacturing Properties
Carolina Plant........................ Manufacturing of flush and granite under
bronze markers
OKLAHOMA
Mill Creek
Quarry Properties
Autumn Rose Quarry.................... Quarrying of dimensional Autumn Rose granite
blocks
SOUTH CAROLINA
Kershaw County
Quarry Properties
Kershaw Quarry........................ Quarrying of dimensional Kershaw granite
blocks
Lancaster County
Quarry Properties
Coral Gray Quarry..................... Quarrying of dimensional Coral Gray granite
blocks
</TABLE>
38
<PAGE> 40
The following table sets forth certain information relating to the
Company's quarry properties. Each of the quarries listed below: (i) is owned by
the Company (other than the Kershaw quarry, which is leased with 40 years
remaining on the lease); (ii) is an open-pit quarry; (iii) contains granite that
is suitable for extraction as dimension granite for memorial or other use; (iv)
is serviced by electricity provided by local utility companies (other than the
Bethel quarry which is serviced by internal generators); and (v) has adequate
and modern extraction and other equipment. The Company presently has no
exploration plans in place.
<TABLE>
<CAPTION>
APPROXIMATE DATE NET SALEABLE
OF COMMENCEMENT PRIOR OWNER, MEANS OF TOTAL COST OF RESERVES(1)
QUARRY OF OPERATIONS (DATE ACQUIRED) ACCESS EACH PROPERTY (CUBIC FEET)
- ------------------- ----------------- --------------------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
E.L. Smith......... 1880 E.L. Smith Quarry Co. Paved road $ 7,562,676 2,460,000,000
(1948)
Adam-Pirie......... 1880 J.K. Pirie Quarry (1955) Paved road $ 4,211,363 985,000,000
Bethel............. 1900 Woodbury Granite Company, Dirt road $ 174,024 76,665,000
Inc. (1957)
Royalty/Berkeley... 1923 Coggins Granite (1991) Paved road $ 2,794,500 6,695,000
Millstone.......... 1985 Coggins Granite (1991) Paved road $ 1,195,900 5,663,000
Caprice............ 1968 Caprice Blue Quarry Paved road $ 0 No estimate
Inc.(1997)
Stanstead.......... 1920 Brodies Limited and Paved road $ 505,453 32,670,000
Stanstead Granite Company
(1960)
Laurentian......... 1944 Brodies Limited (1960) Paved road $ 860,115 3,920,000
American Black..... 1973 Pennsylvania Granite Inc. Paved road $ 2,900,000 14,701,000
(1997)
Salisbury.......... 1918 Pennsylvania Granite Inc. Paved road $ 3,886,592 19,602,000
(1997)
Autumn Rose........ 1969 Autumn Rose Quarry Inc. Paved road $ 200,000 735,000
(1997)
Kershaw............ 1955 Pennsylvania Granite Inc. Paved road $ 200,000 635,000
(1997)
Coral Gray......... 1955 Matthews International Paved road $ 200,000 No estimate
Corporation (1992)
</TABLE>
- ---------------
(1) Net saleable reserves are based on internal Company estimates, except for
the reserves for the E.L. Smith, Adam-Pirie and Bethel quarries, which are
based on independent assessments by CA Rich Consultants, Inc.
In addition, upon consummation of the Keith Acquisition, the Company will
own or lease seventeen retail outlets in Kentucky, and a sandblasting facility
in Elizabethtown, Kentucky.
REGULATION
The Company's quarry and manufacturing operations are subject to
substantial regulation by federal and state governmental statutes and agencies,
including OSHA, the Mine Safety and Health Administration and similar state and
Canadian authorities. The Company's operations are also subject to extensive
laws, and regulations administered by the EPA and similar state and Canadian
authorities for the protection of the environment, including but not limited to
those relating to air and water quality, solid and hazardous waste handling and
disposal. These laws and regulations may require parties to fund remedial action
or to pay damages regardless of fault. Environmental laws and regulations may
also impose liability with respect to divested or terminated operations even if
the operations were divested or terminated many years ago. In addition, current
and future environmental or occupational health and safety laws, regulations or
regulatory interpretations may require significant expenditures for compliance
which could require the Company to modify or curtail its operations. The Company
cannot predict the effect of such laws, regulations or regulatory
interpretations on its business, financial condition, results of operations.
While the Company expects to be able to continue to comply, in all material
respects, with existing laws and regulations, any material non-compliance could
have a material adverse affect on the Company's business, financial condition
and results of operations.
39
<PAGE> 41
LEGAL MATTERS
The Company is a party to legal proceedings that arise from time to time in
the ordinary course of its business. While the outcome of these proceedings
cannot be predicted with certainty, management does not expect these matters to
have a material adverse effect on the Company.
The Company carries insurance with coverages that it believes to be
customary in its industry. Although there can be no assurance that such
insurance will be sufficient to protect the Company against all contingencies,
management believes that its insurance protection is reasonable in view of the
nature and scope of the Company's operations.
40
<PAGE> 42
MANAGEMENT
DIRECTORS AND OFFICERS
Certain information concerning directors, executive officers and other
officers of the Company is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
George R. Anderson........................ 57 Senior Vice President, Chief Financial
Officer, Treasurer, Director
James L. Fox(1)........................... 45 Director
Peter A. Friberg.......................... 46 Senior Vice President -- Memorial Sales,
Director
Mark A. Gherardi.......................... 39 Senior Vice President -- Barre and Canada
Manufacturing Operations, Director
Jon M. Gregory............................ 48 President -- Quarry Division, Director
John E. Keith(1).......................... 50 President -- Retail Division, Director
Richard C. Kimball........................ 57 President -- Memorials Division, Vice
Chairman of the Board of Directors
G. Thomas Oglesby, Jr. ................... 51 President -- Keystone Division, Director
Kurt M. Swenson........................... 52 President and Chief Executive Officer,
Chairman of the Board of Directors
Charles M. Waite.......................... 64 Director
Fredrick E. Webster, Jr.(1)............... 59 Director
OTHER OFFICERS
John R. Monson............................ 56 Secretary and General Counsel
Robert Otis Childs, III(1)................ 38 President -- C&C Division
Albert Gherardi, Jr. ..................... 61 Vice President -- Facilities Management
Edward E. Haydon.......................... 57 Senior Vice President -- National Accounts
Manager
George T. Oglesby, III.................... 27 Vice President -- Keystone Division
Gerald E. Parrott......................... 48 Vice President -- Precision Products
</TABLE>
- ---------------
(1) Messrs. Childs, Fox, Keith and Webster will assume their respective
positions upon consummation of this offering.
George R. Anderson has been the Senior Vice President, Chief Financial
Officer and a director of the Company since 1984. Mr. Anderson joined the
Company in 1969 as the Chief Accountant and subsequently held the positions of
Controller and Treasurer. He has been a director of the Barre Granite
Association and a trustee of the Granite Group Insurance Trust and the Barre
Belt Multi-Employer Pension Plan. Mr. Anderson's term as a director will expire
in 1999.
Robert Otis Childs, III will become, upon consummation of the C&C
Acquisition, President -- C&C Division. Since 1983, Mr. Childs has been Vice
President for Marketing of C&C. He has been President and a member of the Board
of Directors of the American Monument Association, and is the President-elect
and a director of the Manufacturers and Wholesalers Division of the Monument
Builders of North America.
James L. Fox. Since 1989, Mr. Fox has been Executive Vice President and
General Manager of First Data Investor Services Group, a division of First Data
Corporation. Mr. Fox's term as a director of the Company will expire in 1999.
Peter A. Friberg has been Senior Vice President -- Memorial Sales, of the
Company since 1996 and a director of the Company since January 1996. From 1975
to 1995 Mr. Friberg owned and managed the Anderson-Friberg Company, a family
wholesale memorial manufacturing company, in Barre, Vermont,
41
<PAGE> 43
serving as President from 1991 to 1995. From 1991 to 1993, Mr. Friberg was
President of the Barre Granite Association. Mr. Friberg's term as a director of
the Company will expire in 1998.
Albert Gherardi, Jr. has been Vice President, Facilities Management of the
Company since 1996. Prior to 1996, Mr. Gherardi held various positions over a
40-year period with Lawson Granite Company, a memorials company that the Company
acquired in 1996. Albert Gherardi, Jr. is the father of Mark A. Gherardi.
Mark A. Gherardi has been Senior Vice President, Barre and Canada
Manufacturing Operations and a director of the Company since 1996. Prior to
1996, Mr. Gherardi held various sales and production positions over a 20-year
period with Lawson Granite Company. Mr. Gherardi's term as a director of the
Company will expire in 1998. Mark Gherardi is the son of Albert Gherardi, Jr.
Jon M. Gregory has been President -- Quarry Division since 1993 and has
been a director of the Company since 1995. Since joining the Company in 1975,
Mr. Gregory has served in various positions including Senior Vice President of
the Memorials Division, Manager of Manufacturing and line production supervisor.
Mr. Gregory's term as a director of the Company will expire in 1998.
Edward E. Haydon has been Senior Vice President -- National Accounts
Manager since 1996 and President of Rock of Ages Canada, Inc. since 1985. In
addition, Mr. Haydon was also Senior Vice President, Memorial Operations from
1991 to 1993. Mr. Haydon is also a Director of the Canadian Stone Association,
and a Trustee of the Manufacturers and Wholesalers Division of Monument Builders
of North America.
John E. Keith will become, upon consummation of the Keith Acquisition, the
President -- Retail Division and a director of the Company. Mr. Keith has been
an owner of and President of Keith Monument since 1989. From 1965 to 1989, Mr.
Keith held various officer positions with Keith Monument. Mr. Keith's term as a
director of the Company will expire in 2000.
Richard C. Kimball has been President -- Memorials Division, and Vice
Chairman of the Board of Directors since 1993 and a director of the Company
since 1986. Prior to joining the Company, Mr. Kimball served as a director,
principal and President of The Bigelow Company, Inc., a strategic planning and
investment banking firm from 1972 until 1993. Mr. Kimball's current term as a
director of the Company will expire in 2000.
John R. Monson has been Secretary of the Company since 1984 and General
Counsel of the Company since August, 1996. Since 1974, Mr. Monson has been a
partner, director and member of Wiggin & Nourie, P.A., a law firm located in
Manchester, New Hampshire that has represented the Company since 1984.
G. Thomas Oglesby, Jr. became the President -- Keystone Division and a
director of the Company in connection with the consummation of the Keystone
Acquisition in June 1997. Since 1982, Mr. Oglesby has been President of Keystone
Memorials Inc. Mr. Oglesby was a member of the Board of Directors and served
four separate terms as President of the Elberton Granite Association from 1979
until 1996. He is a director of the American Monument Association and the
Manufacturers and Wholesalers Division of the Monument Builders of North
America. He is the father of George T. Oglesby, III. Mr. Oglesby's current term
as a director of the Company will expire in 1999.
George T. Oglesby, III was elected Vice President -- Keystone Division in
connection with the consummation of the Keystone Acquisition in June 1997. Since
1992, Mr. Ogelsby has held various sales and management positions with Keystone
Memorials Inc. He is a member of the Board of Directors of the Elberton Granite
Association.
Gerald E. Parrott has been Vice President -- Precision Products since 1992.
From 1976 to 1992 he was Chief Engineer of the Company.
Kurt M. Swenson has been the President and Chief Executive Officer and
Chairman of the Board of Directors of the Company since 1984. Mr. Swenson has
been the Chief Executive Officer and a director of Swenson Granite Company, Inc.
since 1974. He is also a director of the American Monument Association, the
Funeral and Memorial Information Council, the National Building Granite
Quarriers Association and Group Polycor International. Mr. Swenson is also a
director and the President of the StonExpo Federation and a
42
<PAGE> 44
trustee of the Manufacturers and Wholesalers' Division of Monument Builders of
North America. Mr. Swenson's current term as a director of the Company will
expire in 2000.
Charles M. Waite has been a director of the Company since 1985. Since 1989,
Mr. Waite has been managing partner of Chowning Partners, a financial consulting
firm that provides consulting services to New England companies. Mr. Waite's
current term as a director will expire in 2000.
Fredrick E. Webster, Jr., Ph.D. has been a Professor of Management at the
Amos Tuck School of Business Administration of Dartmouth College since 1965. He
is also a management consultant and lecturer. Dr. Webster serves as a director
of Vermont Public Radio and the American Marketing Association. He is also a
member of the Corporation of Mary Hitchcock Memorial Hospital. Mr. Webster's
term as a director will expire in 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The principal function of the Audit Committee, which, upon consummation of
this offering, will consist of Messrs. Fox and Waite, is to endeavor to assure
the integrity and adequacy of financial statements issued by the Company. It is
intended that the Audit Committee will review internal auditing systems and
procedures as well as the activities of the public accounting firm performing
the external audit.
The principal function of the Compensation Committee, which, upon
consummation of this offering, will consist of Messrs. Fox, Waite and Webster,
is to review periodically the suitability of the remuneration arrangements
(including benefits) for the executive officers of the Company and to administer
the 1994 Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee of the Board of Directors was
comprised of Kurt Swenson, Guy A. Swenson, Jr. and Charles M. Waite. During his
1996 service on the Compensation Committee, Mr. Swenson was the President and
Chief Executive Officer of the Company and Mr. Swenson participated in all
compensation decisions, including those related to his own compensation.
COMPENSATION OF DIRECTORS
Directors who are not also officers of the Company are paid annual
directors' retainers of $5,000, and $250 for each meeting of the Board,
including committee meetings. Directors are also eligible for stock option
grants under the 1994 Plan.
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<PAGE> 45
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the Chief
Executive Officer of the Company and each of the four other most highly
compensated executive officers of the Company (the "Named Executive Officers")
for the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS(#) COMPENSATION(1)
- ---------------------------------- ---- --------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Kurt M. Swenson................... 1996 $304,320 $15,220 12,500 $ 1,050
President, Chief Executive
Officer, Chairman of the Board
of Directors
Richard C. Kimball................ 1996 $204,360 $14,000 12,500 $ 1,050
President -- Memorials Division,
Vice Chairman of the Board of
Directors
George R. Anderson................ 1996 $154,440 $10,500 25,000 $ 1,050
Senior Vice President, Chief
Financial Officer, Director
Jon M. Gregory.................... 1996 $153,360 $10,500 50,000 $ 1,050
President -- Quarry Division,
Director
Mark A. Gherardi.................. 1996 $140,040 $12,500 75,000 --
Senior Vice President -- Barre
and Canada Manufacturing
Operations, Director
</TABLE>
- ---------------
(1) In each case, represents a matching contribution under the Company's 401K
plan.
STOCK OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during the year ended December 31, 1996 by the Company to the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
------------------------------------------------------- RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR(2) PER SHARE(3) DATE 5% 10%
- ---------------------------- ---------- -------------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kurt M. Swenson............. 12,500 2.1% $ 4.12 12/31/01 $ 14,229 $ 31,441
Richard C. Kimball.......... 12,500 2.1% $ 3.74 12/31/01 12,916 28,541
George R. Anderson.......... 25,000 4.3% $ 3.74 12/31/01 25,832 59,083
Jon M. Gregory.............. 50,000 8.5% $ 3.74 12/31/01 51,665 114,165
Mark A. Gherardi............ 75,000 12.8% $ 3.59 01/01/01 74,389 164,380
</TABLE>
- ---------------
(1) The options represent the right to acquire Class B Common Stock, which is
convertible on a share-for-share basis into Class A Common Stock.
(2) Based on an aggregate of 587,500 options granted to employees and directors
of the Company in fiscal 1996, including the Named Executive Officers.
(3) The exercise price of each option was equal to the fair market value of the
Common Stock on the date of grant as determined by the Board of Directors.
(4) These amounts represent certain assumed annual rates of appreciation
calculated from the exercise price, as required by the rules of the
Securities and Exchange Commission. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future performance
of the Common Stock. There can be no assurance that the amounts reflected in
the table will be the actual amounts achieved.
44
<PAGE> 46
The following table sets forth information concerning the fiscal year-end
value of unexercised options held at December 31, 1996 by each of the Named
Executive Officers, using the exercise price of options granted in December,
1996 as the fiscal year-end value per share of Common Stock. Each of the stock
options set forth below represents the right to acquire Class B Common Stock.
During 1996, no stock options were exercised by any of the Named Executive
Officers. The Company has not granted any stock appreciation rights.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, 1996 IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1996
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Kurt M. Swenson............................... 62,500 50,000 $ 66,000 $ 44,000
Richard C. Kimball............................ 47,500 40,000 60,300 40,200
George R. Anderson............................ 35,000 40,000 40,200 26,800
Jon M. Gregory ............................... 25,000 50,000 20,100 13,400
Mark A. Gherardi.............................. 15,000 60,000 2,250 9,000
</TABLE>
PENSION PLANS
The Company maintains a qualified pension plan (the "Pension Plan"), and
non-qualified salary continuation agreements (the "Salary Continuation
Agreements") for certain executive officers of the Company. The Company's
Pension Plan is noncontributory and provides benefits based upon length of
service and final average earnings. Generally, employees age 21 with one year of
continuous service are eligible to participate in the retirement plan. The
annual pension benefits shown for the qualified plan assume a participant
attains age 65 during 1997 and retires immediately. The Employee Retirement
Income Security Act of 1974 places limitations on the compensation used to
calculate pensions and on pensions which may be paid under federal income tax
qualified plans, and some of the amounts shown on the following table may exceed
the applicable limitations. Such limitations are not currently applicable to the
Salary Continuation Agreements.
The following table shows the total estimated annual retirement benefits
payable upon normal retirement under the Pension Plan for the Named Executive
Officers at the specified executive remuneration and years of continuous
service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL AVERAGE
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
---------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000.................... $ 39,492 $ 52,656 $ 65,820 $ 78,984 $ 78,984
$150,000.................... $ 47,742 $ 63,656 $ 79,570 $ 95,484 $ 95,484
$175,000.................... $ 55,992 $ 74,656 $ 93,320 $111,984 $111,984
$200,000.................... $ 64,242 $ 85,656 $107,070 $128,484 $128,484
$225,000.................... $ 72,492 $ 96,656 $120,820 $144,984 $144,984
$250,000.................... $ 80,742 $107,656 $134,570 $161,484 $161,484
$275,000.................... $ 88,992 $118,656 $148,320 $177,984 $177,984
$300,000.................... $ 97,242 $129,656 $194,484 $194,484 $194,484
$325,000.................... $105,492 $140,656 $175,820 $210,984 $210,984
$350,000.................... $113,742 $151,656 $189,570 $227,484 $227,484
$375,000.................... $121,992 $162,656 $203,320 $243,984 $243,984
</TABLE>
45
<PAGE> 47
These calculations are based on the retirement formula in effect as of
December 31, 1996, which provides an annual life annuity at age 65 equal to 1.8%
of a participant's final five-year average compensation (excluding bonus) plus
.4% of a participant's final five-year average compensation in excess of Social
Security Covered Compensation times years of service to a maximum of 30 years.
Estimated years of continuous service for each of the Named Executive Officers,
as of December 31, 1996 and rounded to the full year, are: Mr. G. Anderson, 28
years; Mr. J. Gregory, 21 years; Mr. M. Gherardi, 16 years; Mr. R. Kimball, 4
years; and Mr. K. Swenson, 13 years.
In addition, the Company's Salary Continuation Agreements provide for
supplemental pension benefits to certain executive officers of the Company,
including the Named Executive Officers. The following table sets forth the
supplemental pension benefits for the Named Executive Officers.
<TABLE>
<CAPTION>
ANNUAL
TOTAL YEARS RETIREMENT
ANNUAL BASE OF SERVICE BENEFIT
NAME COMPENSATION AT AGE 65 AT AGE 65
------------------------------------------------ ------------ ----------- ----------
<S> <C> <C> <C>
M. Gherardi..................................... $140,000 27 $ 22,680
G. Anderson..................................... $154,440 35 $ 32,432
R. Kimball...................................... $204,360 12 $ 24,523
K. Swenson...................................... $304,320 26 $ 87,036
J. Gregory...................................... $153,360 39 $ 35,886
</TABLE>
These calculations are based on individual Salary Continuation Agreements,
which provide a 100% joint and survivor annuity at age 65 equal to a percentage,
ranging from .6% to 1.1%, of a participant's highest annual base compensation
times full years of service. The percentage range has been determined by the
Board of Directors. There is no compensation increases assumed in these
calculations.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Kurt M. Swenson
(the "Swenson Employment Agreement") for retention of his services as President
and Chief Executive Officer of the Company. The term of the Swenson Employment
Agreement commences on the date of consummation of the offering (the
"Commencement Date") and continues until the fifth anniversary thereof, provided
that on the third and each subsequent anniversary of the Commencement Date such
term will automatically be extended for one additional year, unless, not later
than ninety days prior to the expiration of the term, the Company or Mr. Swenson
gives notice that the term will not be extended. The Swenson Employment
Agreement provides for continued payment of salary and benefits over the
remainder of the term if Mr. Swenson's employment is terminated by the Company
without Cause (as defined in the Swenson Employment Agreement) or as a result of
death or disability or by Mr. Swenson for Good Reason (as defined in the Swenson
Employment Agreement). The Swenson Employment Agreement also provides for a lump
sum payment to Mr. Swenson equal to the sum of (i) accrued but unpaid salary,
and a prorated bonus amount equal to the greater of the largest annual bonus
paid to Mr. Swenson during the prior three years and the annual bonus payable in
respect of the most recently completed fiscal year (the "Highest Annual Bonus"),
through the date of termination and (ii) three times the sum of (A) his then
annual salary and (B) Highest Annual Bonus, and for continuation of benefits for
three years, if Mr. Swenson's employment is terminated by the Company (other
than for Cause, death or disability) during the twelve-month period following,
or prior to but in connection with, or by Mr. Swenson during the twelve-month
period following, a Change in Control (as defined in the Swenson Employment
Agreement). In the event of such a termination, Mr. Swenson may elect in lieu of
the lump sum payment described above, to receive in a lump sum or over the then
remaining term of the Swenson Employment Agreement, an amount equal to the total
amount he would have been entitled to receive if his employment had been
terminated by the Company Without Cause or by Mr. Swenson for Good Reason. If
any payment or distribution by the Company to or for the benefit of Mr. Swenson
under the Swenson Employment Agreement would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
Mr. Swenson with respect to such excise tax, then Mr. Swenson will
46
<PAGE> 48
generally be entitled to receive an additional payment such that after payment
by Mr. Swenson of all taxes, Mr. Swenson retains an amount of the additional
payment equal to the excise tax imposed.
The Company has entered into an employment agreement with G. Thomas
Oglesby, Jr. and George T. Oglesby, III and will enter into employment
agreements with each of Robert Otis Childs, III, John E. Keith and Roy H. Keith,
Jr. (such persons, together with G. Thomas Oglesby, Jr., being referred to as
the "Acquisition Executives" and such employment agreements with the Acquisition
Executives being referred to collectively as the "Acquisition Employment
Agreements"), upon consummation of the C&C Acquisition and Keith Acquisition.
The Acquisition Employment Agreement with Mr. Oglesby provides for an initial
five-year term commencing on June 27, 1997, and each of the other Acquisition
Employment Agreements provides, in effect, for an initial five-year term
commencing on the date of the offering. Pursuant to the Acquisition Employment
Agreements, the Executives will hold the respective positions listed for such
persons under "Management -- Directors and Officers". The Acquisition Employment
Agreements provide for benefits of the type generally provided to key executives
of the Company, and for continued payment of salary and benefits over the
remainder of the term if the Executive's employment is terminated by the Company
without Cause. The Acquisition Employment Agreements and related undertakings
generally prohibit the Executives from competing with the Company during the
term of employment and for two years thereafter, and contain customary
confidentiality provisions in favor of the Company. In addition, the Acquisition
Employment Agreements of G. Thomas Oglesby, Jr. and John E. Keith provide that,
so long as they remain employed under their respective Acquisition Employment
Agreements, they will be nominated for election to the Board of Directors of the
Company, subject to certain conditions. The Company will also enter into
employment agreements with Richard C. Kimball, George R. Anderson, Jon Gregory
and Edward E. Haydon (the "Officer Employment Agreements"), effective upon
consummation of this offering. The Officer Employment Agreements will contain
substantially the same terms as the Acquisition Employment Agreements, except
that they will not include any right to be nominated for election to the
Company's Board of Directors.
In connection with the acquisitions of Lawson Granite Company and the
Anderson Friberg Company, the Company on January 1, 1996 entered into five-year
employment agreements (the "Lawson-AFCO Employment Agreements") with Peter
Friberg, Albert Gherardi, Jr., Mark Gherardi and Paula Plante (the "Lawson-AFCO
Employees") providing for the employment of such persons in their current
positions. The Lawson-AFCO Employment Agreements contain substantially the same
terms as the Acquisition Employment Agreements except that they provide for
certain severance payments upon certain conditions occurring.
INCENTIVE PLAN
1994 Amended and Restated Stock Plan. Under the 1994 Plan, a total of
1,500,000 shares of Common Stock will be reserved for issuance to officers,
directors, employees and consultants of the Company and its subsidiaries. Awards
under the 1994 Plan made by the Board of Directors prior to the consummation of
this offering will be satisfied in shares of Class B Common Stock and awards
made under the 1994 Plan made on or after that date will be satisfied in shares
of Class A Common Stock. As of the date of this Prospectus, options for 862,500
shares of Class B Common Stock have been granted and were outstanding under the
1994 Plan and no such options have been exercised. Options for 383,252 shares of
Class A Common Stock will be granted in connection with the Acquisitions and to
two non-employee directors who will assume their positions upon consummation of
this offering. In addition, as of the date of this Prospectus, options to
acquire 312,500 shares of Class A Common Stock remained available for future
issuance under the 1994 Plan. Under the terms of the 1994 Plan, "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), "nonqualified stock options" or options which
do not qualify as ISOs ("NQSOs"), awards of Common Stock, and opportunities to
make direct purchases, of Common Stock ("Awards") may be granted by the Board of
Directors to employees (including officers and directors who are employees),
directors and consultants of the Company, except that ISOs may be granted only
to persons who are employees of the Company at the time the ISOs are granted.
Initially, each ISO will be exercisable over a period, determined by the
Board of Directors in its discretion, not to exceed ten years from the date of
grant, as required by the Code. In addition, in the case of an ISO granted to an
individual who, at the time such ISO is granted, owns shares of capital stock of
the
47
<PAGE> 49
Company representing more than ten percent of the total combined voting power of
all classes of stock of the Company, the exercise period for an ISO may not
exceed five years from the date of grant. Options may be exercisable during the
exercise period at such times, in such amount, in accordance with such terms and
conditions, and subject to such restrictions as are set forth in the option
agreement evidencing the grant of such options. The Board of Directors generally
has the right to accelerate the exercisability of any options granted under the
1994 Plan which would otherwise be unexercisable. Upon certain consolidations or
mergers, the board of directors of any entity assuming the obligations of the
Company may make equitable adjustments to the options, accelerate the
exercisability of options or terminate them in exchange for a cash payment.
The 1994 Plan shall expire at the end of the day on November 20, 2004,
except with respect to options or Awards outstanding on such date. The Board of
Directors may terminate the 1994 Plan sooner at any time or amend the Plan at
any time, subject to the terms of the 1994 Plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides that no director of the Company shall
be personally liable to the Company or to any stockholder for monetary damages
arising out of such director's breach of fiduciary duty, except to the extent
that the elimination or limitation of liability is not permitted by the Delaware
General Corporation Law. The Delaware General Corporation Law, as currently in
effect, permits charter provisions eliminating the liability of directors for
breach of fiduciary duty, except that such charter provisions may not eliminate
or limit the liability of directors for: (i) any breach of the director's duty
of loyalty to a corporation or its stockholders; (ii) any acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) any payment of a dividend or approval of a stock purchase or other
transaction that is illegal under Section 174 of the Delaware General
Corporation Law; or (iv) any transaction from which the director derived an
improper personal benefit. A principal effect of this provision of the
Certificate of Incorporation is to limit or eliminate the potential liability of
the Company's directors for monetary damages arising from any breach of their
duty of care, unless the breach involves one of the four exceptions described in
clauses (i) through (iv) of the immediately preceding sentence.
The Certificate of Incorporation and the Company's By-laws further provide
for the indemnification of the Company's directors and officers to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise discretionary.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
At the present time, there is no pending litigation or proceeding involving
any director, officer, employee or agent of the Company in which indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the closing of the offering, the Company will effect a
reorganization (the "Reorganization") as follows: (i) the reincorporation merger
of Rock of Ages Corporation, a Vermont corporation and the immediate predecessor
to the Company ("ROA Vermont"), with and into a newly-formed Delaware
corporation, with the Company surviving as a Delaware corporation (the
"Reincorporation Merger"), which occurred on August 12, 1997, whereby the Class
A and Class B Common Stock was created and each outstanding share of common
stock of ROA Vermont was converted into one half of a share of Class B Common
Stock; (ii) the merger of Swenson Granite Company ("Swenson Granite") with and
into the Company, with the Company as the surviving corporation (the "Swenson
Merger"), in which Swenson Granite's stockholders will receive 1,618.123 shares
of Class B Common Stock for each share of Swenson Granite capital stock held by
them; and (iii) immediately prior to the Swenson Merger, Swenson Granite will
distribute its curb and landscaping business to its stockholders (the "Swenson
Granite Distribution") through
48
<PAGE> 50
a pro rata distribution of all of the member interests in a newly formed limited
liability company to be named Swenson Granite Company LLC ("Swenson LLC").
Swenson Granite is a party to certain financing agreements of the Company
with CIT and is a co-maker and/or guarantor of all indebtedness of the Company
due to CIT (see "Management's Discussion and Analysis -- Liquidity and Capital
Resources"). Upon consummation of the Swenson Granite Distribution and the
offering, Swenson LLC will be released by CIT as a party, co-maker and/or
guarantor of the Company's indebtedness to CIT, and the Company will remain
liable with respect thereto. As at June 30, 1997, the Company carried on its
books approximately $4.6 million as due from Swenson Granite with respect to
borrowings by the Company under these credit facilities and advanced by the
Company to Swenson Granite. Of this amount, approximately $3.3 million will not
be assumed or repaid by Swenson LLC in connection with the Swenson Granite
Distribution and will remain an obligation of the Company. The balance of
approximately $1.3 million, together with any net advances from the Company to
Swenson Granite from and after June 30, 1997 to the date of the Swenson Granite
Distribution and the consummation of the offering, will be repaid by Swenson LLC
to the Company on or before December 31, 1997.
In connection with the Company's acquisition of Lawson Granite Company and
Anderson Friberg Company in December 1995, Swenson Granite is obligated under
certain notes and agreements related thereto (the "Lawson-Anderson Friberg
Obligations"). Except for certain employment agreement and other obligations to
Robert F. Pope (the "Pope Obligations"), the Chief Operating Officer of Swenson
Granite who, effective upon the Swenson Granite Distribution, will become
President and Chief Executive Officer of Swenson LLC, none of the
Lawson-Anderson Friberg Obligations, including but not limited to a note payable
to Paula Plante in the amount of $310,000, will be assumed by Swenson LLC and
will become direct obligations of the Company as a result of the Swenson Merger.
The Company will indemnify Swenson LLC with respect to such obligations, other
than the Pope Obligations as to which Mr. Pope will release, and Swenson LLC
will provide an indemnity to, Swenson Granite and the Company.
Swenson LLC will own two granite quarries, one in Concord, New Hampshire
and other in Woodbury, Vermont. Both have been owned by Swenson Granite for more
than 40 years. The Company anticipates that it will continue to purchase
Woodbury granite from Swenson LLC at the same price Swenson LLC charges its
landscape manufacturing operations. The Company expects that it will continue to
be able to purchase all of the excess output of the Woodbury quarry (beyond that
required by Swenson LLC for its curb and landscaping operations) for resale for
both memorial and other uses. Because of the proximity of the Woodbury quarry to
Barre, Vermont, the Company has provided, and expects to continue to provide,
certain maintenance services and equipment to the Woodbury quarry. Both the
Company and Swenson LLC will have the right to terminate these services at any
time and the Company will have no obligation to purchase or continue to purchase
Woodbury granite from Swenson LLC. The Company's sales of Woodbury granite
provided by Swenson Granite represented less than 2% of 1996 sales of the
Company (less than 1% assuming the Acquisitions occurred as of January 1, 1996).
The Company believes these arrangements with Swenson LLC are as favorable, or
more favorable, than would be available from an unrelated party for comparable
granite blocks.
It is expected that, effective upon the Swenson Granite Distribution,
ongoing pension liabilities under the Pension Plan (which is sponsored jointly
by the Company and Swenson Granite) in respect of the employees of Swenson
Granite will be assumed by Swenson LLC, and appropriate assets, determined in
accordance with applicable law, will be transferred from the Pension Plan to a
pension plan established by Swenson LLC. It is anticipated that in connection
with the Swenson Granite Distribution, the 401(k) accounts of Swenson Granite
employees who participate in 401(k) plans jointly sponsored by the Company and
Swenson Granite will be "rolled-over" into a new 401(k) plan or plans
established by Swenson LLC.
Upon consummation of the Swenson Granite Distribution, Kurt M. Swenson, the
Company's Chairman and Chief Executive Officer, will own approximately 30% of
all outstanding member interests of Swenson LLC. Mr. Swenson, who has served as
Chairman of the Board and Chief Executive Officer of Swenson Granite since 1974,
will resign as President, Chief Executive Officer of Swenson Granite, effective
upon the consummation of the Swenson Granite Distribution. However, Mr. Swenson
will continue to serve as a non-
49
<PAGE> 51
officer Chairman of the Board of Swenson LLC, but will have no involvement with
the day to day operations of Swenson LLC. Neither Mr. Swenson nor any other
officer of the Company, will receive salary, bonus, expenses or other
compensation from Swenson LLC except for any pro rata share of earnings
attributable to their ownership interest.
In connection with the Keystone Acquisition, the Company entered into the
Supply Agreements with Missouri Red and KGCI (see "Business -- Quarrying and
Manufacturing Operations"). The Company believes the terms and conditions of the
Supply Agreements are as favorable as would be available from unrelated
suppliers. Also in connection with the Keystone Acquisition, the Company agreed
to grant to G. Thomas Oglesby, Jr. and George T. Oglesby, III, principal owners
and officers of Keystone, options under the 1994 Plan to purchase 75,000 shares
and 50,000 shares, respectively, at an exercise price per share equal to the
initial public offering price per share of the Class A Common Stock. See
"Management -- Directors and Officers."
In connection with the C&C Acquisition, the Company has agreed to grant to
Robert Otis Childs, III, one of the principal owners of C&C, an option under the
1994 Plan to purchase 75,000 shares of Class A Common Stock at an exercise price
per share equal to the initial public offering price per share of the Class A
Common Stock. See "Mangement -- Directors and Officers."
In connection with the Keith Acquisition, the Company agreed to (i) enter
into a five year triple net lease agreement with John E. Keith and Roy Keith,
Jr., the principal owners of Keith Monument, for office buildings and retail
locations containing 28,000 square feet at an annual rent of $120,000; and (ii)
grant to John E. Keith and Roy Keith, Jr. options under the 1994 Plan to
purchase an aggregate of 125,000 shares of Class A Common Stock at an exercise
price per share equal to the initial public offering price per share of the
Class A Common Stock. See "Management -- Directors and Officers."
Upon consummation of the offering, the Company will grant to each of James
L. Fox and Frederick E. Webster, Jr., each of whom will become non-employee
directors of the Company at that time, options under the 1994 Plan to purchase
29,126 shares of Class A Common Stock at an exercise price per share equal to
the initial public offering price per share of the Class A Common Stock.
The Company has adopted a policy pursuant to which any future transaction
with one of its officers, directors or affiliates will be on terms no less
favorable to the Company than could be obtained from unrelated third parties and
will be approved by a majority of the disinterested members of the Board of
Directors.
50
<PAGE> 52
PRINCIPAL AND SELLING STOCKHOLDERS
The following tables set forth certain information as to the beneficial
ownership of the Common Stock as of , 1997, and as adjusted to
reflect the sale of shares of Class A Common Stock offered hereby, by
(i) each person known by the Company to be the beneficial owner of 5% or more of
Common Stock; (ii) each director of the Company; (iii) each of the executive
officers of the Company; (iv) all directors and executive officers as a group;
and (v) each Selling Stockholder. Unless otherwise indicated, the Company
believes all persons listed have sole voting power and sole investment power
with respect to the shares shown.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED SHARES OF BENEFICIALLY OWNED
PRIOR TO OFFERING(2) CLASS A AFTER OFFERING(2)
NAME AND ADDRESS OF --------------------- COMMON STOCK ---------------------
BENEFICIAL OWNER(1) NUMBER PERCENT TO BE SOLD NUMBER PERCENT
- ------------------------------------- ---------- ------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C>
Kurt M. Swenson(3)(4)................ 1,123,989 27.5 -- 1,123,989
Kevin C. Swenson(4)(5)............... 1,061,489 25.9 -- 1,061,489
Richard C. Kimball(4)(6)............. 76,626 1.9 -- 76,626 *
Jon M. Gregory(4)(7)................. 54,126 1.3 -- 54,126 *
Missouri Red Quarries, Inc.(8)....... 263,441 6.4 -- 263,441
George R. Anderson(4)(9)............. 64,126 1.6 -- 64,126 *
Mark A. Gherardi(4)(10).............. 277,573 6.8 -- 277,573
Peter A. Friberg(4)(11)(17).......... 196,667 4.8 -- 196,667
John E. Keith(12).................... -- * -- 12,500
James L. Fox(12)..................... -- * -- 5,825
G. Thomas Oglesby, Jr.(13)........... 263,441 6.4 -- 278,441
George T. Oglesby, III(14)........... 263,441 6.4 -- 273,441
Frederick E. Webster, Jr.(12)........ -- * -- 5,825
Charles M. Waite(4).................. 29,126 * -- 29,126 *
Lois Swenson Moore Trust(15)......... 161,812 4.0
Melvin Friberg(16)................... 84,142 2.1
Merilyn Friberg(16).................. 77,670 1.9
Guy A. Swenson, III(15).............. 48,544 1.2
Karen Swenson Shue(15)............... 45,307 1.1
Guy A. Swenson, Jr.(15).............. 45,307 1.1
Peter B. Moore(15)................... 40,453 1.0
John D. Swenson(15).................. 32,362 *
George M. Karnedy.................... 29,126 *
Christian P. Swenson(15)............. 24,272 *
Jeanette Swenson Sumner Trust(15).... 19,417 *
Richard J. Vogelsang(15)............. 17,799 *
Susan S. Vogelsang(15)............... 9,709 *
J. Malcolm Swenson(15)............... 8,091 *
Paula G. Plante(17).................. 5,354 *
All directors and executive officers
as a group (11 persons)............ 2,085,674 51.0
</TABLE>
- ---------------
* Less than 1%.
(1) The business address of each director, executive officer and 5% stockholder
of the Company is c/o Rock of Ages Corporation, 772 Graniteville Road,
Graniteville, Vermont 05654.
(2) The listed persons hold Class B Common Stock except as otherwise specified.
Shares of Class B Common Stock held by the Selling Stockholders will
automatically convert into Class A Common Stock on a share-for-share basis
upon the sale by the Selling Stockholders of such shares pursuant to the
offering.
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<PAGE> 53
(3) Includes shares held by a trust for the benefit of the children of Kurt
M. Swenson of which John R. Monson is the sole trustee. Kurt M. Swenson is
the brother of Kevin C. Swenson. Mr. Swenson disclaims any voting power or
beneficial interest in these shares. Mr. Monson is Secretary and General
Counsel to the Company. Also includes 62,500 shares subject to stock
options exercisable within 60 days.
(4) Will be a director of Swenson LLC.
(5) Includes shares held by a trust for the benefit of the children of
Kevin C. Swenson of which John R. Monson is the sole trustee. Kevin C.
Swenson is the brother of Kurt M. Swenson. Mr. Swenson disclaims any voting
power or beneficial interest in these shares.
(6) Includes 47,500 shares subject to currently exercisable stock options.
(7) Includes 25,000 shares subject to currently exercisable stock options.
(8) Missouri Red Quarries, Inc. is 100% owned by G. Thomas Oglesby, Jr. G.
Thomas Oglesby, Jr. is an officer and the sole director of Missouri Red
Quarries, Inc. and is the father of George T. Oglesby, III, who is an
officer of Missouri Red Quarries, Inc. The shares owned by Missouri Red
Quarries, Inc. are also listed in the shares owned by G. Thomas Oglesby,
Jr., and by George T. Oglesby, III.
(9) Includes 35,000 shares subject to currently exercisable stock options.
(10) Includes 30,000 shares subject to currently exercisable stock options.
(11) Includes 30,000 shares subject to currently exercisable stock options.
(12) Represents shares of Class A Common Stock subject to stock options which
will be granted and exercisable upon consummation of the offering.
(13) Includes 263,441 shares owned by Missouri Red Quarries, Inc., of which G.
Thomas Oglesby, Jr. is an officer and director and George T. Oglesby, III
is an officer. Also includes 15,000 shares of Class A Common Stock subject
to options which will be granted and exercisable upon consummation of the
offering. G. Thomas Oglesby, Jr. is the father of George T. Oglesby, III.
(14) Includes 263,441 shares owned by Missouri Red Quarries, Inc., of which Mr.
Oglesby is an officer. Also includes 10,000 shares of Class A Common Stock
subject to stock options which will be granted and exercisable upon
consummation of the offering.
(15) The listed holder, or beneficiaries of the listed trusts are relatives of
Kurt M. Swenson and his brother Kevin C. Swenson.
(16) Melvin and Merilyn Friberg are Peter Friberg's parents.
(17) Includes 500 shares subject to currently exercisable stock options. Paula
Plante is Mark Gherardi's sister and Albert Gherardi, Jr.'s daughter.
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<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
The following summarizes the material terms of the capital stock of the
Company.
GENERAL
The authorized capital stock of the Company consists of 30,000,000 shares
of Class A Common Stock, par value $.01 per share, shares of which will be
issued and outstanding upon the consummation of this offering; 15,000,000 shares
of Class B Common Stock, par value $.01 per share, shares of which will be
issued and outstanding upon consummation of this offering; and 2,500,000 shares
of Preferred Stock, par value $.01 per share, none of which will be outstanding
upon consummation of this offering.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The shares of Class A Common Stock and Class B Common Stock are
substantially identical, except for voting rights and certain conversion rights,
as described below.
Voting Rights. Each share of Class A Common Stock entitles the holder to
one vote on each matter submitted to a vote of the Company's stockholders and
each share of Class B Common Stock entitles the holder to ten votes on each such
matter, in each case including the election of directors. Except as required by
applicable law, holders of the Class A Common Stock and Class B Common Stock
will vote together as a single class on all matters submitted to a vote of the
stockholders. Neither the Class A Common Stock nor the Class B Common Stock has
cumulative voting rights. See "Risk Factors -- Control by Existing Stockholders"
and "Anti-Takeover Effects of Certain Provisions of the Charter and By-laws and
of Delaware Law."
Any action that can be taken at a meeting of the stockholders may be taken
by written consent in lieu of the meeting if the Company receives consents
signed by stockholders having the minimum number of votes that would be
necessary to approve the action at a meeting at which all shares entitled to
vote on the matter were present. This could permit the holders of Class B Common
Stock to take all actions required to be taken by the stockholders without
providing the other stockholders the opportunity to vote or raise other matters
at a meeting.
Dividends. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends at the same rate if and when declared by the Board
of Directors out of funds legally available therefor, subject to the dividend
and liquidation rights of any Preferred Stock that may be issued and
outstanding.
If a dividend or distribution payable in Class A Common Stock is made on
the Class A Common Stock, the Company must also make a pro rata and simultaneous
dividend or distribution on the Class B Common Stock payable in shares of either
Class A Common Stock or Class B Common Stock. Conversely, if a dividend or
distribution payable in Class B Common Stock is made on the Class B Common
Stock, the Company must also make a pro rata and simultaneous dividend or
distribution on the Class A Common Stock payable solely in shares of Class A
Common Stock.
Conversion. Class A Common Stock has no conversion rights. Class B Common
Stock will be convertible into Class A Common Stock, in whole or in part, at any
time and from time to time at the option of the holder on the basis of one share
of Class A Common Stock for each share of Class B Common Stock converted. Each
share of Class B Common Stock will also automatically convert into one share of
Class A Common Stock upon transfer to any person or entity other than a
"Permitted Transferee." For this purpose, a Permitted Transferee is (i) a spouse
or lineal descendant of any person duly holding shares of Class B Common Stock
(a "Qualified Holder") and any spouse of such lineal descendant (all such
spouses and lineal descendants, collectively, "Family Members"), (ii) the
trustee of a trust for the sole benefit of a Qualified Holder or Family Member,
(iii) a partnership comprised exclusively of Qualified Holders or Family members
or other entity wholly owned by Qualified Holders or Family Members, or (iv) the
executor, administrator or personal representative of the estate of a Qualified
Holder or Family Member, or the guardian or conservator of a Qualified Holder or
any Family Member who has been adjudged disabled by a court of competent
jurisdiction.
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<PAGE> 55
Liquidation. In the event of liquidation of the Company, after payment of
the debts and other liabilities of the Company and after making provision for
the holders of Preferred Stock, if any, the remaining assets of the Company will
be distributable ratably among the holders of the Class A Common Stock and Class
B Common Stock treated as a single class.
Other Provisions. The holders of shares of the Common Stock are not
entitled to preemptive rights. Neither the Class A Common Stock nor the Class B
Common Stock may be subdivided or combined in any manner unless the other class
is subdivided or combined in the same proportion.
PREFERRED STOCK
The Board of Directors may, without further action by the Company's
stockholders, from time to time, direct the issuance of shares of Preferred
Stock in series and may, at the time of issuance, determine the rights,
preferences and limitations of each series. Satisfaction of any dividend
preferences of outstanding shares of Preferred Stock would reduce the amount of
funds available for the payment of dividends on shares of Common Stock. Holders
of shares of Preferred Stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of shares of Common Stock. Under certain
circumstances, the issuance of shares of Preferred Stock may render more
difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Company's securities
or the removal of incumbent management. The Board of Directors, without
stockholder approval, may issue shares of Preferred Stock with voting and
conversion rights which could adversely affect holders of shares of Common
Stock. Upon consummation of the offering, there will be no shares of Preferred
Stock outstanding, and the Company has no present intention to issue any shares
of Preferred Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CHARTER AND BY-LAWS AND OF DELAWARE
LAW
Charter and By-Laws
The Certificate of Incorporation and the By-laws, together with certain
provisions of Delaware law, contain certain provisions that could discourage
potential takeover attempts and make more difficult the acquisition of a
substantial block of the Common Stock. The Certificate of Incorporation provides
for a Board of Directors that is divided into three classes. The directors in
Class I hold office until the first annual meeting of stockholders following
this offering, the directors in Class II hold office until the second annual
meeting of stockholders following this offering, and the directors in Class III
hold office until the third annual meeting of stockholders following this
offering (or, in each case, until their successors are duly elected and
qualified or until their earlier resignation, removal from office for cause or
death), and, after each such election, the directors in each such class will
then serve in succeeding terms of three years and until their successors are
duly elected and qualified. The classification system of electing directors and
the ability of stockholders to remove directors only for cause may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of the Company and may maintain the incumbency of the Board of
Directors, as the classification of the Board of Directors generally increases
the difficulty of replacing a majority of the directors.
The Certificate of Incorporation authorizes the directors to issue, without
stockholder approval, shares of Preferred Stock in one or more series and to fix
the voting powers, designations, preferences and relative, participating,
optional or other special rights (and the qualifications, limitations or
restrictions of such preferences and rights) of the shares of each such series.
The By-laws provide that special meetings of the Company's stockholders may be
called only by the Chairman of the Board, (if there is one), or the President,
any Vice President, (if there is one), the Secretary or any Assistant Secretary,
(if there is one), and shall be called by any such officer at the written
request of a majority of the directors. The By-laws also provide that
nominations for directors may not be made by stockholders at any annual or
special meeting thereof unless the stockholder intending to make a nomination
notifies the Company of its intentions a specified number of days in advance of
the meeting and furnishes to the Company certain information regarding itself
and the intended nominee. The By-laws also require a stockholder to provide to
the Secretary of the Company advance notice of
54
<PAGE> 56
business to be brought by such stockholder before any annual or special meeting
of stockholders as well as certain information regarding such stockholder and
others known to support such proposal and any material interest they may have in
the proposed business. These provisions could delay stockholder actions that are
favored by the holders of a majority of the outstanding stock of the Company
until the next stockholders' meeting.
Delaware Anti-Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the time that such stockholder became an
interested stockholder, unless: (i) prior to such time, the board of directors
of the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) at or subsequent
to such time, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the interested stockholder. The application
of Section 203 may limit the ability of stockholders to approve a transaction
that they may deem to be in their best interests.
In general, Section 203 defines "business combination" to include: (i) any
merger or consolidation involving the corporation and the interested
stockholder; (ii) any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation to or with the interested stockholder; (iii)
subject to certain exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the effect
of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the receipt
by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person associated with, affiliated with or
controlling or controlled by such entity or person.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
55
<PAGE> 57
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering and the C&C Acquisition and Keith
Acquisition, the Company will have shares of Common Stock (
shares if the Underwriters' over-allotment option is exercised in full)
outstanding. The shares of Class A Common Stock ( shares if
the Underwriters' over-allotment option is exercised in full) offered hereby
will be freely tradable in the United States without restriction or further
registration under the Securities Act, unless purchased or held by "affiliates"
(as such term is defined in Rule 144) of the Company. All shares of
Class B Common Stock outstanding upon completion of this offering will be
"restricted securities" within the meaning of Rule 144 (the "Restricted
Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144 or 701
promulgated under the Securities Act, which are summarized below. Sales of the
Restricted Shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the Class A Common Stock. None
of the Restricted Shares will be eligible for sale in the public market upon the
effectiveness of the Registration Statement of which this Prospectus is a part
(the "Effective Date"). All of the Restricted Shares will be eligible for sale
in the public market 90 days after the Effective Date, subject to the provisions
of Rule 144 and the lock-up agreements described below, if applicable. In
addition, shares of Common Stock that are or will be subject to vested
options granted pursuant to the 1994 Plan will be available for sale 90 days
after the Effective Date, subject to compliance with Rule 701 and the lock-up
agreements described below, if applicable.
In general, under Rule 144, as currently in effect, beginning 90 days after
the Effective Date, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately shares immediately after
this offering); or (ii) the average weekly reported trading volume during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Further, the Commission has proposed an amendment to Rule 144 which would ease
some of the requirements relating to manner and notice of sale and accordingly,
if this proposal is adopted, shares would be sold more easily and with less
public notice than under the current rules.
In general, under Rule 701, beginning 90 days after the Effective Date,
certain shares issued upon the exercise of options granted by the Company prior
to the date of this Prospectus will also be available for sale in the public
market. Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates and non-affiliates to sell their Rule 701 shares under Rule 144
without complying with the holding period requirements of Rule 144. Rule 701
further provides that non-affiliates may sell such shares in the public market
in reliance on Rule 144 without having to comply with the public information,
volume limitation or notice provisions of Rule 144. In both cases, a holder of
Rule 701 shares is required to wait until 90 days after the date of this
Prospectus before selling such shares in the public market.
An aggregate of 1,500,000 shares of Common Stock will be reserved for
issuance to employees and directors of the Company pursuant to the 1994 Plan.
Currently, 862,500 shares of Class B Common Stock are issuable under existing
options granted to employees pursuant to the 1994 Plan. In addition, upon
consummation of the offering, options exercisable for a total of 383,252 shares
of Class A Common Stock will be granted under the 1994 Plan to employees in
connection with the Acquisitions and to two new directors. After consummation of
the offering, the Company intends to file one or more registration statements on
Form S-8 with respect to shares of Common Stock issuable under the 1994 Plan.
See "Management -- Incentive Plan." Shares covered by any such registration
statement will be eligible for sale in the public
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<PAGE> 58
market upon the effectiveness of such registration statement (which occurs
immediately upon filing), subject to the limitations of Rule 144 that are
applicable to affiliates and to the lock-up agreements described below, if
applicable.
The Company, and the executive officers and directors and holders of more
than 2% of the Common Stock have agreed not to sell, offer to sell, contract to
sell, pledge or otherwise dispose of or transfer any shares of Common Stock, or
any securities convertible into or exchangeable or exercisable for or any rights
to purchase or acquire Common Stock for a period of 180 days following the date
of this Prospectus without the prior written consent of Raymond James &
Associates, Inc., other than, in the case of the Company, the issuance of
options to purchase Common Stock or shares of Common Stock issuable upon the
exercise thereof, issuances of Common Stock in connection with the C&C
Acquisition and the Keith Acquisition and other issuances of capital stock in
connection with other acquisitions, provided such shares of Common Stock issued
upon the exercise of options and such shares of capital stock issued in
connection with any such other acquisitions shall not be transferable prior to
the end of the aforesaid 180-day period. Raymond James & Associates, Inc. may,
in its sole discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements.
As a result of these contractual restrictions, notwithstanding possible
earlier eligibility for public sale under the provisions of Rules 144 and 701,
shares subject to lock-up agreements will not be saleable until such agreements
expire or are waived by Raymond James & Associates. Beginning 180 days after the
Effective Date, upon the expiration of the lock-up agreements not to sell such
shares, (i) Restricted Shares will become eligible for public sale,
subject to the provisions of Rule 144, and (ii) shares of Common Stock
subject to vested options granted pursuant to the 1994 Plan will be available
for public sale, subject to compliance with Rule 701.
Prior to the offering, there has been no market for the Class A Common
Stock. No predictions can be made of the effect, if any, that market sales of
shares of Class A Common Stock or the availability of such shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
significant amounts of Class A Common Stock could adversely affect the
prevailing market price of Class A Common Stock, as well as impair the ability
of the Company to raise capital through the issuance of additional equity
securities.
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<PAGE> 59
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their representative
Raymond James & Associates, Inc. (the "Representative"), have severally agreed
to purchase from the Company and the Selling Stockholders the following
respective numbers of shares of Class A Common Stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Raymond James & Associates, Inc. .........................................
---------
Total...........................................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock offered hereby are subject to approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all shares of Class A Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
purchased.
The Underwriters, through the Representative, propose to offer part of the
shares of Class A Common Stock directly to the public at the public offering
price set forth on the cover page of this Prospectus and part of the shares to
certain dealers at a price that represents a concession not in excess of $
per share under the public offering price. The Underwriters may allow, and such
dealers may re-allow, a concession not in excess of $ per share to certain
other dealers. The Representative has advised the Company that the Underwriters
do not intend to confirm sales to any accounts over which they exercise
discretionary authority.
The Company has granted the Underwriters an option exercisable not later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of additional shares of Class A Common Stock, at the public offering
price, less the underwriting discounts and commissions set forth on the cover
page of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof as the number of shares of Class A
Common Stock to be purchased by it shown in the above table bears to the total
shown, and the Company will be obligated, pursuant to the option, to sell such
shares to the Underwriters. The Underwriters may exercise their option only to
cover over-allotments made in connection with the sale of the shares of Class A
Common Stock offered hereby. If purchased, the Underwriters will sell such
additional shares on the same terms as those on which the shares are being
offered.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against, or to contribute to, losses arising out of certain
liabilities in connection with this offering, including liabilities under the
Securities Act.
The Company, its executive officers and directors, and holders of more than
2% of the Common Stock prior to the consummation of the offering, have agreed
not to sell, offer to sell, contract to sell, pledge or otherwise dispose of or
transfer any shares of Common Stock, or any securities convertible into or
exchangeable or exercisable for, or any rights to purchase or acquire, Common
Stock for a period of 180 days following the date of this Prospectus without the
prior written consent of Raymond James & Associates, Inc., other than, in the
case of the Company, the issuance of options to purchase Common Stock or shares
of Common Stock issuable upon the exercise thereof, issuances of Common Stock in
connection with the C&C Acquisition and the Keith Acquisition and other
issuances of capital stock of the Company in connection with other acquisitions,
provided such shares of Common Stock issued upon the exercise of options and
such shares
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<PAGE> 60
of capital stock issued in connection with any such other acquisitions shall not
be transferable prior to the end of the aforesaid 180-day period. Raymond James
& Associates, Inc. may, in its sole discretion and at any time without notice,
release all or any portion of the shares subject to such lock-up agreements.
Prior to this offering, there has been no public market for the Class A
Common Stock of the Company. The initial public offering price the Class A
Common Stock was determined by negotiation between the Company and the
Representative. Among the factors considered in such negotiations were
prevailing market conditions, the value of publicly traded companies believed to
be comparable to the Company, the results of operations of the Company in recent
periods, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant.
The Representative, acting on behalf of the Underwriters, may over-allot
the shares offered hereby and, during the course of this offering, may engage in
stabilizing and syndicate short covering and may impose a penalty bid on members
of the offering syndicate. Over-allotment involves sales of shares in excess of
the total number being offered, thereby creating a syndicate short position.
Stabilizing involves a bid by the syndicate to purchase shares in the open
market at a specified price, which may not exceed the public offering price and
may be decreased but not increased. Syndicate short covering involves open
market purchases of shares to cover all or a portion of the syndicate short
position created by over-allotments. A penalty bid permits the Representative to
reclaim selling concessions from a syndicate member when shares sold by that
member in the offering are purchased by the Representative in the open market to
cover a syndicate short position or pursuant to a stabilizing bid. All of these
activities may cause the market price of the Class A Common Stock to be higher
than otherwise might be the case in the absence of these activities. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
The foregoing includes a summary of certain principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement that is on file as an exhibit to the
Registration Statement on Form S-1 (the "Registration Statement") under the
Securities Act and filed by the Company with the Commission with respect to the
shares of Class A Common Stock offered hereby, of which this Prospectus is a
part.
LEGAL MATTERS
The validity of the issuance of the shares of Class A Common Stock offered
hereby will be passed upon for the Company by Skadden, Arps, Slate, Meagher &
Flom LLP, Boston, Massachusetts. Certain legal matters will be passed upon for
the Underwriters by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.,
Miami, Florida.
EXPERTS
The audited financial statements of the Company, the audited financial
statements of Keystone, the audited financial statements of C&C, and the audited
financial statements of Keith Monument, have been included herein and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent auditors, as of the dates and for the periods indicated in their
reports appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing. The audited financial statements of the
Quarry Companies and SMI have been included herein and in the Registration
Statement in reliance upon the report of Greene and Company, L.L.P., independent
certified public accountants as of the dates and for the periods indicated in
their reports appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company filed with the Commission the Registration Statement under the
Securities Act with respect to the shares of Class A Common Stock being offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference
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<PAGE> 61
is hereby made. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete;
with respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description thereof.
The Registration Statement and the exhibits and schedules thereto may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and will also be available for inspection and copying at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and at Northwestern Atrium Center, 500 West Madison Street (Suite 1400),
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Additionally, the Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission at (http://www.sec.gov). Upon consummation of this offering,
the Company will become subject to the information requirements of the Exchange
Act, and in accordance therewith will be required to file periodic reports and
other information with the Commission.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements.
60
<PAGE> 62
INDEX TO FINANCIAL STATEMENTS
ROCK OF AGES CORPORATION
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Independent Auditors' Report......................................................... F-3
Consolidated Balance Sheets at December 31, 1995 and 1996 and June 30, 1997
(unaudited)........................................................................ F-4
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and
1996 and the six months ended June 30, 1996 and 1997 (unaudited)................... F-6
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1994, 1995 and 1996 and the six months ended June 30, 1997 (unaudited)............. F-7
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and the six months ended June 30, 1996 and 1997 (unaudited)................... F-8
Notes to Consolidated Financial Statements........................................... F-10
CHILDS & CHILDS GRANITE CO., INC.,
C & C GRANITE CO., INC., QUARRY COMPANIES AND SMI
Independent Auditors' Report......................................................... F-23
Combined Balance Sheet as of May 31, 1997............................................ F-24
Combined Statement of Operations for the Eleven-Month Period ended May 31, 1997...... F-25
Combined Statement of Stockholders' Equity for the Eleven-Month Period ended May 31,
1997............................................................................... F-26
Combined Statement of Cash Flows for the Eleven-Month Period ended May 31, 1997...... F-27
Notes to Combined Financial Statements............................................... F-28
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
Independent Auditors' Report......................................................... F-32
Combined Balance Sheet as of April 30, 1997.......................................... F-33
Combined Statement of Operations for the Ten-Month Period ended April 30, 1997....... F-34
Combined Statement of Stockholder's Deficit for the Ten-Month Period ended April 30,
1997............................................................................... F-35
Combined Statement of Cash Flows for the Ten-Month period ended April 30, 1997....... F-36
Notes to Combined Financial Statements............................................... F-37
KEITH MONUMENT COMPANIES
Independent Auditors' Report......................................................... F-41
Combined Balance Sheets as of June 30, 1996 and 1997................................. F-42
Combined Statements of Operations for the Years ended June 30, 1995, 1996 and 1997... F-43
Combined Statements of Stockholders' Equity for the Years ended June 30, 1995, 1996
and 1997........................................................................... F-44
Combined Statements of Cash Flows for the Years ended June 30, 1995, 1996 and 1997... F-45
Notes to Combined Financial Statements............................................... F-46
</TABLE>
F-1
<PAGE> 63
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PENNSYLVANIA GRANITE CORPORATION
Independent Auditors' Report on Financial Statements................................. F-55
Consolidated Balance Sheets as of May 31, 1997 and April 30, 1997.................... F-56
Consolidated Statement of Operations and Accumulated Deficit for the Eleven Months
ended May 31, 1997................................................................. F-57
Consolidated Statement of Operations and Accumulated Deficit for the Ten Months ended
April 30, 1997..................................................................... F-58
Consolidated Statement of Cash Flows for the Eleven Months ended May 31, 1997........ F-59
Consolidated Statement of Cash Flows for the Ten Months ended April 30, 1997......... F-60
Notes to Consolidated Financial Statements........................................... F-61
PENNSYLVANIA GRANITE CORPORATION
Independent Auditors' Report on Financial Statements................................. F-66
Consolidated Balance Sheet as of June 30, 1996....................................... F-67
Consolidated Statement of Operations and Accumulated Deficit for the Year ended
June 30, 1996...................................................................... F-68
Consolidated Statement of Cash Flows for the Year ended June 30, 1996................ F-69
Notes to Consolidated Financial Statements........................................... F-70
CAPRICE BLUE QUARRY, INC.
Independent Auditors' Report on Financial Statements................................. F-75
Balance Sheets as of May 31, 1997 and April 30, 1997................................. F-76
Statement of Operations and Accumulated Deficit for the Eleven Months ended May 31,
1997............................................................................... F-77
Statement of Operations and Accumulated Deficit for the Ten Months ended April 30,
1997............................................................................... F-78
Statement of Cash Flows for the Eleven Months ended May 31, 1997..................... F-79
Statement of Cash Flows for the Ten Months ended April 30, 1997...................... F-80
Notes to Financial Statements........................................................ F-81
AUTUMN ROSE QUARRY, INC.
Independent Auditors' Report on Financial Statements................................. F-84
Balance Sheets as of May 31, 1997 and April 30, 1997................................. F-84
Statement of Operations and Accumulated Deficit for the Eleven Months ended May 31,
1997............................................................................... F-86
Statement of Operations and Accumulated Deficit for the Ten Months ended April 30,
1997............................................................................... F-87
Statement of Cash Flows for the Eleven Months ended May 31, 1997..................... F-88
Statement of Cash Flows for the Ten Months ended April 30, 1997...................... F-89
Notes to Financial Statements........................................................ F-90
SOUTHERN MAUSOLEUMS, INC.
Independent Auditors' Report......................................................... F-94
Balance Sheets as of May 31, 1997 and April 30, 1997................................. F-95
Statement of Operations and Accumulated Deficit for the Eleven Months ended May 31,
1997............................................................................... F-96
Statement of Operations and Accumulated Deficit for the Ten Months ended April 30,
1997............................................................................... F-97
Statement of Cash Flows for the Eleven Months ended May 31, 1997..................... F-98
Statement of Cash Flows for the Ten Months ended April 30, 1997...................... F-99
Notes to Financial Statements........................................................ F-100
</TABLE>
F-2
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rock of Ages Corporation:
We have audited the accompanying consolidated balance sheets of Rock of
Ages Corporation and Subsidiaries as of December 31, 1995 and 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996.
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 consolidated 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 Rock of Ages
Corporation and Subsidiaries as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
March 24, 1997, except as to
Note 13 which is as of
August 12, 1997
F-3
<PAGE> 65
ROCK OF AGES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,994,534 $ 763,056 $ 191,855
Trade receivables, less allowance for doubtful
accounts of $445,627 in 1995 and $564,242 in
1996........................................... 10,757,049 8,525,463 11,248,648
Due from affiliates............................... 2,292,677 3,584,644 5,375,181
Inventories (note 2).............................. 10,110,107 11,323,613 13,374,103
Deferred tax assets (note 6)...................... 270,071 419,871 467,161
Other current assets.............................. 190,755 322,216 837,308
----------- ----------- -----------
Total current assets........................... 25,615,193 24,938,863 31,494,256
----------- ----------- -----------
Property, plant and equipment:
Granite reserves and development costs............ 6,747,993 7,045,644 7,045,644
Land.............................................. 1,937,132 1,981,230 2,151,084
Buildings and land improvements................... 8,028,757 8,661,575 8,850,364
Machinery and equipment........................... 18,548,026 19,331,762 21,616,857
Furniture and fixtures............................ 13,329 13,270 208,722
Construction-in-process........................... 208,239 372,028 1,955,824
----------- ----------- -----------
35,483,476 37,405,509 41,828,495
Less accumulated depreciation, depletion and
amortization................................... 17,306,340 18,809,535 20,598,189
----------- ----------- -----------
Net property, plant and equipment.............. 18,177,136 18,595,974 21,230,306
----------- ----------- -----------
Other assets:
Cash surrender value of life insurance, net of
loans of $95,412 in 1995 and 1996.............. 752,007 917,137 959,478
Goodwill, less accumulated amortization of $30,450
in 1996........................................ 1,301,113 1,270,663 1,252,663
Debt issuance costs, less accumulated amortization
of $229,976 in 1995 and $104,040 in 1996....... 157,019 123,293 88,683
Organization costs, less accumulated amortization
of $26,688 in 1995 and $63,961 in 1996......... 72,644 212,799 189,985
Deferred tax assets (note 6)...................... 763,862 597,576 543,176
Intangible pension asset (note 8)................. 0 93,418 93,418
Investments in and advances to affiliated
companies (note 5)............................. 378,614 217,953 1,618,512
Other investments, at cost which approximates
market......................................... 109,119 59,366 30,948
Other............................................. 296,333 489,734 0
----------- ----------- -----------
Total other assets............................. 3,830,711 3,981,939 4,776,863
----------- ----------- -----------
Total assets (notes 3 and 4).............. $47,623,040 $47,516,776 $57,501,425
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 66
ROCK OF AGES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under lines of credit (note 3)......... $ 2,579,859 $ 3,500,437 $ 8,667,627
Current installments of long-term debt (note 4)... 4,096,813 2,081,481 2,844,419
Accounts payable.................................. 1,929,388 1,693,144 2,066,541
Accrued expenses.................................. 1,668,822 1,969,976 2,357,840
Income taxes payable.............................. 397,409 466,711 131,149
Current portion of deferred income................ 400,000 400,000 400,000
Customer deposits................................. 851,673 1,541,602 1,794,819
----------- ----------- -----------
Total current liabilities................. 11,923,964 11,653,351 18,262,395
Long-term debt, excluding current installments (note
4)................................................ 14,656,514 13,054,399 13,896,615
Deferred compensation (note 8)...................... 2,754,094 3,026,090 3,088,431
Deferred income, excluding current portion.......... 800,000 400,000 200,000
Accrued pension cost (note 8)....................... 1,504,512 1,504,512 1,504,512
Accrued postretirement benefit cost (note 8)........ 504,750 506,938 506,938
----------- ----------- -----------
Total liabilities......................... 32,143,834 30,145,290 37,458,891
----------- ----------- -----------
Commitments (note 7)
Stockholders' equity:
Preferred stock -- $.01 par value;
2,500,000 shares authorized
No shares issued or outstanding
Common Stock -- Class A, $.01 par value;
30,000,000 shares authorized
No shares issued or outstanding
Common stock -- Class B, $.01 par value;
15,000,000 shares authorized
3,500,000 shares issued and outstanding
in 1995 and 1996............................... 35,000 35,000 37,634
Additional paid-in capital........................ 5,593,843 5,593,843 9,384,759
Retained earnings................................. 9,827,918 11,736,082 10,675,378
Cumulative translation adjustment................. 22,445 6,561 (55,237)
----------- ----------- -----------
Total stockholders' equity................ 15,479,206 17,371,486 20,042,534
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................. $47,623,040 $47,516,776 $57,501,425
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 67
ROCK OF AGES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
----------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues........................ $34,187,749 33,087,783 44,668,851 19,943,096 20,767,426
Cost of revenues.................... 24,094,198 22,638,804 31,262,530 14,686,791 15,562,135
----------- ---------- ---------- ---------- ----------
Gross profit.............. 10,093,551 10,448,979 13,406,321 5,256,305 5,205,291
Selling, general and administrative
expenses.......................... 6,048,890 6,453,425 9,131,459 4,649,628 4,327,952
----------- ---------- ---------- ---------- ----------
Income from operations.... 4,044,661 3,995,554 4,274,862 606,677 877,339
----------- ---------- ---------- ---------- ----------
Other expenses:
Interest expense.................. 1,652,895 1,678,178 1,723,355 933,684 866,064
Early retirement plan expense
(note 8)....................... -- 563,857 -- -- --
----------- ---------- ---------- ---------- ----------
Total other expenses...... 1,652,895 2,242,035 1,723,355 933,684 866,064
----------- ---------- ---------- ---------- ----------
Income (loss) before
provision (benefit) for
income taxes............ 2,391,766 1,753,519 2,551,507 (327,007) 11,275
Provision (benefit) for income taxes
(note 6).......................... 576,485 358,021 643,343 (82,452) 2,843
----------- ---------- ---------- ---------- ----------
Net income (loss)......... $ 1,815,281 1,395,498 1,908,164 (244,555) 8,432
=========== ========== ========== ========== ==========
Net income (loss) per share......... $ .45 .35 .45 (.06) .00
Weighted average number of common
shares outstanding................ 4,029,744 4,029,744 4,216,609 4,212,243 4,216,609
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 68
ROCK OF AGES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
ISSUED AND
OUTSTANDING
SHARES OF
CLASS B CLASS B ADDITIONAL CUMULATIVE TOTAL
COMMON COMMON PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
----------- ------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993...... 3,500,000 $35,000 2,212,044 6,617,139 (15,467) 8,848,716
Net income...................... -- -- -- 1,815,281 -- 1,815,281
Cumulative translation
adjustment.................... -- -- -- -- 22,142 22,142
--------- ------- --------- --------- ------- ----------
Balance at December 31, 1994...... 3,500,000 35,000 2,212,044 8,432,420 6,675 10,686,139
Net income...................... -- -- -- 1,395,498 -- 1,395,498
Acquisitions (note 12).......... -- -- 3,381,799 -- -- 3,381,799
Cumulative translation
adjustment.................... -- -- -- -- 15,770 15,770
--------- ------- --------- --------- ------- ----------
Balance at December 31, 1995...... 3,500,000 35,000 5,593,843 9,827,918 22,445 15,479,206
Net income...................... -- -- -- 1,908,164 -- 1,908,164
Cumulative translation
adjustment.................... -- -- -- -- (15,884) (15,884)
--------- ------- --------- --------- ------- ----------
Balance at December 31, 1996...... 3,500,000 35,000 5,593,843 11,736,082 6,561 17,371,486
Net income...................... -- -- -- 8,432 -- 8,432
Dividends (note 13)............. -- -- -- (1,069,136) -- (1,069,136)
Acquisition (note 13)........... 263,441 2,634 3,790,916 -- -- 3,793,550
Cumulative translation
adjustment.................... -- -- -- -- (61,798) (61,798)
--------- ------- --------- --------- ------- ----------
Balance at June 30, 1997.......... 3,763,441 $37,634 9,384,759 10,675,378 (55,237) 20,042,534
========= ======= ========= ========= ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE> 69
ROCK OF AGES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss).............. $ 1,815,281 1,395,498 1,908,164 (244,555) 8,432
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation, depletion and
amortization.............. 1,399,028 1,413,336 1,846,298 1,049,466 984,841
Decrease (increase) in cash
surrender value of life
insurance................. 26,068 71,132 (165,130) (82,565) (42,341)
Loss (gain) on sale of
property, plant and
equipment................. (319,917) (45,063) (5,500) (3,389) 20,004
Loss (equity) in income of
affiliated companies...... (134,264) 43,156 160,661 134,434 19,019
Deferred taxes.............. 79,967 (131,676) 16,486 (152,452) 7,110
Changes in assets and
liabilities:
Decrease (increase) in
trade receivables...... (1,524,444) (1,727,154) 2,231,586 2,046,113 (1,269,760)
Decrease (increase) in due
from affiliates........ (421,630) 378,885 (1,291,967) (1,416,988) (1,319,007)
Decrease (increase) in
inventories............ 2,148,792 243,979 (1,081,430) (1,686,701) (918,391)
Increase in other current
assets................. (4,022) (36,783) (131,461) (391,593) (497,668)
Decrease (increase) in
intangible pension
asset.................. (178,630) 481,366 (93,418) -- --
Decrease (increase) in
other assets........... 184,454 101,365 (193,401) (762,900) 19,779
Increase (decrease) in
accounts payable....... 499,742 (205,627) (236,244) 477,197 (22,375)
Increase in accrued
expenses............... 733,651 85,493 301,154 515,851 224,869
Increase (decrease) in
income taxes payable... 541,354 (290,090) 69,302 (136,775) (298,374)
Increase in customer
deposits............... 5,918 228,447 689,929 266,453 253,217
Increase (decrease) in
deferred
compensation........... (14,706) 9,264 271,996 73,565 62,341
Decrease in deferred
income................. (400,000) (400,000) (400,000) (200,000) (200,000)
Increase in accrued
pension cost........... 86,700 29,912 2,188 -- --
Increase in accrued
postretirement benefit
cost................... 9,345 10,811 -- 45,000 --
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities........... 4,532,687 1,656,251 3,899,213 (469,839) (2,968,304)
---------- ---------- ---------- ---------- ----------
Cash flows from investing
activities:
Purchases of property, plant
and equipment............... (502,918) (896,447) (1,648,505) (883,593) (1,589,953)
Proceeds from sale of property,
plant and equipment......... 751,866 70,836 14,476 11,000 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 70
ROCK OF AGES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase in investments in and
advances to affiliates...... -- -- -- -- (171,020)
Decrease (increase) in other
investments................. 1,927 (53,933) 49,753 10,897 28,418
Acquisitions, net of cash
acquired.................... -- 2,642 (238,310) -- 73,256
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) investing
activities........... 250,875 (876,902)( 1,822,586) (861,696) (1,659,299)
---------- ---------- ---------- ---------- ----------
Cash flows from financing
activities:
Net borrowings (repayments)
under lines of credit....... (3,062,646) 2,454,269 920,578 2,401,628 5,167,190
Increase in debt issuance
costs....................... (190,027) (2,569) (36,415) (36,415) --
Increase in organization
costs....................... (97,565) (1,766) (172,689) (172,689) --
Proceeds from long-term debt... -- -- 122,082 -- --
Principal payments on long-term
debt........................ (1,145,802) (1,644,533) (4,126,635) (2,376,882) (1,048,990)
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities........... (4,496,040) 805,401 (3,293,079) (184,358) 4,118,200
---------- ---------- ---------- ---------- ----------
Effect of exchange rate changes
on cash........................ 14,498 16,176 (15,026) (32,665) (61,798)
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents.......... 302,020 1,600,926 (1,231,478) (1,548,558) (571,201)
Cash and cash equivalents,
beginning of period............ 91,588 393,608 1,994,534 1,994,534 763,056
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents, end of
period......................... $ 393,608 1,994,534 763,056 445,976 191,855
========== ========== ========== ========== ==========
Supplemental cash flow
information:
Cash paid during the period
for:
Interest.................... $ 1,780,181 1,678,178 1,520,420 933,684 866,064
Income taxes................ 150,150 711,299 742,626 168,983 351,155
</TABLE>
Supplemental non-cash investing and financing activities:
See Note 12 for non-cash activities relating to the acquisitions.
In 1994, $3,663,747 in borrowings under lines of credit was refinanced as
long-term debt.
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Acquisitions:
Assets acquired................ $ -- 8,708,561 625,416 -- 7,018,273
Liabilities assumed and
issued...................... -- (4,971,882) (387,106) -- (3,224,723)
Capital contributed............ -- (3,381,799) -- -- --
Common stock issued............ -- -- -- -- (3,793,550)
---------- ---------- ---------- ---------- ----------
Cash paid...................... -- 354,880 238,310 -- --
Less cash acquired............. -- (357,522) -- -- (73,256)
---------- ---------- ---------- ---------- ----------
Net cash paid for
(received from)
acquisitions......... $ -- (2,642) 238,310 -- (73,256)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 71
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Rock of Ages Corporation, together with its wholly-owned subsidiaries (the
"Company"), Rock of Ages Canada, Inc., Royalty Granite Corporation, Rock of Ages
International, and Associated Memorials, Inc. is an integrated quarrier,
manufacturer and distributor of granite and products manufactured from granite.
The quarry division sells granite both to the manufacturing division and to
outside manufacturers, as well as to distributors in Europe and Japan. The
manufacturing division's principal product is granite memorials used primarily
in cemeteries, although it also manufactures some specialized granite products
for industrial applications. Manufacturing revenues were approximately 50%, 60%
and 60% of total revenues in 1994, 1995 and 1996 respectively, with the balance
being quarry revenues. Foreign revenues represented approximately 27%, 20% and
13% of total revenues in 1994, 1995 and 1996, respectively.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
(b) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.
(c) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
(d) Depreciation, Depletion and Amortization
Property, plant and equipment are stated at cost. Depreciation is
calculated using the straight-line and declining balance methods, based upon the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and land improvements........................ 5 to 40 years
Machinery and equipment................................ 3 to 20 years
Furniture and fixtures................................. 5 to 12 years
</TABLE>
Depreciation expense amounted to $1,281,415, $1,253,186 and $1,659,160 in
1994, 1995 and 1996, respectively.
Cost depletion and amortization of granite reserves and development costs
is provided by charges to operations based on cubic feet produced in relation to
estimated reserves of the property. Cost depletion and amortization charged to
operations amounted to $71,010, $69,338 and $54,013 in 1994, 1995 and 1996,
respectively.
(e) Foreign Currency Translation
The Company translates the accounts of its foreign subsidiary in accordance
with Statement of Financial Accounting Standards No. 52, under which all assets
and liabilities are translated at the rate of exchange in effect at year end.
Revenue and expense accounts are translated using weighted average exchange
rates in effect during the year. Gains or losses from foreign currency
translation are charged to "cumulative translation adjustment" which is included
in stockholders' equity in the accompanying consolidated balance sheets.
F-10
<PAGE> 72
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(f) Income Taxes
The Company files its Federal income tax returns on a consolidated basis.
Rock of Ages Canada, Inc. is responsible for income taxes in Canada.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the 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.
(g) Goodwill
Goodwill was recorded in 1995 as a result of two acquisitions (see Note 12)
and is being amortized over 40 years using the straight-line method.
Amortization expense amounted to $30,450 in 1996. The Company periodically
evaluates the recoverability of goodwill and measures the amount of impairment,
if any, by assessing current and future levels of income and cash flows, as well
as other factors, such as business trends and prospects and market and economic
conditions.
(h) Debt Issuance Costs
Debt issuance costs are amortized using the straight-line method over the
term of the related borrowing. Amortization expense amounted to $40,603, $70,124
and $70,141 in 1994, 1995 and 1996, respectively.
(i) Organization Costs
Organization costs are amortized using the straight-line method over 60
months. Amortization expense amounted to $6,000, $20,688 and $32,534 in 1994,
1995 and 1996, respectively.
(j) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of the Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
(k) Deferred Income
Deferred income represents revenues received in 1992 in relation to a
distribution agreement. Revenue is being recognized over six years beginning in
1993, per the terms of the agreement.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to use estimates and
assumptions that affect the reported amounts of assets and
F-11
<PAGE> 73
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
(m) Stock-Based Employee Compensation
The Company uses the intrinsic value based method per APB Opinion No. 25,
Accounting for Stock Issued to Employees, for all of its stock-based employee
compensation arrangements.
(n) Net Income Per Share
Net income per share is computed by dividing earnings available for common
shares by the weighted average number of common shares outstanding during each
year. Common stock equivalent shares are not included in the per share
calculations where the effect of their inclusion would be antidilutive.
(o) Interim Consolidated Financial Statements
The consolidated financial statements for the six months ended June 30,
1996 and 1997 are unaudited but, in the opinion of management, include all
normal, recurring adjustments necessary for a fair presentation of results for
these interim periods. The results of operations for the interim periods are not
necessarily indicative of trends or results expected for a full year.
(2) INVENTORIES
Inventories consist of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Raw materials..................................... $ 6,994,078 7,065,320
Work-in-process................................... 1,304,347 1,694,671
Finished goods and supplies....................... 1,811,682 2,563,622
----------- -----------
$10,110,107 11,323,613
=========== ===========
</TABLE>
(3) LINES OF CREDIT
The Company and an affiliate, Swenson Granite Company, Inc., may be
advanced up to a maximum of $9,500,000 under the terms of line of credit
agreements with a lending institution, based on percentages of eligible accounts
receivable and eligible inventory. The line of credit arrangements expire August
1999 and bear interest at the Chemical Bank prime rate plus 1%, and are secured
by substantially all assets of the Company. Amounts outstanding as of December
31, 1995 and 1996 were $1,179,859 and $1,779,124, respectively.
Effective November 30, 1995, Rock of Ages Canada, Inc. entered into a line
of credit agreement with a lending institution. Under the terms of this
agreement, a maximum of approximately $2,400,000 may be advanced based on
percentages of eligible accounts receivable, eligible inventory, and tangible
fixed assets. The line of credit agreement will be reviewed at least annually
for any revisions to the agreement, bears interest at the prime rate plus 3/4%,
and is secured by substantially all assets of the subsidiaries. Amounts
outstanding as of December 31, 1995 and 1996 were $1,400,000 and $1,721,313,
respectively.
F-12
<PAGE> 74
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
----------- ----------
<S> <C> <C>
Note payable -- bank, interest at Chemical Bank prime plus
1 1/4%, payable in quarterly installments of $100,000
with the final installment of $2,500,000 due October
1998, secured by substantially all assets of the
Company.................................................. $ 3,600,000 3,200,000
Note payable -- bank, interest at Chemical Bank prime plus
1 1/4%, payable in quarterly installments of $400,000
with the final installment of $8,400,000 due January
1999, secured by substantially all assets of the
Company.................................................. 13,010,384 11,410,385
Notes payable -- bank, interest at prime plus 1%,
unsecured, paid in full in January 1996.................. 1,320,622 --
Note payable -- Small Business Administration, interest at
10.147%, secured by property, plant and equipment, paid
in full in January 1996.................................. 327,230 --
Note payable -- VEDA, interest at 4%, unsecured, paid in
full in January 1996..................................... 118,233 --
Note payable -- Dutton, interest at 6%, payable in monthly
principal and interest payments of $674, unsecured, due
December 2003............................................ 51,280 46,130
Note payable -- Friberg, interest at 8%, unsecured, paid in
full in April 1996....................................... 325,578 --
Note payable -- bank, interest at lender's operational rate
plus 1%, payable in monthly installments of $3,649 plus
interest, due April 2004, secured by property with a net
book value of $336,330 at December 31, 1996.............. -- 321,068
Note payable -- bank, interest at 10.5%, payable in monthly
principal and interest installments of $1,216, due March
2000, secured by machinery with a net book value of
$39,792 at December 31, 1996............................. -- 40,012
Note payable -- bank, interest at prime plus 1.5%, payable
in monthly installments of $608 plus interest, due
November 2001, secured by property with a net book value
of $40,193 at December 31, 1996.......................... $ -- 35,269
Obligation under capital lease, interest at 7.99%, payable
in monthly installments of $1,680 plus interest, due
December 2000, secured by equipment with a cost and
accumulated depreciation of $95,731 and $1,595,
respectively, at December 31, 1996....................... -- 83,016
----------- ----------
18,753,327 15,135,880
Less current installments.................................. 4,096,813 2,081,481
----------- ----------
Long-term debt, excluding current installments............. $14,656,514 13,054,399
=========== ==========
</TABLE>
All bank-related obligations are guaranteed by an affiliate, Swenson
Granite Company, Inc.
F-13
<PAGE> 75
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) LONG-TERM DEBT -- (CONTINUED)
Future maturities of the December 31, 1996 long-term debt are as follows:
<TABLE>
<CAPTION>
OBLIGATION OTHER
UNDER LONG-TERM
YEAR ENDED DECEMBER 31: CAPITAL LEASE DEBT
----------------------------------------------------------- ------------- ----------
<S> <C> <C>
1997.................................................. $ 20,163 2,067,444
1998.................................................. 20,163 4,468,983
1999.................................................. 20,163 1,670,669
2000.................................................. 41,337 6,671,596
2001.................................................. -- 56,810
Thereafter............................................ -- 117,362
-------- ----------
101,826 15,052,864
==========
Interest included in obligation under capital lease........ 18,810
--------
$ 83,016
========
</TABLE>
The financing agreements with banks contain various restrictive covenants
with respect to the maintenance of financial ratios, capital additions, and
other items. As of December 31, 1996 all covenants have been complied with or
waived by the banks.
(5) INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES
Investments in and advances to affiliated companies, accounted for under
the equity method, at December 31, 1995 and 1996 consists of a 50% equity
interest in Rock of Ages of Asia of $378,613 and $217,953, respectively.
The Company's equity (loss) in the income of Rock of Ages Asia was
$134,264, $(43,156) and $(160,661), in 1994, 1995 and 1996, respectively. Sales
to Rock of Ages Asia were $3,911,195, $2,997,845 and $592,100 in 1994, 1995 and
1996, respectively. Accounts receivable from Rock of Ages Asia was $2,221,824,
$2,327,054 and $769,354 as of December 31, 1994, 1995 and 1996, respectively.
See note 13.
(6) INCOME TAXES
A summary of components of the provision for income taxes for the years
ended December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Current............................................ $496,518 $381,719 $626,857
Deferred........................................... 79,967 (23,698) 16,486
-------- -------- --------
Total.................................... $576,485 $358,021 $643,343
======== ======== ========
</TABLE>
F-14
<PAGE> 76
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented below:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Accrued pension, accrued postretirement benefit cost and
deferred compensation.................................. $ 903,743 $ 890,941
Allowance for doubtful accounts........................... 79,096 94,920
Accrued expenses.......................................... 60,224 86,120
Deferred income........................................... 326,400 217,600
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the Tax Reform
Act of 1986............................................ 211,634 237,279
Other assets.............................................. 297,426 374,789
---------- ----------
Total gross deferred tax assets................... 1,878,523 1,901,649
Less valuation allowance.......................... (482,241) (495,877)
---------- ----------
Total net deferred tax assets..................... 1,396,282 1,405,772
---------- ----------
Deferred tax liabilities:
Quarry development........................................ (309,176) (375,445)
Other liabilities......................................... (53,173) (12,880)
---------- ----------
Total gross deferred tax liabilities.............. (362,349) (388,325)
---------- ----------
Net deferred tax assets........................... $1,033,933 $1,017,447
========== ==========
</TABLE>
The reconciliation of differences between the statutory U.S. federal income
tax rate and the Company's effective tax rate follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
U.S. statutory rate......................................... 34.0% 34.0% 34.0%
State taxes................................................. 5.9 6.0 6.1
Valuation allowance change.................................. (5.3) -- --
Other....................................................... (10.5) (19.6) (14.9)
----- ----- -----
Effective tax rate.......................................... 24.1% 20.4% 25.2%
===== ===== =====
</TABLE>
SFAS No. 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. Management believes that
it is more likely than not that the results of future operations will generate
sufficient taxable income to realize the deferred tax assets.
(7) LEASES
The Company has several noncancellable operating leases for vehicles and
equipment which expire over the next four years. Rental expense for operating
leases was $118,211, $164,467 and $161,607 during 1994, 1995 and 1996,
respectively.
F-15
<PAGE> 77
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) LEASES -- (CONTINUED)
Future minimum lease payments under noncancellable operating leases (with
initial or remaining lease terms in excess of one year) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31:
----------------------------------------------------------
<S> <C>
1997...................................................... $149,763
1998...................................................... 134,777
1999...................................................... 105,008
2000...................................................... 37,989
--------
$427,537
========
</TABLE>
The Company also acts as the lessor of various parcels of land. Rental
income was $28,841, $32,182 and $32,210 in 1994, 1995 and 1996, respectively.
Future minimum rentals to be received under noncancellable leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31:
----------------------------------------------------------
<S> <C>
1997...................................................... $ 22,950
1998...................................................... 19,950
1999...................................................... 19,575
2000...................................................... 16,950
2001...................................................... 16,200
Thereafter................................................ 44,550
--------
$140,175
========
</TABLE>
(8) PENSION AND RETIREMENT PLANS
Pension Plans -- Non-Union
The Company has a defined benefit pension plan which covers all salaried
employees of the Company and its affiliate, Swenson Granite Company, Inc. who
have attained age 21 and have completed one year of service. Employees with five
or more years of service are entitled to pension benefits beginning at normal
retirement age (65) equal to 1.8% of average compensation times years of
credited service. Maximum number of years of credited service is equal to 30
years.
The Company makes contributions in such amounts and at such times as it
shall determine in accordance with an established funding method and policy,
which is consistent with plan objectives and the requirements of the Employee
Retirement Income Security Act of 1974 (ERISA). The Company's contributions for
the year ended December 31, 1994, 1995 and 1996 were based on the minimum
funding requirements of ERISA.
Plan assets consist of marketable securities and an unallocated insurance
contract.
F-16
<PAGE> 78
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) PENSION AND RETIREMENT PLANS -- (CONTINUED)
Net periodic pension cost for the Company's defined benefit pension plan
for the years ended December 31, 1995 and 1996, charged to operations in the
accompanying consolidated statements of operations, excluding the expense
incurred as a result of the early retirement window described below, consisted
of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Service cost-benefits attributable to service during the
period.................................................. $ 222,485 $ 392,429
Interest cost on projected benefit obligation............. 881,644 1,042,864
Return on plan assets..................................... (1,660,367) (1,342,269)
Net amortization and deferral............................. 1,149,127 776,636
----------- -----------
Net periodic pension cost................................. $ 592,889 $ 869,660
=========== ===========
</TABLE>
Assumptions used by the Company in the determination of pension plan
information consisted of the following as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Discount rate.......................................................... 7.25% 7.25%
Rate of increase in compensation levels................................ 5.50% 5.50%
Expected long-term rate of return on plan assets....................... 9.00% 9.00%
</TABLE>
The following table sets forth the funded status of the plan and amounts
recognized in the accompanying consolidated balance sheets at December 31, 1995
and 1996:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation including vested benefits of $10,760,173 in
1995 and $11,654,986 in 1996.......................... $(11,087,582) $(12,225,920)
============ ============
Actuarial present value of projected benefit
obligation............................................ (12,845,942) (15,045,099)
Plan assets at fair value............................... 9,901,354 11,296,553
------------ ------------
Projected benefit obligation in excess of plan assets... (2,944,588) (3,748,546)
Unrecognized net gain from past experience different
from that assumed and the effects of changes in
assumptions........................................... (500,947) (899,363)
Unrecognized net prior service cost..................... 865,707 2,209,852
Unrecognized net obligation............................. 1,075,316 933,545
------------ ------------
Accrued pension cost.................................... $ (1,504,512) $ (1,504,512)
============ ============
</TABLE>
Effective November 1, 1995 the Company offered an early retirement window
for eligible employees. As a result, the Company recognized a curtailment loss
of $563,857 which has been charged to other expenses in the accompanying
consolidated statement of operations.
Postretirement Benefits
In addition to providing pension benefits, the Company and its affiliate,
Swenson Granite Company, Inc. (Swenson) have sponsored a defined benefit
postretirement health care plan for early retirees. No other Company employees
or retirees are eligible to participate in the plan. The Company and Swenson
also sponsor defined benefit postretirement group life insurance plans for union
and non-union employees. The death benefit provided to union retirees is $6,000;
the death benefit provided to non-union retirees is 0.75 times the retiree's
salary on the date of retirement (capped at $60,000). Included in selling,
general and administrative
F-17
<PAGE> 79
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) PENSION AND RETIREMENT PLANS -- (CONTINUED)
expenses of the Company is its share of the net periodic postretirement benefit
costs of $219,428, $194,719 and $188,076 for the years ended December 31, 1994,
1995 and 1996, respectively.
Net periodic postretirement benefit costs for the Company and its affiliate
for the years ended December 31, 1994, 1995 and 1996 consisted of the following:
<TABLE>
<CAPTION>
POSTRETIREMENT POSTRETIREMENT
1994 MEDICAL LIFE INSURANCE TOTAL
---------------------------------------------- -------------- -------------- --------
<S> <C> <C> <C>
Service cost-benefits attributable to service
during the period........................... $ -- $ 14,728 $ 14,728
Interest cost on accumulated postretirement
benefit obligation.......................... 49,000 99,079 148,079
Net amortization and deferral................. 37,625 66,053 103,678
------- ------- -------
Net periodic postretirement benefit cost...... $ 86,625 $179,860 $266,485
======= ======= =======
1995
Service cost-benefits attributable to service
during the period........................... $ -- $ 12,559 $ 12,559
Interest cost on accumulated postretirement
benefit obligation.......................... 35,677 98,599 134,276
Net amortization and deferral................. 24,410 66,053 90,463
------- ------- -------
Net periodic postretirement benefit cost...... $ 60,087 177,211 237,298
======= ======= =======
1996
Service cost-benefits attributable to service
during the period........................... $ -- $ 20,308 $ 20,308
Interest cost on accumulated postretirement
benefit obligation.......................... 22,096 106,150 128,246
Net amortization and deferral................. 9,878 66,053 75,931
------- ------- -------
Net periodic postretirement benefit cost...... $ 31,974 $192,511 $224,485
======= ======= =======
</TABLE>
The amounts recognized in the accompanying consolidated balance sheets as
of December 31, 1995 and 1996, representing the Company's share of the funded
status of the plans, were $504,750 and $506,938, respectively. The following
table sets forth the funded status for the Company and its affiliate as of
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
POSTRETIREMENT POSTRETIREMENT
1995 MEDICAL LIFE INSURANCE TOTAL
-------------------------------------------- -------------- -------------- -----------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees.................................. $ (429,652) $ (1,048,213) $(1,477,865)
Fully eligible active plan participants... -- (148,911) (148,911)
Other active plan participants............ -- (181,823) (181,823)
--------- ---------- ----------
Accumulated postretirement benefit
obligation in excess of plan assets....... (429,652) (1,378,947) (1,808,599)
Unrecognized transition obligation.......... 73,231 1,188,952 1,262,183
Unrecognized net (gain)/loss from past
experience different from that assumed.... (22,012) 16,184 (5,828)
--------- ---------- ----------
Accrued postretirement benefit cost......... $ (378,433) $ (173,811) $ (552,244)
========= ========== ==========
</TABLE>
F-18
<PAGE> 80
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) PENSION AND RETIREMENT PLANS -- (CONTINUED)
<TABLE>
<CAPTION>
POSTRETIREMENT POSTRETIREMENT
MEDICAL LIFE INSURANCE TOTAL
-------------- -------------- -----------
<S> <C> <C> <C>
1996
Accumulated postretirement benefit
obligation:
Retirees.................................. $ (285,441) $ (1,094,623) $(1,380,064)
Fully eligible active plan participants... -- (193,450) (193,450)
Other active plan participants............ -- (219,676) (219,676)
--------- ---------- ----------
Accumulated postretirement benefit
obligation in excess of plan assets....... (285,441) (1,507,749) (1,793,190)
Unrecognized transition obligation.......... 48,821 1,122,899 1,171,720
Unrecognized net (gain)/loss from past
experience different from that assumed.... (79,047) 133,080 54,033
--------- ---------- ----------
Accrued postretirement benefit cost......... $ (315,667) $ (251,770) $ (567,437)
========= ========== ==========
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the accumulated postretirement benefit obligation was 7.25% and
7.5% as of December 31, 1995 and 1996, respectively.
For measurement purposes, a 9% rate of increase in the per capita cost of
covered health care benefits was assumed for 1996 and was assumed to gradually
decrease to 4% over the next 6 years. An increase in the assumed health care
cost trend rates of 1 percentage point in each year would result in an increase
in the postretirement medical plan accumulated postretirement benefit obligation
as of December 31, 1996 of $9,846 and the aggregate of the service and the
interest cost components of the postretirement medical plan net periodic
postretirement benefit cost for 1996 would increase by $687.
Union Employee Plans
Union employees participate in a multi-employer defined benefit pension
plan. The Company contributes amounts as required by the union contract. At the
present time, there is not sufficient information to accurately determine the
Company's share of the liability for unfunded vested benefits of the plan. If
the Company terminated its operations or withdrew from the plan, it would be
required, under federal law, to accelerate funding of its proportionate share of
the plan's unfunded vested benefits. The amount charged to operations in the
accompanying consolidated statements of operations was $284,591, $456,470 and
$713,738 in 1994, 1995 and 1996, respectively.
Deferred Compensation Plans
The Company has deferred compensation agreements with certain employees
under a salary continuation plan. Generally, the terms of the plan provides for
specified monthly payments to the employee or the beneficiary for a 15-year
period beginning at the employee's retirement, disability or death. In certain
cases, the plan also provides for minimum payments in the event of termination
other than retirement, disability or death.
F-19
<PAGE> 81
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) PENSION AND RETIREMENT PLANS -- (CONTINUED)
Net periodic deferred compensation cost, charged to operations in the
accompanying consolidated statements of operations, under the plan for the years
ended December 31, 1994, 1995 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Service cost earned during the period.............. $ 33,635 $ 13,369 $ 56,108
Interest cost on projected benefit obligation...... 87,457 87,876 98,386
Net amortization and deferral...................... 18,761 18,761 31,392
-------- -------- --------
Net periodic deferred compensation cost............ $139,853 $120,006 $185,886
======== ======== ========
</TABLE>
The following table sets forth the funded status of the plan as of December
31, 1995 and 1996 and amounts recognized in the accompanying consolidated
balance sheets as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Actuarial present value of projected benefit obligation... $(1,159,113) $(1,445,083)
Plan assets at fair value................................. -- --
----------- ----------
Projected benefit obligation in excess of plan assets..... (1,159,113) (1,445,083)
Unrecognized net gain from past experience different from
that assumed and the effect of changes in assumptions... (57,128) (17,589)
Unrecognized net obligation............................... 41,205 36,736
Unrecognized prior service obligation..................... 90,121 251,873
Adjustment required to recognize minimum liability........ (570) (183,418)
----------- ----------
Deferred compensation..................................... $(1,085,485) $(1,357,481)
=========== ==========
</TABLE>
The assumed rate of return used in determining the value of accumulated
plan benefits was 7.25% and 7.5% for the years ended December 31, 1995 and 1996,
respectively.
The Company also has deferred compensation agreements with former
stockholders of Lawson Granite Company and a former stockholder of
Anderson-Friberg Company which are not covered under the Company's salary
continuation plan. Total annual payments of $224,000 begin in 2000 and end at
various dates through 2020. The present value of these payments was $1,668,609
as of December 31, 1995 and 1996, which is included in deferred compensation in
the consolidated balance sheets.
Savings and Profit Sharing Plan
The Company has a defined contribution savings plan under Section 401(k) of
the Internal Revenue Code for employees whose employment is not governed by a
collective bargaining agreement and who have completed one year of service. The
Company's contribution was $12,088, $19,804 and $27,587 in 1994, 1995 and 1996,
respectively.
The Company has a defined contribution savings plan under Section 401(k) of
the Internal Revenue Code for employees covered by a collective bargaining
agreement who have completed one year of service. The Company's contribution was
$7,257, $13,830 and $24,362 in 1994, 1995 and 1996, respectively.
(9) STOCK-BASED EMPLOYEE COMPENSATION
Under the terms of the Amended and Restated 1994 Stock Plan, 1,500,000
options were reserved for issuance to key employees to purchase equivalent
shares of common stock at exercise prices ranging from $2.40 to $4.12. The
options granted have a five year term and vest at 20% per year over this period.
F-20
<PAGE> 82
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) STOCK-BASED EMPLOYEE COMPENSATION -- (CONTINUED)
The following table sets forth the stock option transactions for the years
ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
----------- ----------------
<S> <C> <C>
Outstanding, December 31, 1993, 1994 and 1995............ 275,000 $ 2.49
Granted, January 2, 1996............................... 225,000 3.59
Granted, December 31, 1996............................. 362,500 3.75
------- -----
Outstanding, December 31, 1996........................... 862,500 3.31
======= =====
Exercisable, December 31, 1996........................... 282,500 2.99
Weighted average remaining contractual life.............. 3.4 years
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Standards No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized for stock options granted
under the plan during 1996 as the options were all granted at exercise prices
which equaled the fair value at the date of the grant. There were no awards
granted during 1995 and 1994. Had compensation cost for the Company's stock
option plan been determined based on the fair value at the grant date for awards
during 1996 consistent with the provisions of SOFAS No. 123, the Company's net
income would have been reduced to the pro forma amount indicated below:
<TABLE>
<S> <C>
Net income, as reported.................................. $1,908,164
Net income, pro forma.................................... 1,798,619
Net income per share, pro forma.......................... $ .43
</TABLE>
Pro forma net income reflects only options granted in 1996. Therefore, the
full impact of calculating compensation cost for stock options under SFAS No.
123 is not reflected in the pro forma net income amounts presented because
compensation cost is reflected over the options' vesting periods and
compensation cost for options granted prior to January 1, 1995 is not
considered.
The fair value of each option grant is estimated on the date of the grant
using the Minimum Value Method with the following weighted-average assumptions
used for grants in 1996: risk-free interest rate of 6%; dividend yield of $0;
and expected lives of five (5) years.
(10) RELATED PARTY TRANSACTIONS
The Company is related, through common ownership, to Swenson Granite
Company, Inc. (Swenson). The Company paid a management fee of $632,000,
$912,000, $936,000 in 1994, 1995 and 1996, respectively. Sales to Swenson were
$0, $0 and $729,611 and purchases from Swenson were $0, $0 and $197,047 in 1994,
1995 and 1996, respectively.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About the
Fair Value of Financial Instruments", requires disclosure of information about
the fair value of certain financial instruments for which it is practicable to
estimate that value. For purposes of the following disclosure the fair value of
a financial instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties other than in a forced sale or
liquidation. Management has determined that the carrying values of its financial
assets and liabilities approximate fair value at December 31, 1996.
(12) ACQUISITIONS
Effective December 31, 1995 Swenson Granite Company purchased all of the
outstanding stock of Lawson Granite Company and Anderson-Friberg Company. The
aggregate cost of these acquisitions was
F-21
<PAGE> 83
ROCK OF AGES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) ACQUISITIONS -- (CONTINUED)
$5,715,288 made up of 463 shares of Swenson stock valued at $3,381,799, a
$310,000 note payable, $354,880 in cash paid in 1996, and $1,668,609 in deferred
compensation arrangements. Accordingly, the purchase price was allocated to the
assets acquired and liabilities assumed based upon their respective fair values.
This treatment resulted in $1,301,113 of cost in excess of net assets acquired,
or goodwill, and was accounted for under the purchase method. The net assets
from the acquisition were contributed by Swenson to the Company.
The following unaudited pro forma information has been prepared assuming
that the acquisitions occurred at the beginning of the periods presented. The
pro forma information is presented for information purposes only and is not
necessarily indicative of what would have occurred if the acquisitions had been
made as of those dates.
<TABLE>
<CAPTION>
(UNAUDITED) YEARS ENDED
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Net revenues...................................... $43,689,296 $41,199,480
Net income........................................ 1,842,046 1,462,688
Net income per share.............................. .46 .36
</TABLE>
The Company also acquired certain assets and assumed certain liabilities of
Adru Granite, Inc. for $238,310 in 1996. The results of operations were not
material in relation to the Company's consolidated results of operations.
(13) SUBSEQUENT EVENTS
On June 27, 1997 the Company dividended assets of $1,069,136 to Swenson
Granite Company, Inc.
On June 30, 1997 the Company acquired all of the outstanding stock of KSMG,
a successor to Keystone Memorials, Inc. for 263,441 shares of the Company's
stock which was accounted for under the purchase method. The fair market value
of KSMG on the date of acquisition was $3,793,550. As of June 30, 1997
investments in and advances to affiliated companies included Keystone's share of
its investment in and advances to four Quarry Companies and Southern Mausoleums,
Inc.
The following unaudited pro forma information has been prepared assuming
that the acquisitions occurred at the beginning of the periods presented. The
pro forma information is presented for information purposes only and is not
necessarily indicative of what would have occurred if the acquisitions had been
made as of those dates.
<TABLE>
<CAPTION>
(UNAUDITED)
---------------------------
YEAR
ENDED SIX MONTHS
DECEMBER ENDED
31, JUNE 30,
1996 1997
----------- -----------
<S> <C> <C>
Net sales......................................... $53,972,546 $25,415,687
Net income (loss)................................. 1,711,447 (285,625)
Net income (loss) per share....................... .41 (.08)
</TABLE>
On August 12, 1997, pursuant to the reincorporation merger of Rock of Ages
Corporation, a Vermont corporation and the immediate predecessor to the Company
("ROA Vermont") with and into a newly-formed Delaware corporation, with the
Company surviving as a Delaware corporation, (i) the Company authorized
30,000,000 shares of $.01 par value Class A Common Stock, 15,000,000 shares of
$.01 par value Class B Common Stock, and 2,500,000 shares of $.01 par value
Preferred Stock and (ii) each outstanding share of common stock of ROA Vermont
was converted into one half of a share of Class B Common Stock of the Company.
As of August 12, 1997, no shares of Class A Common or Preferred Stock had been
issued. The Common Stock outstanding and weighted average shares outstanding for
all periods presented have been adjusted for the new stock capitalization.
F-22
<PAGE> 84
INDEPENDENT AUDITORS' REPORT
The Board of Directors,
Childs & Childs Granite Company, Inc.
and C & C Granite Company, Inc.:
We have audited the accompanying combined balance sheet of Childs & Childs
Granite Company, Inc., C & C Granite Company Inc., the Quarry Companies and
Southern Mausoleums, Inc. (SMI) as of May 31, 1997, and the related combined
statements of operations, stockholders' equity, and cash flows for the eleven-
month period ended May 31, 1997. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit. We did not
audit the financial statements of the Quarry Companies (Caprice Blue Quarry,
Inc.; Autumn Rose Quarry, Inc.; and Pennsylvania Granite Corporation, including
its wholly-owned subsidiary, Carolina Quarries, Inc.) or SMI. The Company's
combined investment in and advances to the Quarry Companies and SMI at May 31,
1997 was $540,184 and its equity in the earnings of the Quarry Companies and SMI
was $128,839 for the eleven-month period ended May 31, 1997. The financial
statements of the Quarry Companies and SMI were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to the
amounts included for the Quarry Companies and SMI, is based solely on the
reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit and the reports of the other auditors provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors,
the combined financial statements referred to above present fairly, in all
material respects, the financial position of Childs & Childs Granite Company,
Inc., C & C Granite Company, Inc., the Quarry Companies and SMI at May 31, 1997,
and the results of their operations and their cash flows for the eleven-month
period ended May 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
July 18, 1997
F-23
<PAGE> 85
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
COMBINED BALANCE SHEET
MAY 31, 1997
<TABLE>
<S> <C>
ASSETS (NOTE 5)
Current assets:
Cash........................................................................... $ 113,486
Trade accounts receivable, less allowance for doubtful accounts of $134,000.... 1,055,833
Inventories (note 2)........................................................... 1,136,298
----------
Total current assets........................................................ 2,305,617
----------
Investments in and advances to affiliated companies (note 4)..................... 540,184
Property, plant, and equipment:
Land........................................................................... 15,000
Buildings...................................................................... 480,115
Machinery and equipment........................................................ 1,050,767
Trucks, autos, and trailers.................................................... 357,319
Furniture and fixture.......................................................... 45,310
----------
1,948,511
Less accumulated depreciation.................................................. 945,953
----------
Net property, plant, and equipment.......................................... 1,002,558
----------
$3,848,359
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (note 5)..................................... $ 412,185
Trade accounts payable......................................................... 128,887
Trade accounts payable-affiliates (note 4)..................................... 170,290
Due to stockholders............................................................ 23,909
Accrued wage related costs..................................................... 37,318
----------
Total current liabilities................................................... 772,589
Long-term debt, less current portion (note 5).................................... 500,000
----------
Total liabilities........................................................... 1,272,589
----------
Commitment and contingency (notes 5 and 7).......................................
Stockholders' equity:
Common stock (note 6).......................................................... 22,500
Quarry Companies' and SMI's capital............................................ 348,184
Retained earnings.............................................................. 2,205,086
----------
Total stockholders' equity.................................................. 2,575,770
----------
$3,848,359
==========
</TABLE>
See accompanying notes to combined financial statements.
F-24
<PAGE> 86
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
COMBINED STATEMENT OF OPERATIONS
FOR THE ELEVEN-MONTH PERIOD ENDED MAY 31, 1997
<TABLE>
<S> <C>
Net revenues..................................................................... $5,606,364
Cost of goods sold (including purchases from the Quarry Companies of
$1,009,448) -- (note 4)........................................................ 4,592,884
----------
Gross profit........................................................... 1,013,480
Selling, general, and administrative expenses.................................... 701,325
----------
Operating income....................................................... 312,155
----------
Other income (expense):
Interest expense............................................................... (58,758)
Finance charge income.......................................................... 28,322
Miscellaneous income........................................................... 2,033
----------
Net other expense...................................................... (28,403)
----------
Net income before equity in earnings of investees...................... 283,752
Equity in earnings of investees (note 4)......................................... 128,839
----------
Net income............................................................. $ 412,591
==========
</TABLE>
See accompanying notes to combined financial statements.
F-25
<PAGE> 87
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE ELEVEN-MONTH PERIOD ENDED MAY 31, 1997
<TABLE>
<CAPTION>
QUARRY
COMPANIES' TOTAL
COMMON AND SMI'S RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Balance at June 30, 1996...................... $22,500 $ 219,345 $2,269,711 $ 2,511,556
Distributions to stockholders............... -- -- (348,377) (348,377)
Net income.................................. -- 128,839 283,752 412,591
------- -------- ---------- ----------
Balance at May 31, 1997....................... $22,500 $ 348,184 $2,205,086 $ 2,575,770
======= ======== ========== ==========
</TABLE>
See accompanying notes to the combined financial statements.
F-26
<PAGE> 88
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
COMBINED STATEMENT OF CASH FLOWS
FOR THE ELEVEN-MONTH PERIOD ENDED MAY 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income.................................................................... $ 412,591
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................................... 144,638
Equity in earnings of Quarry Companies and SMI............................. (128,839)
Changes in operating assets and liabilities:
Trade accounts receivable................................................ (213,089)
Inventories.............................................................. (57,466)
Prepaid expenses......................................................... 57,561
Trade accounts payable, trade accounts payable-affiliates, and accrued
costs................................................................... 96,690
---------
Net cash provided by operating activities............................. 312,086
---------
Cash flows from investing activities:
Additions to property, plant, and equipment................................... (31,768)
Increase in cash surrender value.............................................. (56,008)
---------
Net cash used in investing activities................................. (87,776)
---------
Cash flows from financing activities:
Proceeds from long-term debt.................................................. 912,185
Payments on long-term debt.................................................... (814,377)
Distributions to stockholders................................................. (234,000)
---------
Net cash used in financing activities................................. (136,192)
---------
Net change in cash.................................................... 88,118
Cash at beginning of period..................................................... 25,368
---------
Cash at end of period........................................................... $ 113,486
=========
Supplemental disclosure of cash flow information -- cash paid during the period
for interest.................................................................. $ 62,545
=========
Supplemental disclosure of noncash investing and financing activities -- the
Company distributed the cash surrender value of certain life insurance
policies to the Company's stockholders which amounted to...................... $ 114,377
=========
</TABLE>
See accompanying notes to the combined financial statements.
F-27
<PAGE> 89
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) Description of Business
Childs & Childs Granite Company, Inc. is a manufacturer of granite
monuments and memorials in Elberton, Georgia. The three stockholders of Childs &
Childs Granite Company, Inc. collectively own C & C Granite Company, Inc., which
is a trucking company that primarily delivers products to Childs & Childs
Granite Company, Inc.'s customers. Additionally, the three stockholders of
Childs & Childs Granite Company, Inc. collectively own a 50% interest in the
Quarry Companies (Caprice Blue Quarry, Inc.; Autumn Rose Quarry, Inc.; and
Pennsylvania Granite Corporation, including its wholly owned subsidiary,
Carolina Quarries, Inc.) which operate six granite quarries in five states and
Southern Mausoleum, Inc. (SMI), a mausoleum manufacturing plant. Net revenues
are to various retail monument customers throughout the United States.
(b) Basis of Presentation
The combined financial statements include the financial statements of
Childs & Childs Granite Company, Inc.; C & C Granite Company, Inc.; and the 50%
ownership in the aforementioned three Quarry Companies and SMI owned by the
three stockholders of Childs & Childs Granite Company, Inc. (collectively, the
"Company"). Childs & Childs Granite Company, Inc., the Quarry Companies and SMI
have been combined using historical costs as a result of the common ownership.
The Quarry Companies and SMI are accounted for under the equity method.
All significant intercompany balances and transactions have been eliminated
in combination.
(c) Cash Equivalents
For purposes of the combined statement of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. At May 31, 1997, the Company owned no cash
equivalents.
(d) Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined using the first-in, first-out (FIFO) method for all
inventories.
(e) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the assets on a straight-line basis.
Property, plant, and equipment are depreciated over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Buildings.................................................... 39
Machinery and equipment...................................... 12
Vehicles..................................................... 5
Office equipment............................................. 5 to 7
</TABLE>
F-28
<PAGE> 90
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
(f) Income Taxes
The stockholders of the Company have elected to have the earnings of the
Company taxed under the S Corporation provisions of the Internal Revenue Code.
Under the S Corporation provisions, the income taxes of the Company are the
responsibility of the stockholders for Federal and state income tax purposes.
Accordingly, no income tax provision or income tax balances have been recorded
by the Company.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
(h) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) INVENTORIES
The components of inventories are as follows:
<TABLE>
<S> <C>
Raw materials............................................ $ 896,816
Work in process.......................................... 56,629
Finished goods........................................... 182,853
----------
Total inventories.............................. $1,136,298
==========
</TABLE>
(3) FAIR VALUE OF FINANCIAL INSTRUMENTS
For cash, trade accounts receivables, trade accounts payables, trade
accounts payable-affiliates, due to stockholders, and accrued wage related
costs, the carrying amounts approximate fair value because of the short maturity
of these instruments.
The carrying value of long-term debt approximates fair value due to the
variable interest of these instruments using a discounted cash flow analysis.
F-29
<PAGE> 91
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES
Investments in affiliated companies consist of the three stockholders' 50%
of the common stock of each of the Quarry Companies and SMI. Summary unaudited
financial information for the Quarry Companies and SMI as of and for the
eleven-month period ended May 31, 1997 is as follows:
<TABLE>
<CAPTION>
CAPRICE AUTUMN
BLUE ROSE PENNSYLVANIA
QUARRY SMI QUARRY GRANITE TOTAL
--------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Current assets.............. $ 25,169 $ 611,297 $ 85,413 $ 1,887,749 $ 2,609,628
Noncurrent assets........... 277,301 288,514 1,530,708 5,476,508 7,573,031
--------- --------- --------- --------- ---------
Total assets...... $ 302,470 $ 899,811 $1,616,121 $ 7,364,257 $10,182,659
========= ========= ========= ========= =========
Current liabilities......... $ 200,443 $ 587,554 $ 171,684 $ 5,097,809 $ 6,057,490
Noncurrent liabilities...... 797,511 590,242 1,511,181 529,868 3,428,802
Stockholders' equity
(deficit)................. (695,484) (277,985) (66,744) 1,736,580 696,367
--------- --------- --------- --------- ---------
Total liabilities
and
stockholders'
equity
(deficit)....... $ 302,470 $ 899,811 $1,616,121 $ 7,364,257 $10,182,659
========= ========= ========= ========= =========
Net revenues................ $ 183,569 $1,225,396 $ 325,533 $ 6,725,009 $ 8,459,507
Gross profit (loss)......... (234,920) 244,123 (29,267) 1,657,346 1,637,282
Net earnings (loss)......... $(254,707) $ 126,185 $ (78,525) $ 464,725 $ 257,678
========= ========= ========= ========= =========
</TABLE>
In addition, the Company has advances to the Quarry Companies and SMI
totaling $192,000 at May 31, 1997.
Childs & Childs Granite Co., Inc. purchases a substantial portion of its
raw granite from the Quarry Companies. Such purchases amounted to $1,009,448 for
the eleven-month period ended May 31, 1997. Individually, the purchases from
each Quarry Company are as follows:
<TABLE>
<S> <C>
Caprice Blue Quarry...................................... $ 158,657
Autumn Rose Quarry....................................... 84,608
Pennsylvania Granite..................................... 766,183
----------
Total.......................................... $1,009,448
==========
</TABLE>
At May 31, 1997, the Company's 50% interest in the cumulative losses of the
Quarry Companies and SMI amounted to $(928,927).
(5) LONG-TERM DEBT
Long-term debt at May 31, 1997 consists of the following:
<TABLE>
<S> <C>
Borrowings under line of credit, interest at 9.00%,
payable monthly, principal due November 1998............ $500,000
Borrowings under line of credit, interest at prime plus 1%
(9.5% at May 31, 1997) payable quarterly beginning
August 1997, principal due May 1998..................... 412,185
--------
Total long-term debt............................ 912,185
Less current portion...................................... 412,185
--------
Long-term debt, less current portion............ $500,000
========
</TABLE>
F-30
<PAGE> 92
CHILDS & CHILDS GRANITE COMPANY, INC.,
C & C GRANITE COMPANY, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(5) LONG-TERM DEBT -- (CONTINUED)
The aggregate maturities of long-term debt for each of the two years
subsequent to May 31, 1997 are as follows: 1998, $412,185 and 1999, $500,000.
Childs & Childs Granite Co., Inc. has two lines of credit with a bank for a
total of $1,000,000, of which $912,185 was outstanding at May 31, 1997. The
lines of credit are secured by substantially all of the assets of Childs and
Childs Granite Co., Inc. The lines of credit may be prepaid at any time without
penalty.
(6) COMMON STOCK
At May 31, 1997, the par value and the authorized shares of common stock of
Childs & Childs Granite Co., Inc. were $100 and 5,000, respectively. In
addition, 210 shares were issued and outstanding.
At May 31, 1997, the par value and the authorized shares of common stock of
C & C Granite Co., Inc. were $100 and 5,000, respectively. In addition, 15
shares were issued and outstanding.
(7) SUBSEQUENT EVENT
On June 28, 1997, Rock of Ages Corporation entered into a definitive
agreement with the shareholders of the Company to purchase all of the
outstanding stock of the Company.
F-31
<PAGE> 93
INDEPENDENT AUDITORS' REPORT
The Board of Directors,
Keystone Memorials, Inc.:
We have audited the accompanying combined balance sheet of Keystone
Memorials, Inc., the Quarry Companies and Southern Mausoleums, Inc. (SMI) as of
April 30, 1997, and the related combined statements of operations, stockholder's
deficit, and cash flows for the ten-month period ended April 30, 1997. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit. We did not audit the financial
statements of the Quarry Companies (Caprice Blue Quarry, Inc.; Autumn Rose
Quarry, Inc.; or Pennsylvania Granite Corporation and its subsidiary, Carolina
Quarries, Inc.) or SMI. The Company's combined investment in and advances to the
Quarry Companies and SMI at April 30, 1997 was $585,010 and its equity in the
earnings of the Quarry Companies and SMI was $55,787 for the ten-month period
ended April 30, 1997. The financial statements of the Quarry Companies and SMI
were audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for the Quarry Companies
and SMI, is based solely on the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit and the reports of the other auditors provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors,
the combined financial statements referred to above present fairly, in all
material respects, the financial position of Keystone Memorials, Inc., the
Quarry Companies and SMI at April 30, 1997, and the results of their operations
and their cash flows for the ten-month period ended April 30, 1997 in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
July 25, 1997
F-32
<PAGE> 94
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
COMBINED BALANCE SHEET
APRIL 30, 1997
<TABLE>
<S> <C>
ASSETS (NOTE 6)
Current assets:
Cash equivalents............................................................... $ 35,883
Trade accounts receivable, less allowance for doubtful accounts of
$1,282,000.................................................................. 1,626,474
Due from employees............................................................. 14,790
Prepaid expenses............................................................... 62,040
Inventories (note 2)........................................................... 1,532,099
----------
Total current assets........................................................ 3,271,286
----------
Investments in and advances to affiliated companies (note 4)..................... 585,010
----------
Property, plant, and equipment:
Land........................................................................... 272,977
Buildings...................................................................... 906,882
Machinery and equipment........................................................ 3,293,562
Trucks, autos, and trailers.................................................... 718,778
Furniture and fixtures......................................................... 195,452
----------
5,387,651
Less accumulated depreciation.................................................. 2,682,924
----------
Net property, plant, and equipment.......................................... 2,704,727
----------
$6,561,023
==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current portion of long-term debt (note 6)..................................... $ 844,419
Bank overdraft................................................................. 70,921
Trade accounts payable......................................................... 816,917
Trade accounts payable-affiliates.............................................. 3,394,680
Accrued expenses............................................................... 171,464
----------
Total current liabilities................................................... 5,298,401
Long-term debt, less current portion (note 6).................................... 1,745,649
----------
Total liabilities...................................................... 7,044,050
----------
Stockholder's deficit:
Common stock, $100 par value. Authorized 100 shares; issued and outstanding 100
shares...................................................................... 10,000
Quarry Companies and SMI's capital............................................. 275,132
Accumulated deficit............................................................ (768,159)
----------
Total stockholder's deficit............................................ (483,027)
Commitments and contingencies (notes 5 and 6)....................................
----------
$6,561,023
==========
</TABLE>
See accompanying notes to combined financial statements.
F-33
<PAGE> 95
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
COMBINED STATEMENT OF OPERATIONS
FOR THE TEN-MONTH PERIOD ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Net revenues..................................................................... $7,537,876
Cost of goods sold (including purchases from affiliated companies of $761,923 and
related parties of $848,822) -- (notes 4 and 8)................................ 6,723,718
----------
Gross profit........................................................... 814,158
Selling, general, and administrative expenses.................................... 1,093,782
----------
Operating loss......................................................... (279,624)
----------
Other income (expense):
Interest expense............................................................... (186,401)
Finance charge income.......................................................... 92,955
Gain on sales of property and equipment........................................ 40,207
----------
Total other expense.................................................... (53,239)
----------
Loss before equity in earnings of Quarry Companies and SMI and income
taxes.................................................................. (332,863)
Equity in earnings of Quarry Companies and SMI (note 4).......................... 55,787
----------
Loss before income taxes............................................... (277,076)
Income taxes (note 7)............................................................ --
----------
Net loss............................................................... $ (277,076)
==========
</TABLE>
See accompanying notes to combined financial statements.
F-34
<PAGE> 96
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
COMBINED STATEMENT OF STOCKHOLDER'S DEFICIT
FOR THE TEN-MONTH PERIOD ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
QUARRY
COMPANIES' TOTAL
COMMON AND SMI'S ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT DEFICIT
------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at June 30, 1996............................ $10,000 219,345 (435,296) (205,951)
Net earnings (loss)............................... -- 55,787 (332,863) (277,076)
------- ------- -------- --------
Balance at April 30, 1997........................... $10,000 275,132 (768,159) (483,027)
======= ======= ======== ========
</TABLE>
See accompanying notes to the combined financial statements.
F-35
<PAGE> 97
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
COMBINED STATEMENT OF CASH FLOWS
FOR THE TEN-MONTH PERIOD ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $ (277,076)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation................................................................ 297,023
Gain on sales of property, plant, and equipment............................. (40,207)
Equity in earnings of Quarry Companies and SMI.............................. (55,787)
Changes in operating assets and liabilities:
Trade accounts receivable and due from employees.......................... (190,647)
Inventories............................................................... (59,243)
Prepaid expenses.......................................................... 33,258
Trade accounts payable, trade accounts payable-affiliates, and accrued
expenses................................................................. 172,684
----------
Net cash used in operating activities.................................. (119,995)
----------
Cash flows from investing activities:
Additions to property, plant, and equipment.................................... (172,670)
Proceeds from sales of property, plant, and equipment.......................... 185,000
Increase in advances to affiliated companies................................... (121,998)
----------
Net cash used in investing activities.................................. (109,668)
----------
Cash flows from financing activities:
Increase in bank overdraft..................................................... 70,921
Proceeds from long-term debt................................................... 1,013,458
Payments on long-term debt..................................................... (979,972)
----------
Net cash provided by financing activities.............................. 104,407
----------
Net change in cash equivalents......................................... (125,256)
Cash equivalents at beginning of period.......................................... 161,139
----------
Cash equivalents at end of period................................................ $ 35,883
==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................................... $ 186,401
==========
Income taxes................................................................ $ --
==========
</TABLE>
See accompanying notes to the combined financial statements.
F-36
<PAGE> 98
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS
APRIL 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) Description of Business
Keystone Memorials, Inc. is a manufacturer of granite monuments and
memorials in Elberton, Georgia. Additionally, the sole stockholder of Keystone
Memorials, Inc. owns a 50% interest in three Quarry Companies (Caprice Blue
Quarry, Inc.; Autumn Rose Quarry, Inc.; and Pennsylvania Granite Corporation,
including its wholly owned subsidiary, Carolina Quarries, Inc.) which operate
six granite quarries in five states and Southern Mausoleum, Inc. (SMI), a
mausoleum manufacturing plant. Net revenues are to various retail monument
customers throughout the United States.
(b) Basis of Presentation
The combined financial statements include the financial statements of
Keystone Memorials, Inc., and its 50% ownership in three Quarry Companies and
SMI owned by the sole stockholder of Keystone Memorials, Inc. (collectively, the
"Company"). Keystone Memorials, Inc., Quarry Companies and SMI have been
combined using historical costs as a result of the common ownership. The Quarry
Companies and SMI are accounted for under the equity method.
(c) Cash Equivalents
For purposes of the combined statement of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. At April 30, 1997, the cash equivalents consisted
of $35,883 invested in a money market account.
(d) Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined using the first-in, first-out (FIFO) method for all
inventories.
(e) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the assets on a straight-line basis.
Property, plant, and equipment are depreciated over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Buildings.................................................... 39
Machinery and equipment...................................... 12
Vehicles..................................................... 5
Office equipment............................................. 5 to 7
</TABLE>
(f) 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 and operating loss and tax credit carryforwards. 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.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be
F-37
<PAGE> 99
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES -- (CONTINUED)
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell. Adoption of
this statement did not have a material impact on the Company's financial
position, results of operations, or liquidity.
(h) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) INVENTORIES
The components of inventories are as follows:
<TABLE>
<S> <C>
Raw materials............................................ 791,570
Work in process.......................................... 154,017
Finished goods........................................... $ 586,512
----------
Total inventories.............................. $1,532,099
==========
</TABLE>
(3) FAIR VALUE OF FINANCIAL INSTRUMENTS
For cash equivalents, trade accounts receivables, due from employees, bank
overdraft, trade accounts payables, trade accounts payable-affiliates, and
accrued expenses, the carrying amounts approximate fair value because of the
short maturity of these instruments.
The carrying value of long-term debt approximates fair value based on
discounted cash flow analyses.
(4) INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES
Investments in affiliated companies consists of the sole stockholder's 50%
of the common stock of each of the Quarry Companies and SMI. Summary unaudited
financial information for the Quarry Companies and SMI as of and for the
ten-month period ended April 30, 1997 is as follows:
<TABLE>
<CAPTION>
CAPRICE AUTUMN ROSE PENNSYLVANIA
BLUE QUARRY SMI QUARRY GRANITE TOTAL
----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Current assets.............. $ 17,557 $ 610,406 $ 91,700 $ 1,774,381 $ 2,494,044
Noncurrent assets........... 279,247 292,488 1,534,118 5,454,693 7,560,546
-------- -------- ---------- ---------- -----------
Total assets...... $ 296,804 $ 902,894 $1,625,818 $ 7,229,074 $10,054,590
======== ======== ========== ========== ===========
Current liabilities......... $ 231,976 $ 632,922 $ 178,070 $ 4,994,908 $ 6,037,876
Noncurrent liabilities...... 749,409 605,748 1,512,690 579,868 3,447,715
Stockholders' equity
(deficit)................. (684,581) (335,776) (64,942) 1,654,298 568,999
-------- -------- ---------- ---------- -----------
Total liabilities
and
stockholders'
equity
(deficit)....... $ 296,804 $ 902,894 $1,625,818 $ 7,229,074 $10,054,590
======== ======== ========== ========== ===========
Net revenues................ $ 164,197 $1,073,646 $ 294,495 $ 6,076,004 $ 7,608,342
Gross profit (loss)......... (226,437) 174,251 (31,007) 1,401,663 1,318,470
Net earnings (loss)......... $ (243,804) $ 68,394 $ (76,723) $ 382,443 $ 130,310
======== ======== ========== ========== ===========
</TABLE>
In addition, the Company has advances to the Quarry Companies and SMI
totaling $300,510 at April 30, 1997.
F-38
<PAGE> 100
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES -- (CONTINUED)
Keystone Memorials, Inc. purchases a substantial portion of its raw granite
from the Quarry Companies and SMI. Such purchases amounted to $761,923 for the
ten-month period ended April 30, 1997. Intercompany profits of $9,368 have been
eliminated in combination. Individually, the purchases from each of the Quarry
Companies and SMI are as follows:
<TABLE>
<S> <C>
Caprice Blue Quarry....................................... $ 21,297
Southern Mausoleums....................................... 31,597
Autumn Rose Quarry........................................ 62,068
Pennsylvania Granite...................................... 646,961
--------
$761,923
========
</TABLE>
Keystone Memorials, Inc. sold various property and equipment to
Pennsylvania Granite for $109,000 for the ten-month period ended April 30, 1997.
At April 30, 1997, the Company's 50% interest in the cumulative losses of
the Quarry Companies and SMI amounted to $(992,611).
(5) LEASES
The Company has several noncancelable operating leases, primarily for
office equipment, that expire over the next three years. Rental expense for the
operating leases (except those with lease terms of a month or less that were not
renewed) during the ten-month period ending April 30, 1997 was $4,000.
Future minimum lease payments under noncancelable operating leases with
initial or remaining lease terms in excess of one year as of April 30, 1997 are
$13,000 over the next three years.
(6) LONG-TERM DEBT
Long-term debt at April 30, 1997 consists of the following:
<TABLE>
<S> <C>
9.75% note payable in monthly installments of $7,840,
including interest, with final payment of $484,708, due
June 1999.............................................. $ 568,688
9.75% note payable in monthly installments of $4,035,
including interest, with final payment of $249,962, due
June 1999.............................................. 293,083
Borrowings under line of credit, interest at prime plus
.25% (8.75% at April 30, 1997) payable monthly,
principal due May 1998................................. 945,243
Non-interest bearing note payable to former owner which
is the estate of the relative of the sole
stockholder............................................ 783,054
----------
Total long-term debt........................... 2,590,068
Less current portion..................................... 844,419
----------
Long-term debt, excluding current portion...... $1,745,649
==========
</TABLE>
The aggregate maturities of long-term debt for each of the three years
subsequent to April 30, 1997 are as follows: 1998, $844,419; 1999, $1,012,866;
and 2000, $732,783.
Keystone Memorials, Inc. has a line of credit with a bank for a total of
$1,000,000, of which $945,243, was outstanding at April 30, 1997. The line of
credit is secured by substantially all of the assets of Keystone Memorials, Inc.
The line of credit may be prepaid at any time without penalty.
Keystone Memorials, Inc. also has two financing notes used to finance
various equipment. These notes are paid on a monthly basis, with the final
payments due in June 1999. These notes are secured by the equipment they are
financing.
F-39
<PAGE> 101
KEYSTONE MEMORIALS, INC., QUARRY COMPANIES AND SMI
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES
Income taxes for the ten-month period ended April 30, 1997 differed from
the amounts computed by applying the U.S. federal income tax rate of 34% to loss
before income taxes as a result of the following:
<TABLE>
<S> <C>
Computed "expected" tax benefit.......................... $ (94,206)
Increase (reduction) in income taxes resulting from:
Change in the beginning-of-the-year balance of the
valuation allowance for deferred tax assets
allocated to income taxes........................... 108,060
State and local income taxes, net of federal income tax
benefit............................................. (15,683)
Other, net............................................. 1,829
---------
$ --
=========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at April 30,
1997 are presented below.
<TABLE>
<S> <C>
Deferred tax assets:
Accounts receivable principally due to allowance for
doubtful accounts................................... $ 499,980
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the Tax
Reform Act of 1986.................................. 72,150
Accruals not deductible until paid..................... 21,648
Investments in affiliated companies, principally due to
undistributed losses of affiliated companies........ 387,118
Net operating loss carryforwards....................... 253,422
Other.................................................. 4,801
---------
Total gross deferred tax assets................ 1,239,119
Less valuation allowance............................... 821,555
---------
Net deferred tax assets........................ 417,564
---------
Deferred tax liability -- Property, plant, and equipment,
principally due to differences in depreciation......... (417,564)
---------
Net deferred taxes............................. $ --
=========
</TABLE>
The change in the income tax valuation allowance for the ten-month period
ended April 30, 1997 was $108,060.
At April 30, 1997, the Company has net operating loss carryforwards for
federal income tax purposes of $649,800 which are available to offset future
federal taxable income, if any, through 2012. Such net operating loss
carryforwards may not be utilized subsequent to the acquisition (see note 9).
(8) RELATED PARTY TRANSACTIONS
The sole stockholder of the Company has an ownership interest in two
quarries that sell raw granite to the Company on a routine basis. Total
purchases from these related parties for the ten-month period ended April 30,
1997 was $848,822. Also, the Company sold various machinery and equipment to one
of the quarries for $76,000.
(9) SUBSEQUENT EVENT
On June 30, 1997, a successor to the Company was acquired by Rock of Ages
Corporation ("Rock of Ages") in exchange for 263,441 shares of common stock of
Rock of Ages. A total of $3,273,856, included in trade accounts payable, was not
included in this transaction.
F-40
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
Keith Monument Companies:
We have audited the accompanying combined balance sheets of Keith Monument
Companies (the "Companies") as of June 30, 1997 and 1996, and the related
combined statements of operations, stockholders' equity, and cash flows for each
of the years in the three-year period ended June 30, 1997. These combined
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Keith Monument
Companies as of June 30, 1997 and 1996, and the results of their operations and
their cash flows for each of the years in the three-year period ended June 30,
1997 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Louisville, Kentucky
August 8, 1997
F-41
<PAGE> 103
KEITH MONUMENT COMPANIES
COMBINED BALANCE SHEETS
JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $1,866,496 $1,783,346
Accounts receivable, less allowance for doubtful accounts of
$124,500....................................................... 834,237 1,002,527
Current portion of notes receivable (note 4):
Related party.................................................. 63,145 89,876
Other.......................................................... 39,525 28,738
Inventories (note 2).............................................. 664,100 1,192,364
Prepaid expenses and other current assets......................... 77,474 98,210
Prepaid income taxes (note 7)..................................... 26,300 16,400
Deferred income taxes (note 7).................................... 9,900 10,300
---------- ----------
Total current assets........................................... 3,581,177 4,221,761
Property, plant and equipment, net (notes 3 and 5).................. 977,386 1,393,261
Notes receivable, excluding current portion (note 4):
Related party..................................................... 468,346 401,406
Other............................................................. 26,580 15,775
Due from related party.............................................. 48,870 48,870
Investments......................................................... 304,046 319,434
Cash surrender value of life insurance.............................. 148,956 164,329
Covenants not to compete, less accumulated amortization of $45,000
and $83,022, respectively (note 9)................................ 105,000 387,861
Goodwill, less accumulated amortization of $13,982 (note 9)......... -- 824,940
Other assets........................................................ 237,853 209,199
---------- ----------
$5,898,214 $7,986,836
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (note 5)..................... $ -- $ 277,921
Trade accounts payable............................................ 31,818 96,964
Accrued expenses.................................................. 493,602 630,137
Dividends payable................................................. 141,303 85,825
Customer deposits................................................. 964,324 844,895
---------- ----------
Total current liabilities...................................... 1,631,047 1,935,742
Long-term debt, excluding current maturities (note 5)............... -- 1,840,562
Deferred income taxes (note 7)...................................... 27,200 --
---------- ----------
Total liabilities......................................... 1,658,247 3,776,304
---------- ----------
Commitments and contingencies (note 8)..............................
Stockholders' equity (note 6):
Common stock...................................................... 179,700 179,700
Retained earnings................................................. 4,066,267 4,036,832
Treasury stock.................................................... (6,000) (6,000)
---------- ----------
Total stockholders' equity................................ 4,239,967 4,210,532
---------- ----------
$5,898,214 $7,986,836
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-42
<PAGE> 104
KEITH MONUMENT COMPANIES
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues........................................... $7,041,748 $6,781,005 $7,810,831
Cost of goods sold..................................... 2,133,608 2,048,600 2,531,797
---------- ---------- ----------
Gross profit................................. 4,908,140 4,732,405 5,279,034
Selling, general and administrative expenses........... 3,940,554 3,854,739 4,208,996
---------- ---------- ----------
Operating income............................. 967,586 877,666 1,070,038
Interest income........................................ 98,856 148,582 172,300
Other income........................................... 81,295 93,521 71,633
Other expense.......................................... (23,251) (23,502) (85,328)
---------- ---------- ----------
Income before income taxes................... 1,124,486 1,096,267 1,228,643
Income tax expense (benefit) (note 7).................. 11,000 2,600 (23,650)
---------- ---------- ----------
Net income................................... $1,113,486 $1,093,667 $1,252,293
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-43
<PAGE> 105
KEITH MONUMENT COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON RETAINED TREASURY
STOCK EARNINGS STOCK TOTAL
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Balance at June 30, 1994...................... $179,700 4,230,074 (6,000) 4,403,774
Net income.................................. -- 1,113,486 -- 1,113,486
Dividends................................... -- (1,207,237) -- (1,207,237)
-------- ---------- ------ ----------
Balance at June 30, 1995...................... 179,700 4,136,323 (6,000) 4,310,023
Net income.................................. -- 1,093,667 -- 1,093,667
Dividends................................... -- (1,163,723) -- (1,163,723)
-------- ---------- ------ ----------
Balance at June 30, 1996...................... 179,700 4,066,267 (6,000) 4,239,967
Net income.................................. -- 1,252,293 -- 1,252,293
Dividends................................... -- (1,281,728) -- (1,281,728)
-------- ---------- ------ ----------
Balance at June 30, 1997...................... $179,700 4,036,832 (6,000) 4,210,532
======== ========== ====== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-44
<PAGE> 106
KEITH MONUMENT COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $1,113,486 $1,093,667 $1,252,293
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.......................................... 131,295 104,203 117,072
Amortization.......................................... 15,000 30,000 52,004
(Gain) loss on sale of property, plant and
equipment........................................... (4,044) 7,433 25,349
Deferred income taxes................................. (1,900) (1,800) (27,600)
(Increase) decrease in accounts receivable............ 27,061 306,879 (168,290)
(Increase) decrease in inventories.................... (37,649) 24,952 41,914
(Increase) decrease in prepaid expenses and other
current assets...................................... 24,768 104,627 (20,736)
(Increase) decrease in prepaid income taxes........... 14,400 (26,300) 9,900
(Increase) decrease in other assets................... (20,269) (161,091) 28,654
Increase (decrease) in trade accounts payable......... (85,882) (18,784) 65,146
Increase (decrease) in accrued expenses............... 5,524 (20,162) 136,535
Increase (decrease) in income taxes payable........... 12,709 (12,709) --
Increase (decrease) in customer deposits.............. (43,356) 254,593 (119,429)
---------- ---------- ----------
Net cash provided by operating activities........ 1,151,143 1,685,508 1,392,812
---------- ---------- ----------
Cash flows from investing activities:
Decrease in notes receivable............................. 75,579 91,223 61,801
Additions to property, plant and equipment............... (74,562) (142,857) (195,701)
Proceeds from sale of property, plant and equipment...... 11,400 28,105 25,905
(Increase) decrease in investments....................... (13,306) 92,635 (15,388)
Increase in cash surrender value of life insurance....... (11,172) (23,070) (15,373)
Cash paid for covenant not to compete.................... (150,000) -- --
---------- ---------- ----------
Net cash provided by (used in) investing
activities..................................... (162,061) 46,036 (138,756)
---------- ---------- ----------
Cash flows from financing activities --
Cash dividends paid...................................... (1,255,494) (1,192,264) (1,337,206)
---------- ---------- ----------
Net increase (decrease) in cash.................. (266,412) 539,280 (83,150)
Cash and cash equivalents at beginning of year............. 1,593,628 1,327,216 1,866,496
---------- ---------- ----------
Cash and cash equivalents at end of year................... $1,327,216 $1,866,496 $1,783,346
========== ========== ==========
Supplemental cash flow information --
Cash (paid) refunded for income taxes.................... $ 14,026 $ (23,517) $ --
========== ========== ==========
Supplemental schedule of noncash investing and financing
activities --
Note receivable for sale of building and land............ $ -- $ 36,000 $ --
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-45
<PAGE> 107
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Keith Monument Companies (the Companies) are engaged in a single line of
business of the engraving and selling of memorials, primarily to customers in
the Commonwealth of Kentucky.
(b) Principles of Combination
The combined financial statements include the following Kentucky
corporations, all affiliated through common ownership and control of
substantially all of the issued and outstanding shares of common stock of the
Companies by Messers. John E. Keith and Roy H. Keith, Jr., and their families:
Keith Monument Company, National Memorial Corporation, Riehm-Gerlack Monument
Company, Inc., Keith Lettering & Setting Corporation, Glasgow Monument Company,
Inc. and Snyder Corporation. Keith Monument Company is a wholly-owned subsidiary
of Keith National Corporation, a Kentucky corporation also controlled by
Messers. Keith. All significant intercompany balances and transactions have been
eliminated in the combined financial statements.
(c) Cash Equivalents
Cash equivalents of $415,283 and $321,572 at June 30, 1996 and 1997,
respectively, consist primarily of money market funds and certificates of
deposit with an initial term of less than three months. For purposes of the
statements of cash flows, the Companies consider all short-term highly liquid
investments with original maturities of three months or less to be cash
equivalents. Cash and certificates of deposit are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. The Companies had bank balances
exceeding individual FDIC insurance limits by $1,184,665 at June 30, 1997.
(d) Accounts Receivable and Revenue Recognition
The Companies recognize revenue upon the setting of the memorial. In
certain instances, the Companies may enter into agreements with their customers
which provide for extended payment terms, generally up to two years from either
the date of setting of the memorial or, in certain instances, upon the
settlement of an estate. Customer deposits and prepayments are recorded as a
liability and recognized as revenue upon the setting of the memorial. Finance
charges are recognized when received.
The Companies do not require collateral or other security on accounts
receivable. The credit risk on accounts is controlled by requiring significant
deposits and monitoring procedures.
(e) Notes Receivable
Notes receivable are recorded at cost, less the related allowance for
impaired notes receivable, if necessary. Management, considering current
information and events regarding the borrowers' ability to repay their
obligations, considers a note to be impaired when it is probable that the
Companies will be unable to collect all amounts due according to the contractual
terms of the note agreement. When a loan is considered to be impaired, the
amount of the impairment is measured based on the present value of expected
future cash flows discounted at the notes effective interest rate. No impairment
losses are estimated to exist at June 30, 1996 and 1997.
(f) Inventories
Inventories consist primarily of memorials purchased for resale or for
display purposes, and are stated at the lower of cost or market. Cost is
determined using the last-in, first-out method (LIFO) for all inventories
F-46
<PAGE> 108
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
except those acquired from Lexington Granite Company, Inc. (which were acquired
March 31, 1997, see note 9) for which cost is determined using the first-in,
first-out method (FIFO).
(g) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation on plant and
equipment is calculated on various accelerated methods over the estimated useful
lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements............................ 10 to 30 years
Machinery, equipment, furniture and fixtures.......... 5 to 10 years
Vehicles.............................................. 4 to 10 years
</TABLE>
(h) Investments
Investments consist of certificates of deposit with initial terms of six
years with maturities through 1999. Certificates of deposit are valued at cost
plus accrued interest, which approximates fair value. The Companies had
certificates of deposits exceeding individual FDIC insurance limits (see note
1(c)) by $224,118 at June 30, 1997.
(i) Covenants Not to Compete
Covenants not to compete are amortized on a straight-line basis over five
to ten years, the lives of the covenants.
(j) Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over 15 years, the
expected periods to be benefited. The Companies assess the recoverability of
this intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate reflecting the Companies' average cost of
funds. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
(k) Income Taxes
National Memorial Corporation, Riehm-Gerlack Monument Company, Inc., Keith
Lettering & Setting Corporation, Glasgow Monument Company, Inc. and Snyder
Corporation have elected to be taxed as Small Business Corporations for Federal
and state income tax purposes. Therefore, no provision for Federal and state
income taxes has been made in the combined financial statements for those
companies since such taxes are the responsibility of the stockholders.
Keith Monument Company has elected to be taxed as a C Corporation.
Accordingly, income taxes are accounted for under the asset and liability method
for Keith Monument Company. 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.
F-47
<PAGE> 109
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(l) Use of Estimates
Management of the Companies has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from these estimates.
(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Companies adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, on July 1, 1996. This Statement requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this Statement did not have
a material impact on the Companies' financial position, results of operations,
or liquidity.
(n) Fair Value of Financial Instruments
Various methods and assumptions were used by the Companies in estimating
their fair value disclosures for significant financial instruments. Fair values
of cash equivalents, accounts and notes receivable, investments, trade accounts
payable, accrued expenses and customer deposits approximate their carrying
amount because of the short maturity of those instruments. The fair value of
long-term debt is based on the present value of the underlying cash flows
discounted at the current estimated borrowing rates available to the Companies.
The fair value of the Companies' long-term debt at June 30, 1997 approximates
the carrying value.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Memorials accounted for under the FIFO
method.................................... $ -- $ 577,672
Memorials accounted for under the LIFO
method.................................... 865,821 860,903
LIFO reserve................................ (201,721) (246,211)
---------- ----------
$ 664,100 $1,192,364
========== ==========
</TABLE>
During 1996 and 1997, LIFO inventory layers were reduced. The impact of
charging lower inventory costs prevailing in previous years to cost of goods
sold in 1996 and 1997 was not significant.
F-48
<PAGE> 110
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land........................................ $ 297,557 $ 521,462
Buildings and improvements.................. 880,454 1,084,032
Machinery, equipment, furniture and
fixtures.................................. 336,122 364,005
Vehicles.................................... 499,125 478,537
---------- ----------
2,013,258 2,448,036
Less accumulated depreciation............... 1,035,872 1,054,775
---------- ----------
$ 977,386 $1,393,261
========== ==========
</TABLE>
(4) NOTES RECEIVABLE
Notes receivable consist of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
GMMC, Inc., an affiliated company, $200,000
dated April 26, 1993, receivable in
semi-annual installments of $13,443
commencing October 26, 1993 with a final
receipt due on April 26, 2003, at a 6%
rate of interest, secured by a first
mortgage on real estate................... $ 151,855 $ 133,814
GMMC, Inc., an affiliated company, $500,000
dated April 26, 1993, receivable in
semi-annual installments of $33,608
commencing October 26, 1993 with a final
receipt due on April 26, 2003, at a 6%
rate of interest, secured by a first
mortgage on real estate................... 379,636 357,468
Others...................................... 66,105 44,513
-------- --------
Total notes receivable............ 597,596 535,795
Less current portion........................ 102,670 118,614
-------- --------
Notes receivable, excluding
current portion................. $ 494,926 $ 417,181
======== ========
</TABLE>
F-49
<PAGE> 111
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(5) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Lexington Granite Company, Inc., $1,797,600
dated March 31, 1997, payable in annual
installments of $256,800 plus interest
commencing March 31, 1998 with a final
payment due on March 31, 2004, at a 9%
rate of interest.......................... $ -- $1,797,600
David DeMarcus, $500,000 covenant not to
compete dated March 31, 1997, payable in
annual installments of $50,000 commencing
March 31, 1998 with a final payment due
March 31, 2007, with no interest stated,
imputed interest at 9%.................... -- 320,883
--------- ----------
Total long-term debt.............. -- 2,118,483
Less current maturities..................... -- 277,921
--------- ----------
Long-term debt, excluding current
maturities...................... -- $1,840,562
========= ==========
</TABLE>
The Lexington Granite Company, Inc. note and interest are secured by
certain assets of Keith & Keith Partnership, a related party, and National
Memorial Corporation.
Long-term debt matures as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
---------------------------------------------------------
<S> <C>
1998..................................................... $ 277,921
1999..................................................... 279,821
2000..................................................... 281,893
2001..................................................... 284,152
2002..................................................... 286,613
Thereafter............................................... 708,083
----------
$ 2,118,483
==========
</TABLE>
(6) STOCKHOLDERS EQUITY
Common stock at June 30, 1996 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
SHARES
SHARES ISSUED AND
COMPANY PAR/STATED VALUE AUTHORIZED OUTSTANDING AMOUNT
- ------------------------------------------- --------------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Keith Monument Company..................... Par value of $100 1,500 1,320 $132,000
National Memorial Corporation.............. Stated value of $10 1,000 1,000 10,000
Riehm-Gerlack Monument
Company, Inc. ........................... Par value of $100 1,000 95 9,500
Keith Lettering & Setting Corporation...... Par value of $100 500 60 6,000
Glasgow Monument Company, Inc. ............ Stated value of $150 160 60 9,000
Snyder Corporation......................... Stated value of $60 1,000 220 13,200
===== =====
--------
$179,700
========
</TABLE>
All of the above shares of stock are voting shares.
F-50
<PAGE> 112
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) STOCKHOLDERS EQUITY -- (CONTINUED)
Treasury stock consists of the cost of shares purchased from shareholders
of Keith Lettering & Setting Corporation and Snyder Corporation in the amounts
of $4,000 (2 shares) and $2,000 (20 shares), respectively.
National Memorial Corporation also has authorized 1,000 shares of no par
value Class A Preferred Stock and 10,000 shares of no par value Class B
Preferred Stock. None of these shares were issued on June 30, 1996 or 1997.
The dividends represent distributions of Small Business Corporations.
(7) INCOME TAXES
Income tax expense (benefit) is attributable only to Keith Monument Company
and consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- --------
<S> <C> <C> <C>
Year ended June 30, 1995:
U.S. Federal...................... $10,400 $ (1,425) $ 8,975
State and local................... 2,500 (475) 2,025
------- --------
$12,900 $ (1,900) $ 11,000
======= ========
Year ended June 30, 1996:
U.S. Federal...................... $ 3,300 $ (1,350) $ 1,950
State and local................... 1,100 (450) 650
------- --------
$ 4,400 $ (1,800) $ 2,600
------- --------
Year ended June 30, 1997:
U.S. Federal...................... $ 2,700 $(20,700) $(18,000)
State and local................... 1,250 (6,900) (5,650)
------- --------
$ 3,950 $(27,600) $(23,650)
------- --------
</TABLE>
Income tax expense (benefit) was $11,000, $2,600 and ($23,650) for the
years ended June 30, 1995, 1996 and 1997, respectively, and differed from the
amounts computed by applying the U.S. Federal income tax rate of 35% to Keith
Monument Company pretax income (loss) as a result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense
(benefit)........................ $ 19,593 $ 11,005 $(33,696)
Increase (reduction) in income
taxes resulting from:
State and local income taxes, net
of federal income tax
benefit....................... 2,911 1,635 (5,006)
Other, net....................... (11,504) (10,040) 15,052
-------- -------- --------
$ 11,000 $ 2,600 $(23,650)
======== ======== ========
</TABLE>
F-51
<PAGE> 113
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portion of the deferred tax assets (liabilities) at June 30, 1996 and 1997 are
presented below.
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowances for doubtful accounts.......... $ 5,800 $ 5,800
Compensated absences, principally due to
accrual for financial reporting
purposes.................................. 2,000 2,000
Other........................................ 2,100 2,500
------- ------
Total gross deferred tax assets...... 9,900 10,300
Less valuation allowance..................... -- --
------- ------
Net deferred tax assets.............. $ 9,900 $ 10,300
------- ------
Deferred tax liabilities:
Deferred income from affiliated companies.... (27,200) --
------- ------
Net deferred tax asset (liability)... $(17,300) $ 10,300
======= ======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not Keith Monument
Company will realize the benefits of these deductible differences.
(8) COMMITMENTS AND CONTINGENT LIABILITIES
The Companies have entered into certain leases, all of which will expire by
1999. Certain of such leases are with related parties. Such leases are
classified as operating leases and will require cash outflows as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
-------------------------------------------------------
<S> <C>
1998................................................... $66,500
1999................................................... 17,000
-------
$83,500
-------
</TABLE>
The Companies are in the process of negotiating with Keith and Keith
Partnership, an entity controlled by Messrs. John E. Keith and Roy H. Keith,
Jr., for a lease of land and buildings associated with the purchase of Lexington
Granite Company, Inc. (see note 9). The monthly lease amount will be $10,000.
The lease term has not yet been finalized.
Rent expense was $75,635, $75,692 and $93,398 for 1995, 1996 and 1997,
respectively, of which $51,515, $50,772 and $80,772, respectively, was with
related parties.
The Companies sponsor two defined contribution profit sharing plans, which
cover substantially all employees. Contributions to the plans are based on a
percentage of employees' compensation. Such expenses amounted to $297,073,
$304,572 and $303,869 in 1995, 1996 and 1997, respectively.
F-52
<PAGE> 114
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) COMMITMENTS AND CONTINGENT LIABILITIES -- (CONTINUED)
In the ordinary course of business, the Companies are subject to
environmental matters. Management provides for such matters when they are
probable and can be reasonably estimated. Management is of the opinion there are
no existing matters which would have a material impact on the Companies'
financial condition or results of operations.
In the ordinary course of business, the Companies are subject to litigation
matters. Management provides for such matters when they are probable and can be
reasonably estimated. Management is of the opinion there are no existing matters
which would have a material impact on the Companies' financial condition or
results of operations.
The Companies participate in the Safety Association Fund (the Fund), a
workers' compensation self-insurance fund organized pursuant to the regulations
of the Commonwealth of Kentucky -- Department of Workers' Claims. The Companies
are charged premiums for workers' compensation based on rates determined by the
Fund. While significant judgmental factors are included in the determination of
these premiums, management of the Companies believes the amounts paid are
adequate to provide for all existing known and incurred but not reported cases,
and retroactive adjustments, if any, from the Fund would not have a material
impact on the Companies' financial condition or results of operations.
(9) ACQUISITION
On March 31, 1997, National Memorial Corporation acquired certain assets of
Lexington Granite Company, Inc. for a note payable in the amount of $1,797,600
(see note 5). The acquisition has been accounted for as a purchase, with the
results of operations of Lexington Granite Company, Inc. included in the
combined results of operations of the Companies since April 1, 1997. The
purchase price was allocated as follows:
<TABLE>
<S> <C>
Inventories.............................................. $ 570,178
Land..................................................... 300,000
Equipment and machinery.................................. 88,500
Goodwill................................................. 838,922
----------
$1,797,600
==========
</TABLE>
In addition, the previous owner of Lexington Granite Company, Inc. entered
into a ten-year covenant not to compete with National Memorial Corporation for
$500,000, payable $50,000 per year for ten years with no interest rate. The
covenant not to compete has been recorded at its net present value using a 9%
discount rate (see note 5).
Pro forma results, giving effect to interest, amortization, rent, salary
and commissions, as if the acquisition had occurred on July 1, 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Net revenues................................ $8,273,000 $9,021,000
---------- ----------
Net income.................................. $1,009,000 $1,225,000
---------- ----------
</TABLE>
(10) SUBSEQUENT EVENT
On July 30, 1997, Messrs. John E. Keith and Roy H. Keith, Jr. and the
Companies entered into a definitive agreement with Rock of Ages Corporation
("Rock of Ages"), whereby Rock of Ages will purchase substantially all of the
assets and assume substantially all of the liabilities of the Companies for
$16,375,000 in cash and shares of Class A common stock, the number of shares to
be determined pursuant to a formula
F-53
<PAGE> 115
KEITH MONUMENT COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(10) SUBSEQUENT EVENT -- CONTINUED
defined in the agreement. The purchase price includes an amount of $1,797,600 to
be used to repay the Companies' long-term debt to Lexington Granite Company,
Inc. (see note 5) at the closing date of the purchase. Rock of Ages is currently
planning an initial public offering, and the sale of the Companies is expected
to occur concurrently with the consummation of the offering.
F-54
<PAGE> 116
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
To the Board of Directors
Pennsylvania Granite Corporation
St. Peters, Pennsylvania
We have audited the accompanying consolidated balance sheets of
Pennsylvania Granite Corporation and subsidiary as of May 31, 1997 and April 30,
1997, and the related consolidated statements of operations and accumulated
deficit, and cash flows for the eleven months and ten months then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Pennsylvania
Granite Corporation and subsidiary as of May 31, 1997 and April 30, 1997, and
the results of their operations and their cash flows for the eleven months and
ten months then ended in conformity with generally accepted accounting
principles.
/s/ GREENE AND COMPANY, L.L.P.
--------------------------------------
GREENE AND COMPANY, L.L.P.
Anderson, South Carolina
July 22, 1997
F-55
<PAGE> 117
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND APRIL 30, 1997
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalent.......................................... $ 432,487 $ 402,432
Trade receivables, less allowance for doubtful accounts of
$13,495........................................................ 457,327 453,609
Trade receivables -- affiliates................................... 661,348 616,645
Employee receivables.............................................. 120 70
Inventory -- finished goods....................................... 244,751 220,347
Prepaid taxes..................................................... 2,109 4,040
Prepaid expenses.................................................. 86,107 73,738
Deposits.......................................................... 3,500 3,500
---------- ----------
Total current assets...................................... 1,887,749 1,774,381
---------- ----------
Property and equipment, net......................................... 2,273,052 2,297,914
---------- ----------
Other assets:
Advances to affiliates............................................ 941,489 873,989
Intangibles, net.................................................. 2,261,967 2,282,790
---------- ----------
Total other assets............................................. 3,203,456 3,156,779
---------- ----------
Total assets.............................................. $7,364,257 $7,229,074
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 503,185 $ 483,839
Accounts payable -- affiliates.................................... 196,529 192,058
Accrued interest.................................................. 20,794 10,877
Accrued expenses.................................................. 14,837 22,608
Income taxes payable.............................................. 155,720 82,000
Deferred income taxes............................................. 279,000 261,000
Notes payable..................................................... 3,927,744 3,942,526
---------- ----------
Total current liabilities................................. 5,097,809 4,994,908
---------- ----------
Long-term liabilities -- advances from affiliates................... 529,868 579,868
---------- ----------
Stockholders' equity:
Common stock, no par value. Authorized 1,950 shares; 1,740 shares
issued and outstanding......................................... 2,500,500 2,500,500
Accumulated deficit............................................... (763,920) (846,202)
---------- ----------
Total stockholders' equity..................................... 1,736,580 1,654,298
---------- ----------
Total liabilities and stockholders' equity................ $7,364,257 $7,229,074
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-56
<PAGE> 118
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $1,526,022)................... $ 6,725,009
Cost of goods sold (including purchases from affiliates of $99,997)............. 5,067,663
-----------
Gross profit.................................................................... 1,657,346
Selling and administrative expenses (including fees paid to affiliates of
$55,278)...................................................................... 619,257
-----------
Operating income................................................................ 1,038,059
-----------
Other (income) expense:
Interest expense.............................................................. 343,601
Finance charges............................................................... (1,982)
Interest income............................................................... (10,350)
Rental income................................................................. (3,935)
-----------
Total other expense................................................... 327,334
-----------
Income before income taxes...................................................... 710,725
Income taxes.................................................................... 246,000
-----------
Net income...................................................................... 464,725
Accumulated deficit, July 1, 1996............................................... (1,228,645)
-----------
Accumulated deficit, May 31, 1997............................................... $ (763,920)
===========
</TABLE>
See accompanying notes to financial statements.
F-57
<PAGE> 119
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $1,323,006)................... $ 6,076,004
Cost of goods sold (including purchases from affiliates of $97,776)............. 4,674,341
-----------
Gross profit.................................................................... 1,401,663
Selling and administrative expenses (including fees paid to affiliates of
$49,767)...................................................................... 569,950
-----------
Operating income................................................................ 831,713
-----------
Other (income) expense:
Interest expense.............................................................. 312,223
Finance charges............................................................... (1,879)
Interest income............................................................... (10,139)
Rental income................................................................. (3,935)
-----------
Total other expense................................................... 296,270
-----------
Income before income taxes...................................................... 535,443
Income taxes.................................................................... 153,000
-----------
Net income...................................................................... 382,443
Accumulated deficit, July 1, 1996............................................... (1,228,645)
-----------
Accumulated deficit, April 30, 1997............................................. $ (846,202)
===========
</TABLE>
See accompanying notes to financial statements.
F-58
<PAGE> 120
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $ 464,725
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization................................................................ 207,426
Depletion................................................................... 24,078
Depreciation................................................................ 296,646
Deferred income taxes....................................................... 61,000
(Increase) decrease in assets:
Trade receivables......................................................... (157,215)
Employee receivables...................................................... 1,083
Inventory................................................................. (114,021)
Prepaid taxes............................................................. 1,673
Prepaid expenses.......................................................... 36,682
Increase (decrease) in liabilities:
Accounts payable.......................................................... 215,322
Accrued interest.......................................................... 20,794
Accrued expenses.......................................................... (71,114)
Income taxes payable...................................................... 155,720
----------
Net cash provided by operating activities.............................. 1,142,799
----------
Cash flows used in investing activities -- purchase of property and equipment.... (230,572)
----------
Cash flows from financing activities:
Payments on notes payable...................................................... (318,908)
Advances to affiliates......................................................... (611,500)
----------
Net cash used in financing activities.................................. (930,408)
----------
Net decrease in cash and cash equivalents........................................ (18,181)
Cash and cash equivalents, July 1, 1996.......................................... 450,668
----------
Cash and cash equivalents, May 31, 1997.......................................... $ 432,487
==========
Supplemental disclosures of cash flows information -- cash paid for interest..... $ 343,601
==========
</TABLE>
See accompanying notes to financial statements.
F-59
<PAGE> 121
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $ 382,443
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization................................................................ 188,569
Depletion................................................................... 22,112
Depreciation................................................................ 268,523
Deferred income taxes....................................................... 43,000
(Increase) decrease in assets:
Trade receivables......................................................... (108,795)
Employee receivables...................................................... 1,133
Inventory................................................................. (89,617)
Prepaid taxes............................................................. (258)
Prepaid expenses.......................................................... 49,052
Increase (decrease) in liabilities:
Accounts payable.......................................................... 191,506
Accrued interest.......................................................... 10,877
Accrued expenses.......................................................... (63,344)
Income taxes payable...................................................... 82,000
----------
Net cash provided by operating activities.............................. 977,201
----------
Cash flows used in investing activities -- purchase of property and equipment.... (227,311)
----------
Cash flows used in financing activities:
Payments on notes payable...................................................... (304,126)
Advances to affiliates......................................................... (494,000)
----------
Net cash used in financing activities.................................. (798,126)
----------
Net decrease in cash and cash equivalents........................................ (48,236)
Cash and cash equivalents, July 1, 1996.......................................... 450,668
----------
Cash and cash equivalents, April 30, 1997........................................ $ 402,432
==========
Supplemental disclosures of cash flows information -- cash paid for interest..... $ 312,223
==========
</TABLE>
See accompanying notes to financial statements.
F-60
<PAGE> 122
PENNSYLVANIA GRANITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND APRIL 30, 1997
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented
to assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Nature of Business
The Company quarries granite dimensional blocks for monuments, industrial
surface plates and building materials in Pennsylvania and North and South
Carolina. These products are sold nationwide and in Europe.
Use of Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents. The Company has a money market account in the amount of
$266,887 at May 31, 1997 and $66,703 at April 30, 1997.
Trade Receivables
The Company accounts for uncollectible trade receivables on the reserve
method.
Inventory
Inventory of quarry product is valued at the lower of average cost or
market. Average cost is the cost to quarry, which includes direct labor and
overhead.
See accountants' report.
F-61
<PAGE> 123
PENNSYLVANIA GRANITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Property and Equipment
Property and equipment are stated at acquisition cost as of October 12,
1988, and cost for additions thereafter. Depreciation is computed under the
straight-line method for financial reporting purposes over the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings............................................ 10-40
Trucks and automobiles............................... 3-7
Machinery and equipment.............................. 3-10
Office fixtures and equipment........................ 3-10
</TABLE>
Major renewals and betterments are added to the property accounts while
maintenance and repairs are charged against earnings as incurred.
Intangibles
Amortization is computed under the straight-line method for financial
reporting purposes over the following estimated useful lives:
<TABLE>
<S> <C>
Goodwill........................................... 18 1/2-40
Organization costs................................. 5
Loan costs......................................... 5
Overburden removal................................. 15
Covenant not to compete............................ 5
</TABLE>
Depletion of mineral deposits is computed using cost depletion for
financial reporting purposes.
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 and operating loss and tax credit carryforwards. 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 recognized in income in the period that includes the enactment
date.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
See accountants' report.
F-62
<PAGE> 124
PENNSYLVANIA GRANITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
----------- -----------
<S> <C> <C>
Land.............................................. $ 721,570 $ 721,570
Buildings......................................... 477,955 477,955
Trucks and automobiles............................ 181,331 181,331
Machinery and equipment........................... 4,719,544 4,716,283
Office fixtures and equipment..................... 61,819 61,819
----------- -----------
6,162,219 6,158,958
Accumulated depreciation.......................... (3,889,167) (3,861,044)
----------- -----------
$ 2,273,052 $ 2,297,914
=========== ===========
</TABLE>
Depreciation expense for the eleven months ended May 31, 1997 and the ten
months ended April 30, 1997 was $296,646 and $268,523, respectively.
NOTE C -- INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
----------- -----------
<S> <C> <C>
Goodwill.......................................... $ 2,883,628 $ 2,884,511
Organization costs................................ 36,990 37,262
Mineral deposits.................................. 540,162 540,162
Loan costs........................................ 24,711 24,711
Overburden removal................................ 150,204 150,204
Covenant not to compete........................... 300,000 300,000
----------- -----------
3,935,695 3,936,850
Accumulated amortization and depletion............ (1,673,728) (1,654,060)
----------- -----------
$ 2,261,967 $ 2,282,790
=========== ===========
</TABLE>
Amortization and depletion expense for the eleven months ended May 31, 1997
were $207,426 and $24,078, respectively.
Amortization and depletion expense for the ten months ended April 30, 1997
were $188,569 and $22,112, respectively.
See accountants' report.
F-63
<PAGE> 125
PENNSYLVANIA GRANITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- NOTES PAYABLE
Notes Payable are as follows:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
----------- -----------
<S> <C> <C>
Bank mortgage, payable $19,092 monthly (principal
and interest at 9 1/2%) with a maturity date of
October 1998; the mortgage balance is secured by
substantially all of the Company's assets and
guarantees by the stockholders. ................ $ 1,590,843 $ 1,597,291
Bank mortgage, payable $8,334 monthly plus
interest at prime plus 1 1/2% with a maturity
date of October 1998; secured by substantially
all of the Company's assets and guarantees by
the stockholders. .............................. 1,050,117 1,058,451
Bank mortgage, payable $25,000 monthly (principal
and interest at prime plus 0.45%) with a
maturity date of May 1997; the mortgage balance
is secured by substantially all of the
subsidiary's assets and guarantees by the
stockholders. Principal and accrued interest
were paid in full on July 2, 1997. ............. 1,286,784 1,286,784
---------- ----------
3,927,744 3,942,526
Current portion................................... (3,927,744) (3,942,526)
---------- ----------
$ -- $ --
========== ==========
</TABLE>
In regard to the term loans, the Company has agreed to maintain proper
financial records and statements and to maintain certain financial ratios
pertaining to its net worth, working capital, debt coverage, etc. The Company
has not met these requirements for the periods ended May 31, 1997 and April 30,
1997, and the bank has decided not to waive the requirements. Therefore, all
notes payable have been classified as current.
NOTE E -- RELATED-PARTY TRANSACTIONS
The Company is affiliated with numerous other companies through common
control and stock ownership. The stockholders and other joint venture companies
have made unsecured non-interest bearing advances to the Company for working
capital purposes.
NOTE F -- INCOME TAX MATTERS
A summary of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
APRIL
MAY 31, 30,
1997 1997
-------- --------
<S> <C> <C>
Current................................................ $185,000 $110,000
Deferred............................................... 61,000 43,000
-------- --------
Provision for Income Taxes................... $246,000 $153,000
======== ========
</TABLE>
See accountants' report.
F-64
<PAGE> 126
PENNSYLVANIA GRANITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- INCOME TAX MATTERS -- (CONTINUED)
The net deferred tax liability on the balance sheet includes the following
components:
<TABLE>
<CAPTION>
APRIL
MAY 31, 30,
1997 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities arising from:
Accelerated methods of depreciation for tax.......... $136,000 $137,000
Tax depletion on quarry.............................. 26,000 26,000
Alternative minimum tax.............................. 129,000 129,000
Deferred tax assets arising from:
Allowance for bad debts.............................. (5,000) (5,000)
Inventory adjustments (Section 263(a))............... (7,000) (6,000)
Net operating loss carryovers........................ -- (8,000)
Investment tax credit carryovers..................... -- (12,000)
-------- --------
Net deferred tax liability................... $279,000 $261,000
======== ========
</TABLE>
The Company has unused net operating losses and investment tax credits
available for carryforward to offset future taxable income and tax liabilities
for income tax reporting purposes which expire as follows:
<TABLE>
<CAPTION>
NET
YEARS ENDING OPERATING TAX
SEPTEMBER 30, LOSS CREDITS
-------------------------------------------------------- --------- -------
<S> <C> <C>
1999.................................................. $ -- $ 6,992
2000.................................................. -- 12,483
2001.................................................. -- 9,831
2006.................................................. 10,375 --
2007.................................................. 6,302 --
2008.................................................. 3,964 --
------- -------
$20,641 $29,306
======= =======
</TABLE>
NOTE G -- CONCENTRATION OF CREDIT RISK
All of the Company's cash funds are located in financial institutions that
are insured by the FDIC for up to $100,000. The amounts in excess of this limit
at May 31, 1997 and April 30, 1997 are $166,887 and $187,949, respectively.
Sales to two major customers represented 56% of total revenues for both the
eleven and ten months ended May 31, 1997 and April 30, 1997. Trade accounts
receivable from major customers represented 40% and 62% of total trade accounts
receivable as of May 31, 1997 and April 30, 1997, respectively.
NOTE H -- SUBSEQUENT EVENTS
Subsequent to the date of these financial statements, the Company joined in
a merger with its affiliates and other unrelated granite companies.
NOTE I -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all financial
instruments at May 31, 1997 and April 30, 1997 does not differ materially from
the aggregate carrying values of its financial instruments recorded in the
accompanying balance sheets. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgement is necessarily required in
interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
See accountants' report.
F-65
<PAGE> 127
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
To the Board of Directors
Pennsylvania Granite Corporation
St. Peters, Pennsylvania
We have audited the accompanying consolidated balance sheet of Pennsylvania
Granite Corporation and subsidiary as of June 30, 1996, and the related
consolidated statements of operations and accumulated deficit, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Pennsylvania
Granite Corporation and subsidiary as of June 30, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ GREENE AND COMPANY, L.L.P.
--------------------------------------
GREENE AND COMPANY, L.L.P.
Anderson, South Carolina
July 22, 1997
F-66
<PAGE> 128
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 450,668
Trade receivables, less allowance for doubtful accounts of $13,495............ 634,240
Trade receivables -- affiliates............................................... 327,220
Employee receivables.......................................................... 1,203
Inventory -- finished goods................................................... 130,730
Prepaid taxes................................................................. 3,782
Prepaid expenses.............................................................. 122,789
Deposits...................................................................... 3,500
----------
Total current assets.................................................. 1,674,132
----------
Property and equipment, net..................................................... 2,339,126
----------
Other assets:
Advances to affiliates........................................................ 489,989
Intangibles, net.............................................................. 2,493,471
----------
Total other assets......................................................... 2,983,460
----------
Total assets.......................................................... $ 6,996,718
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 393,970
Accounts payable -- affiliates................................................ 90,421
Accrued expenses.............................................................. 85,952
Deferred income taxes......................................................... 218,000
Notes payable................................................................. 4,246,652
----------
Total current liabilities............................................. 5,034,995
----------
Long-term liabilities -- advances from affiliates............................... 689,868
----------
Stockholders' equity:
Common stock, no par value, 1,950 shares authorized, 1,740 shares issued
and outstanding............................................................ 2,500,500
Accumulated deficit........................................................... (1,228,645)
----------
Total stockholders' equity................................................. 1,271,855
----------
Total liabilities and stockholders' equity............................ $ 6,996,718
==========
</TABLE>
See accompanying notes to financial statements.
F-67
<PAGE> 129
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
Net revenues (including sales to affiliates of $1,772,844)...................... $ 7,528,511
Cost of goods sold (including purchases from affiliates of $57,029)............. 6,244,640
-----------
Gross profit.................................................................... 1,283,871
Selling and administrative expenses (including fees paid to affiliates of
$54,269)...................................................................... 589,172
-----------
Operating income................................................................ 694,699
-----------
Other (income) expense:
Interest expense.............................................................. 409,255
Loss from judgment............................................................ 62,104
Other income.................................................................. (32,591)
Interest income............................................................... (7,763)
Rental income................................................................. (3,000)
Gain on sale of equipment..................................................... (1,656)
Finance charges............................................................... (1,478)
-----------
Total other expense................................................... 424,871
-----------
Income before income tax........................................................ 269,828
Income tax...................................................................... (72,000)
-----------
Net income...................................................................... 341,828
Accumulated deficit, beginning of year.......................................... (1,002,250)
Distributions................................................................... (568,223)
-----------
Accumulated deficit, end of year................................................ $(1,228,645)
===========
</TABLE>
See accompanying notes to financial statements.
F-68
<PAGE> 130
PENNSYLVANIA GRANITE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $ 341,828
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization................................................................ 226,283
Depreciation................................................................ 289,155
Depletion................................................................... 24,783
Deferred income taxes....................................................... (72,000)
Gain on sale of equipment................................................... (1,656)
(Increase) decrease in assets:
Trade receivables......................................................... (24,649)
Employee receivables...................................................... (756)
Inventory................................................................. 60,600
Prepaid taxes............................................................. 2,521
Prepaid expenses.......................................................... 61,631
Deposits.................................................................. 10,938
Increase (decrease) in liabilities:
Accounts payable.......................................................... (8,632)
Accrued expenses.......................................................... 61,135
--------
Net cash provided by operating activities.............................. 971,181
--------
Cash flows used in investing activities:
Purchase of fixed assets....................................................... (220,759)
Sale of equipment -- proceeds.................................................. 41,000
--------
Net cash used in investing activities.................................. (179,759)
--------
Cash flows used in financing activities:
Distributions to stockholders.................................................. (568,223)
Payments on notes payable...................................................... (384,480)
Advances from affiliates....................................................... 683,800
Advances to affiliates......................................................... (385,000)
--------
Net cash used in financing activities.................................. (653,903)
--------
Net increase in cash and cash equivalents........................................ 137,519
Cash and cash equivalents at beginning of year................................... 313,149
--------
Cash and cash equivalents at end of year......................................... $ 450,668
========
Supplemental disclosure of cash flow information -- cash paid for interest....... $ 409,255
========
</TABLE>
See accompanying notes to financial statements.
F-69
<PAGE> 131
PENNSYLVANIA GRANITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented
to assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Nature of Business
The Company quarries granite dimensional blocks for monuments, industrial
surface plates and building materials in Pennsylvania and North and South
Carolina. These products are sold nationwide and in Europe.
Use of Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Intangibles
Amortization is computed under the straight-line method for financial
reporting purposes over the following estimated useful lives:
<TABLE>
<S> <C>
Goodwill........................................... 18 1/2-40
Organization costs................................. 20
Loan costs......................................... 5
Overburden removal................................. 15
Covenant not to compete............................ 5
</TABLE>
Depletion of mineral deposits is computed using cost depletion for
financial reporting purposes.
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 and operating loss and tax credit carryforwards. 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 recognized in income in the period that includes the enactment
date.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents. The Company has a money market account in the amount of
$352,014 at June 30, 1996.
See accountants' report.
F-70
<PAGE> 132
PENNSYLVANIA GRANITE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Trade Receivables
The Company accounts for uncollectible trade receivables on the reserve
method.
Inventory
Inventory of quarry product is valued at the lower of average cost or
market. Average cost is the cost to quarry, which includes direct labor and
overhead.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. The fair
value of the Company's assets approximates the carrying cost at the balance
sheet dates.
Property and Equipment
Property and equipment are stated at acquisition cost as of October 12,
1988, and cost for additions thereafter. Depreciation is computed under the
straight-line method for financial reporting purposes over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings........................................... 10-40
Trucks and automobiles.............................. 3-7
Machinery and equipment............................. 3-10
Office fixtures and equipment....................... 3-10
Overburden removal.................................. 15
</TABLE>
Major renewals and betterments are added to the property accounts while
maintenance and repairs are charged against earnings as incurred.
See accountants' report.
F-71
<PAGE> 133
PENNSYLVANIA GRANITE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Land........................................................... $ 701,570
Buildings...................................................... 433,955
Trucks and automobiles......................................... 181,331
Machinery and equipment........................................ 4,561,674
Office fixtures and equipment.................................. 53,117
-----------
5,931,647
Accumulated depreciation....................................... (3,592,521)
-----------
$2,339,126
===========
</TABLE>
Depreciation expense for the year ended June 30, 1996 was $289,155.
NOTE C -- INTANGIBLES
Intangibles consist of the following:
<TABLE>
<S> <C>
Goodwill........................................................ $ 2,893,345
Organization costs.............................................. 39,982
Mineral deposits................................................ 540,162
Loan costs...................................................... 24,711
Overburden removal.............................................. 150,204
Covenant not to compete......................................... 300,000
-----------
3,948,404
Accumulated amortization and depletion.......................... (1,454,933)
-----------
$ 2,493,471
===========
</TABLE>
Amortization and depletion expense for the year ended June 30, 1996 was
$226,283 and $24,783, respectively.
NOTE D -- NOTES PAYABLE
Notes payable are as follows:
<TABLE>
<S> <C>
Bank mortgage, payable $25,000 monthly (principal and interest
at prime + 0.45%) with a maturity date of May, 1997; the
mortgage balance is secured by substantially all of the
subsidiary's assets and guarantees by the stockholders........ $ 1,440,571
Bank mortgage, payable $19,092 monthly (principal and interest
at 9 1/2%) with a maturity date of October 1998; the mortgage
balance is secured by substantially all of the Company's
assets and guarantees by the stockholders..................... $ 1,664,290
Bank mortgage, payable $8,334 monthly plus interest at prime
plus 1 1/2% with a maturity date of October 1998; secured by
substantially all of the Company's assets and guarantees by
the stockholders.............................................. 1,141,791
-----------
4,246,652
Current portion................................................. (4,246,652)
-----------
$ 0
===========
</TABLE>
See accountants' report.
F-72
<PAGE> 134
PENNSYLVANIA GRANITE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- NOTES PAYABLE -- (CONTINUED)
In regard to the term loans, the Company has agreed to maintain proper
financial records and statements and to maintain certain financial ratios
pertaining to its net worth, working capital, debt coverage, etc. The Company
has not met these requirements for the year ended June 30, 1996 and the bank has
decided not to waive the requirements. Therefore, the entire notes payable
balance must be classified as current.
NOTE E -- RELATED-PARTY TRANSACTIONS
The Company is affiliated with numerous other companies through common
control and stock ownership. The stockholders and other joint venture companies
have made unsecured non-interest bearing advances to the Company for working
capital purposes.
NOTE F -- INCOME TAX MATTERS
A summary of the provision for income taxes is as follows:
<TABLE>
<S> <C>
Current........................................................... $ 0
Deferred.......................................................... (72,000)
--------
Provision (benefit) for income taxes.................... $(72,000)
========
</TABLE>
The net deferred tax liability on the balance sheet includes the following
components:
<TABLE>
<S> <C>
Deferred tax liabilities arising from:
Accelerated methods of depreciation for tax..................... $134,000
Tax depletion on quarry......................................... 32,000
Alternative minimum tax......................................... 121,000
Deferred tax assets arising from:
Allowance for bad debts......................................... (6,000)
Inventory adjustments (Section 263(a)).......................... (7,000)
Net operating loss carryovers................................... (45,000)
Investment tax credit carryovers................................ (11,000)
--------
Net deferred tax liability.............................. $218,000
========
</TABLE>
The Company has unused net operating losses and investment tax credits
available for carryforward to offset future taxable income and tax liabilities
for income tax reporting purposes which expire in the following tax years:
<TABLE>
<CAPTION>
NET OPERATING LOSS TAX CREDITS
------------------ -----------
<S> <C> <C>
1999............................................ $ 0 $ 6,992
2000............................................ 0 12,483
2001............................................ 0 9,831
2006............................................ 104,786 0
2007............................................ 6,302 0
2008............................................ 3,964 0
-------- -------
$115,052 $29,306
======== =======
</TABLE>
See accountants' report.
F-73
<PAGE> 135
PENNSYLVANIA GRANITE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- CONCENTRATION OF CREDIT RISK
Cash accounts are insured by the FDIC for up to $100,000. Amount in excess
of insured limits was approximately $252,014 at June 30, 1996.
Sales to two major customers represented 54% of total revenues for the year
ended June 30, 1996. Trade accounts receivable from major customers represented
72% of total trade accounts receivable as of June 30, 1996.
NOTE H -- SUBSEQUENT EVENTS
Subsequent to the date of these financial statements, the Company joined in
a merger with its affiliates and other unrelated granite companies.
NOTE I -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all financial
instruments at June 30, 1996 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheets. The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. Considerable judgement is necessarily required in interpreting
market data to develop the estimates of fair value, and accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
See accountants' report.
F-74
<PAGE> 136
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
To the Board of Directors
Caprice Blue Quarry, Inc.
Elberton, Georgia
We have audited the accompanying balance sheets of Caprice Blue Quarry,
Inc. (an "S" corporation) as of May 31, 1997 and April 30, 1997, and the related
statements of operations and accumulated deficit, and cash flows for the eleven
months and ten months then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Caprice Blue
Quarry, Inc. as of May 31, 1997 and April 30, 1997, and the results of its
operations and its cash flows for the eleven months and ten months then ended in
conformity with generally accepted accounting principles.
/s/ GREENE AND COMPANY, L.L.P.
--------------------------------------
GREENE AND COMPANY, L.L.P.
Anderson, South Carolina
July 22, 1997
F-75
<PAGE> 137
CAPRICE BLUE QUARRY, INC.
BALANCE SHEETS
MAY 31, 1997 AND APRIL 30, 1997
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................... $ 1,525 $ 370
Trade receivables.................................................. 3,782 380
Trade receivables -- affiliates.................................... 4,112 2,794
Employee receivables............................................... 1,144 1,295
Inventory -- finished goods........................................ 13,550 10,022
Prepaid expenses................................................... 1,056 2,696
--------- ---------
Total current assets....................................... 25,169 17,557
--------- ---------
Property and equipment, net.......................................... 81,898 83,376
--------- ---------
Other assets:
Intangibles, net................................................... 168,103 169,166
Advances to affiliates............................................. 27,300 26,705
--------- ---------
Total other assets.............................................. 195,403 195,871
--------- ---------
Total assets............................................... $ 302,470 $ 296,804
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Bank overdraft..................................................... $ 0 $ 5,616
Accounts payable................................................... 18,470 9,493
Accounts payable -- affiliates..................................... 123,620 158,586
Accrued expenses................................................... 2,592 3,004
Current portion of long-term debt.................................. 55,761 55,277
--------- ---------
Total current liabilities.................................. 200,443 231,976
--------- ---------
Long-term liabilities:
Long-term debt, less current portion............................... 45,636 50,534
Advances from affiliates........................................... 483,000 430,000
Advances from stockholders......................................... 268,875 268,875
--------- ---------
Total long-term liabilities................................ 797,511 749,409
--------- ---------
Stockholders' deficit:
Common stock, $10 par value. Authorized 100,000 shares; 240 shares
issued and outstanding.......................................... 2,400 2,400
Additional paid-in capital......................................... 121 121
Accumulated deficit................................................ (698,005) (687,102)
--------- ---------
Total stockholders' deficit..................................... (695,484) (684,581)
--------- ---------
Total liabilities and stockholders' deficit................ $ 302,470 $ 296,804
========= =========
</TABLE>
See accompanying notes to financial statements.
F-76
<PAGE> 138
CAPRICE BLUE QUARRY, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $176,562)...................... $ 183,569
Cost of goods sold (including purchases from affiliates of $104,659)............. 418,489
---------
Gross loss....................................................................... (234,920)
Selling and administrative expenses (including fees paid to affiliates of
$4,601)........................................................................ 10,768
---------
Operating loss................................................................... (245,688)
---------
Other (income) expense:
Rent income.................................................................... (2,973)
Interest expense............................................................... 11,992
---------
Total other expense.................................................... 9,019
---------
Net loss......................................................................... (254,707)
Accumulated deficit, July 1, 1996................................................ (443,298)
---------
Accumulated deficit, May 31, 1997................................................ $(698,005)
=========
</TABLE>
See accompanying notes to financial statements.
F-77
<PAGE> 139
CAPRICE BLUE QUARRY, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $160,592)...................... $ 164,197
Cost of goods sold (including purchases from affiliates of $104,292)............. 390,634
---------
Gross loss....................................................................... (226,437)
Selling and administrative expenses (including fees paid to affiliates of
$4,234)........................................................................ 8,636
---------
Operating loss................................................................... (235,073)
---------
Other (income) expense:
Rental income.................................................................. (2,378)
Interest expense............................................................... 11,109
---------
Total other expense.................................................... 8,731
---------
Net loss......................................................................... (243,804)
Accumulated deficit, July 1, 1996................................................ (443,298)
---------
Accumulated deficit, April 30, 1997.............................................. $(687,102)
=========
</TABLE>
See accompanying notes to financial statements.
F-78
<PAGE> 140
CAPRICE BLUE QUARRY, INC.
STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $(254,707)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation................................................................ 21,303
Depletion................................................................... 9,651
(Increase) decrease in assets:
Trade receivables......................................................... (7,126)
Employee receivables...................................................... (533)
Advances to affiliates.................................................... (2,973)
Inventory................................................................. (13,550)
Prepaid expenses.......................................................... 790
Increase (decrease) in liabilities:
Accounts payable.......................................................... 78,718
Accrued expenses.......................................................... 1,758
---------
Net cash used in operating activities.................................. (166,669)
---------
Cash flows used in investing activities -- purchases of machinery and
equipment...................................................................... (21,586)
---------
Cash flows from financing activities:
Payments on notes payable...................................................... (45,577)
Advances from affiliates....................................................... 234,000
---------
Net cash provided by financing activities.............................. 188,423
---------
Net increase in cash............................................................. 168
Cash, July 1, 1996............................................................... 1,357
---------
Cash, May 31, 1997............................................................... $ 1,525
=========
Supplemental disclosure of cash flow information -- cash paid for interest....... $ 11,992
=========
</TABLE>
See accompanying notes to financial statements.
F-79
<PAGE> 141
CAPRICE BLUE QUARRY, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $(243,804)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation................................................................ 19,824
Depletion................................................................... 8,588
(Increase) decrease in assets:
Trade receivables......................................................... (2,407)
Employee receivables...................................................... (683)
Advances to affiliates.................................................... (2,378)
Inventory................................................................. (10,022)
Prepaid expenses.......................................................... (850)
Increase (decrease) in liabilities:
Accounts payable.......................................................... 104,708
Accrued expenses.......................................................... 2,170
---------
Net cash used in operating activities.................................. (124,854)
---------
Cash flows from investing activities -- purchases of fixed assets................ (21,586)
---------
Cash flows from financing activities:
Increase in bank overdraft..................................................... 5,616
Payments on notes payable...................................................... (41,163)
Advances from affiliates....................................................... 181,000
---------
Net cash provided by financing activities.............................. 145,453
---------
Net decrease in cash............................................................. (987)
Cash, July 1, 1996............................................................... 1,357
---------
Cash, April 30, 1997............................................................. $ 370
=========
Supplemental disclosure of cash flow information -- cash paid for interest....... $ 11,109
=========
</TABLE>
See accompanying notes to financial statements.
F-80
<PAGE> 142
CAPRICE BLUE QUARRY, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 AND APRIL 30, 1997
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented
to assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Nature of Business
The Company quarries granite blocks in northeast Georgia for sale to
customers nationwide.
Use of Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Basis of Accounting
Assets, liabilities, revenues, and expenses are recognized on the accrual
method of accounting.
Inventory
Inventories are stated at lower of cost or market with cost being
determined using average cost.
Property and Equipment
Property and equipment are stated at acquisition cost. Depreciation is
computed under the accelerated method for financial reporting purposes over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Vehicles.............................................. 3-7
Machinery and equipment............................... 3-10
</TABLE>
Major renewals and betterments are added to the property accounts while
maintenance and repairs are charged against earnings as incurred.
Intangibles
Intangibles consist of mineral rights which are depleted using cost
depletion.
Income Taxes
The Company with the consent of its stockholders has elected to be an "S"
Corporation under the Internal Revenue Code. Instead of paying corporate income
taxes the stockholders of an "S" Corporation are taxed individually on their
proportionate share of the Company's taxable income. Therefore, no provision or
liability for federal income taxes has been included in these financial
statements.
See accountants' report.
F-81
<PAGE> 143
CAPRICE BLUE QUARRY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. The fair
value of the Company's assets approximates the carrying cost at the balance
sheet dates.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
--------- ---------
<S> <C> <C>
Land................................................. $ 43,000 $ 43,000
Vehicles............................................. 18,635 18,635
Machinery and equipment.............................. 318,087 318,087
--------- ---------
379,722 379,722
Accumulated depreciation............................. (297,824) (296,346)
--------- ---------
$ 81,898 $ 83,376
========= =========
</TABLE>
Depreciation expense for the eleven months ended May 31, 1997 was $21,303.
Depreciation expense for the ten months ended April 30, 1997 was $19,825.
NOTE C -- INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
APRIL
MAY 31, 30,
1997 1997
-------- --------
<S> <C> <C>
Mineral rights......................................... $240,000 $240,000
Accumulated depletion.................................. (71,897) (70,834)
-------- --------
$168,103 $169,166
======== ========
</TABLE>
Depletion expense for the eleven months ended May 31, 1997 was $9,651.
Depletion expense for the ten months ended April 30, 1997 was $8,588.
See accountants' report.
F-82
<PAGE> 144
CAPRICE BLUE QUARRY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- NOTES PAYABLE
Notes payable are as follows:
<TABLE>
<CAPTION>
APRIL
MAY 31, 30,
1997 1997
-------- --------
<S> <C> <C>
Bank loan, payable $5,297 monthly (principal and
interest at 10 1/2%) with a maturity date of February
1999; the loan is secured by the Company's
inventory............................................ $101,397 $105,811
Current portion........................................ (55,761) (55,277)
-------- --------
$ 45,636 $ 50,534
======== ========
</TABLE>
The following is a schedule of maturities of notes payable at May 31, 1997
and April 30, 1997:
<TABLE>
<CAPTION>
APRIL
MAY 31, 30,
1997 1997
-------- --------
<S> <C> <C>
1998................................................... $ 55,761 $ 55,277
1999................................................... 45,636 50,534
-------- --------
$101,397 $105,811
======== ========
</TABLE>
NOTE E -- RELATED-PARTY TRANSACTIONS
The Company is affiliated with numerous other companies through common
control and stock ownership. The stockholders and other joint venture companies
have made unsecured non-interest bearing advances to the Company for working
capital purposes.
The Company classifies advances payable to affiliates as long-term based
upon the intent of the parties.
NOTE F -- CONCENTRATION OF CREDIT RISK
All of the Company's cash funds are located in financial institutions that
are insured by the FDIC for up to $100,000. There are no amounts in excess of
this limit at May 31, 1997 and April 30, 1997.
NOTE G -- SUBSEQUENT EVENT
Subsequent to the date of these financial statements, the Company joined in
a merger with its affiliates and other unrelated granite companies. As of the
effective date of the merger, the Company's election to be an "S" corporation
under the Internal Revenue Code will terminate.
NOTE H -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all financial
instruments at May 31, 1997 and April 30, 1997, does not differ materially from
the aggregate carrying values of its financial instruments recorded in the
accompanying balance sheets. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
See accountants' report.
F-83
<PAGE> 145
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
To the Board of Directors
Autumn Rose Quarry, Inc.
Ada, Oklahoma
We have audited the accompanying balance sheets of Autumn Rose Quarry, Inc.
as of May 31, 1997 and April 30, 1997, and the related statements of operations
and accumulated deficit, and cash flows for the eleven months and ten months
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Autumn Rose
Quarry, Inc. as of May 31, 1997 and April 30, 1997, and the results of its
operations and its cash flows for the eleven months and ten months then ended in
conformity with generally accepted accounting principles.
/s/ GREENE AND COMPANY, L.L.P.
--------------------------------------
GREENE AND COMPANY, L.L.P.
Anderson, South Carolina
July 22, 1997
F-84
<PAGE> 146
AUTUMN ROSE QUARRY, INC.
BALANCE SHEETS
MAY 31, 1997 AND APRIL 30, 1997
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 8,291 $ 4,864
Trade receivables................................................. 8,535 19,456
Trade receivables -- affiliates................................... 22,830 18,943
Employee receivables.............................................. 155 280
Inventory -- finished goods....................................... 45,602 45,094
Prepaid expenses.................................................. 0 3,063
---------- ----------
Total current assets...................................... 85,413 91,700
---------- ----------
Property and equipment, net......................................... 174,066 176,757
---------- ----------
Other assets:
Intangibles, net.................................................. 1,351,362 1,352,081
Deposits.......................................................... 5,280 5,280
---------- ----------
Total other assets............................................. 1,356,642 1,357,361
---------- ----------
Total assets.............................................. $1,616,121 $1,625,818
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.................................................. $ 207 $ 7,707
Accounts payable -- due to affiliates............................. 8,923 8,238
Accrued expenses.................................................. 5,525 5,096
Current portion of long-term debt................................. 157,029 157,029
---------- ----------
Total current liabilities................................. 171,684 178,070
---------- ----------
Long-term liabilities:
Long-term debt, less current portion.............................. 505,681 521,690
Advances from affiliates.......................................... 605,500 591,000
Advances from stockholders........................................ 400,000 400,000
---------- ----------
Total long-term liabilities............................... 1,511,181 1,512,690
---------- ----------
Stockholders' deficit:
Common stock, $100 par value. Authorized 1,000,000 shares; 60
shares issued and outstanding.................................. 6,000 6,000
Additional paid-in capital........................................ 44,000 44,000
Accumulated deficit............................................... (116,744) (114,942)
---------- ----------
Total stockholders' deficit.................................... (66,744) (64,942)
---------- ----------
Total liabilities and stockholders' deficit............... $1,616,121 $1,625,818
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-85
<PAGE> 147
AUTUMN ROSE QUARRY, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $168,059)...................... $ 325,533
Cost of goods sold............................................................... 354,800
---------
Gross loss....................................................................... (29,267)
Selling and administrative expenses (including fees paid to affiliates of
$3,685)........................................................................ 25,392
---------
Operating loss................................................................... (54,659)
---------
Other (income) expense:
Interest expense............................................................... 21,249
Loss on disposal of equipment.................................................. 2,930
Finance charge income.......................................................... (313)
---------
Total other expense.................................................... 23,866
---------
Net loss......................................................................... (78,525)
Accumulated deficit, July 1, 1996................................................ (38,219)
---------
Accumulated deficit, May 31, 1997................................................ $(116,744)
=========
</TABLE>
See accompanying notes to financial statements.
F-86
<PAGE> 148
AUTUMN ROSE QUARRY, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $149,426)...................... $ 294,495
Cost of goods sold............................................................... 325,502
---------
Gross loss....................................................................... (31,007)
Selling and administrative expenses (including fees paid to affiliates of
$3,318)........................................................................ 23,589
---------
Operating loss................................................................... (54,596)
---------
Other (income) expense:
Interest expense............................................................... 19,482
Loss on disposal of equipment.................................................. 2,930
Finance charge income.......................................................... (285)
---------
Total other expense.................................................... 22,127
---------
Net loss......................................................................... (76,723)
Accumulated deficit, July 1, 1996................................................ (38,219)
---------
Accumulated deficit, April 30, 1997.............................................. $(114,942)
=========
</TABLE>
See accompanying notes to financial statements.
F-87
<PAGE> 149
AUTUMN ROSE QUARRY, INC.
STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $ (78,525)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization................................................................ 4,392
Depreciation................................................................ 29,503
Depletion................................................................... 3,360
Loss on disposal of equipment............................................... 2,930
(Increase) decrease in assets:
Trade receivables......................................................... (24,520)
Employee receivables...................................................... 1,175
Deposits.................................................................. 1,692
Inventory................................................................. 7,253
Prepaid expenses.......................................................... 10,903
Increase (decrease) in liabilities:
Accounts payable.......................................................... (28,356)
Accrued expenses.......................................................... 3,972
---------
Net cash used in operating activities.................................. (66,221)
---------
Cash flows from financing activities:
Payments on notes payable...................................................... (146,409)
Advances from affiliates....................................................... 217,500
---------
Net cash provided by financing activities.............................. 71,091
---------
Net increase in cash............................................................. 4,870
Cash, July 1, 1996............................................................... 3,421
---------
Cash, May 31, 1997............................................................... $ 8,291
=========
Supplemental disclosure of cash flow information -- cash paid for interest....... $ 21,249
=========
</TABLE>
See accompanying notes to financial statements.
F-88
<PAGE> 150
AUTUMN ROSE QUARRY, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $ (76,723)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization................................................................ 3,993
Depreciation................................................................ 26,814
Depletion................................................................... 3,039
Loss on disposal of equipment............................................... 2,930
(Increase) decrease in assets:
Trade receivables......................................................... (31,554)
Employee receivables...................................................... 1,050
Deposits.................................................................. 1,692
Inventory................................................................. 7,761
Prepaid expenses.......................................................... 7,840
Increase (decrease) in liabilities:
Accounts payable.......................................................... (21,542)
Accrued expenses.......................................................... 3,543
---------
Net cash used in operating activities.................................. (71,157)
---------
Cash flows from financing activities:
Payments on notes payable...................................................... (130,400)
Advances from affiliates....................................................... 203,000
---------
Net cash provided by financing activities.............................. 72,600
---------
Net increase in cash............................................................. 1,443
Cash, July 1, 1996............................................................... 3,421
---------
Cash, April 30, 1997............................................................. $ 4,864
=========
Supplemental disclosure of cash flow information -- cash paid for interest....... $ 19,482
=========
</TABLE>
See accompanying notes to financial statements.
F-89
<PAGE> 151
AUTUMN ROSE QUARRY, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 AND APRIL 30, 1997
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented
to assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Nature of Business
The Company quarries granite blocks in northeast Oklahoma for sales to
customers nationwide.
Use of Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Basis of Accounting
Assets, liabilities, revenues, and expenses are recognized on the accrual
method of accounting.
Inventory
Inventories are stated at lower of cost or market, with cost determined
using average cost.
Property and Equipment
Property and equipment are stated at acquisition cost. Depreciation is
computed under the straight-line method for financial reporting purposes over
the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings............................................. 7
Vehicles.............................................. 3-7
Machinery and equipment............................... 3-10
</TABLE>
Major renewals and betterments are added to the property accounts while
maintenance and repairs are charged against earnings as incurred.
Intangibles
Intangibles consist of loan costs, mineral rights, and overburden removal.
Amortization of the loan costs is computed using the straight-line method over
the term of the loan which is five years. Amortization of overburden removal is
computed using the straight-line method over ten years. Depletion of mineral
rights is computed using cost depletion.
See accountants' report.
F-90
<PAGE> 152
AUTUMN ROSE QUARRY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. The fair
value of the Company's assets approximates the carrying cost at the balance
sheet dates.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
APRIL
MAY 31, 30,
1997 1997
-------- --------
<S> <C> <C>
Land................................................... $ 40,000 $ 40,000
Buildings.............................................. 5,536 5,536
Machinery and equipment................................ 196,773 196,773
Vehicles............................................... 2,613 2,613
-------- --------
244,922 244,922
Accumulated depreciation............................... (70,856) (68,165)
-------- --------
$174,066 $176,757
======== ========
</TABLE>
Depreciation expense for the eleven months ended May 31, 1997 was $29,503.
Depreciation expense for the ten months ended April 30, 1997 was $26,814.
NOTE C -- INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
---------- ----------
<S> <C> <C>
Loan costs.......................................... $ 2,709 $ 2,709
Mineral rights...................................... 1,327,500 1,327,500
Overburden removal.................................. 42,500 42,500
---------- ----------
1,372,709 1,372,709
Accumulated amortization and depletion.............. (21,347) (20,628)
---------- ----------
$1,351,362 $1,352,081
========== ==========
</TABLE>
Amortization and depletion expense for the eleven months ended May 31, 1997
were $4,392 and $3,360, respectively.
See accountants' report.
F-91
<PAGE> 153
AUTUMN ROSE QUARRY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE C -- INTANGIBLES -- (CONTINUED)
Amortization and depletion expense for the ten months ended April 30, 1997
were $3,993 and $3,039, respectively.
NOTE D -- NOTES PAYABLE
Notes payable are as follows:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
--------- ---------
<S> <C> <C>
Bank loan, payable $5,833 principal monthly plus
9 1/2% interest with a maturity date of June 2000;
the mortgage balance is secured by substantially
all of the Company's assets and guarantees by the
shareholders. ..................................... $ 210,000 $ 215,833
Note to corporation to be paid with granite
inventory. Sales price set at $14.50 per cubic foot
per agreement of purchase and sale. ............... 452,710 462,886
--------- ---------
662,710 678,719
Current portion...................................... (157,029) (157,029)
--------- ---------
$ 505,681 $ 521,690
========= =========
</TABLE>
The following is a schedule of maturities of notes payable:
<TABLE>
<CAPTION>
APRIL
MAY 31, 30,
1997 1997
-------- --------
<S> <C> <C>
1998................................................... $157,029 $157,029
1999................................................... 162,862 162,862
2000................................................... 162,862 162,862
2001................................................... 98,696 104,529
2002................................................... 81,261 91,437
-------- --------
$662,710 $678,719
======== ========
</TABLE>
NOTE E -- RELATED-PARTY TRANSACTIONS
The Company is affiliated with numerous other companies through common
control and stock ownership. The stockholders and other joint venture companies
have made unsecured non-interest bearing advances to the Company for working
capital purposes.
The Company classifies advances payable to affiliates as long-term based
upon the intent of the parties.
NOTE F -- CONCENTRATION OF CREDIT RISK
All of the Company's cash funds are located in financial institutions that
are insured by the FDIC for up to $100,000. There are no amounts in excess of
this limit at May 31, 1997 and April 30, 1997.
NOTE G -- SUBSEQUENT EVENTS
Subsequent to the date of these financial statements, the Company joined in
a merger with its affiliates and other unrelated granite companies.
See accountants' report.
F-92
<PAGE> 154
AUTUMN ROSE QUARRY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE H -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all financial
instruments at May 31, 1997 and April 30, 1997, does not differ materially from
the aggregate carrying values of its financial instruments recorded in the
accompanying balance sheets. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
NOTE I -- INCOME TAXES
The Company is taxed as a corporation under the Internal Revenue Code. For
federal income tax purposes, approximately $430,727 of net operating loss
carryforwards exist to offset future taxable income. These carryforwards begin
to expire in 2009. No tax benefit has been reported in the accompanying
financial statements, however, because the Company believes that the
carryforwards will expire unused. Accordingly, the $146,000 tax benefit of the
cumulative carryforwards has been offset by evaluation allowance of the same
amount.
See accountants' report.
F-93
<PAGE> 155
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
To the Board of Directors
Southern Mausoleums, Inc.
Elberton, Georgia
We have audited the accompanying balance sheets of Southern Mausoleums,
Inc. (an "S" corporation) as of May 31, 1997 and April 30, 1997, and the related
statements of operations and accumulated deficit, and cash flows for the eleven
months and ten months then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Southern
Mausoleums, Inc. as of May 31, 1997 and April 30, 1997, and the results of its
operations and its cash flows for the eleven months and ten months then ended in
conformity with generally accepted accounting principles.
/s/ GREENE AND COMPANY, L.L.P.
--------------------------------------
GREENE AND COMPANY, L.L.P.
Anderson, South Carolina
July 22, 1997
F-94
<PAGE> 156
SOUTHERN MAUSOLEUMS, INC.
BALANCE SHEETS
MAY 31, 1997 AND APRIL 30, 1997
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 223,242 $ 237,934
Cash -- restricted................................................. 7,115 6,265
Trade receivables (less allowance for doubtful accounts of $25,539
and $25,162).................................................... 26,443 32,529
Trade receivables -- affiliates.................................... 42,576 40,613
Inventory.......................................................... 302,272 280,759
Prepaid expenses................................................... 9,649 12,306
--------- ---------
Total current assets....................................... 611,297 610,406
--------- ---------
Property and equipment, net.......................................... 270,445 274,355
--------- ---------
Other assets:
Intangibles, net................................................... 2,088 2,152
Deposits........................................................... 3,885 3,885
Advances to affiliates............................................. 12,096 12,096
--------- ---------
Total other assets.............................................. 18,069 18,133
--------- ---------
Total assets............................................... $ 899,811 $ 902,894
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................................... $ 45,159 $ 49,234
Accrued expenses................................................... 19,478 25,084
Current portion of long-term debt.................................. 157,068 156,267
Customer deposits.................................................. 365,849 402,337
--------- ---------
Total current liabilities.................................. 587,554 632,922
--------- ---------
Long-term liabilities:
Long-term debt, less current portion............................... 271,588 280,472
Advances from affiliates........................................... 36,489 36,489
Accounts payable -- affiliates..................................... 252,154 258,776
Advances from stockholders......................................... 30,011 30,011
--------- ---------
Total long-term liabilities................................ 590,242 605,748
--------- ---------
Stockholders' deficit:
Common stock, $10 par value. Authorized 100,000 shares; 120 shares
issued and outstanding.......................................... 1,200 1,200
Accumulated deficit................................................ (279,185) (336,976)
--------- ---------
Total stockholders' deficit..................................... (277,985) (335,776)
--------- ---------
Total liabilities and stockholders' deficit................ $ 899,811 $ 902,894
========= =========
</TABLE>
See accompanying notes to financial statements.
F-95
<PAGE> 157
SOUTHERN MAUSOLEUMS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $47,912)....................... $1,225,396
Cost of goods sold (including purchases from affiliates of $261,501)............. 981,273
----------
Gross profit..................................................................... 244,123
Selling and administrative expenses (reduced by fees charged to affiliates of
$63,565)....................................................................... 80,993
----------
Operating income................................................................. 163,130
----------
Other (income) expense:
Interest expense............................................................... 40,640
Finance charge income.......................................................... (1,482)
Interest income................................................................ (2,213)
----------
Total other expense.................................................... 36,945
----------
Net income....................................................................... 126,185
Accumulated deficit, July 1, 1996................................................ (405,370)
----------
Accumulated deficit, May 31, 1997................................................ $ (279,185)
==========
</TABLE>
See accompanying notes to financial statements.
F-96
<PAGE> 158
SOUTHERN MAUSOLEUMS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Net revenues (including revenues to affiliates of $46,368)....................... $1,073,646
Cost of goods sold (including purchases from affiliates of $232,842)............. 899,395
----------
Gross profit..................................................................... 174,251
Selling and administrative expenses (reduced by fees charged to affiliates of
$57,319)....................................................................... 71,471
----------
Operating income................................................................. 102,780
----------
Other (income) expense:
Interest expense............................................................... 37,135
Finance charge income.......................................................... (760)
Interest income................................................................ (1,989)
----------
Total other expense.................................................... 34,386
----------
Net income....................................................................... 68,394
Accumulated deficit, July 1, 1996................................................ (405,370)
----------
Accumulated deficit, April 30, 1997.............................................. $ (336,976)
==========
</TABLE>
See accompanying notes to financial statements.
F-97
<PAGE> 159
SOUTHERN MAUSOLEUMS, INC.
STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $ 126,185
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization................................................................ 696
Depreciation................................................................ 51,724
(Increase) decrease in assets:
Trade receivables......................................................... 7,304
Related party receivables................................................. (10,596)
Inventory................................................................. (102,264)
Prepaid expenses.......................................................... 1,744
Increase (decrease) in liabilities:
Accounts payable.......................................................... (42,662)
Accrued expenses.......................................................... 22,799
Customer deposits......................................................... 224,367
---------
Net cash provided by operating activities.............................. 279,297
---------
Cash flows used in investing activities -- purchase of property and equipment.... (1,628)
---------
Cash flows from financing activities:
Payments on notes payable...................................................... (78,282)
Loan proceeds.................................................................. 5,000
---------
Net cash used in financing activities.................................. (73,282)
---------
Net increase in cash and cash equivalents........................................ 204,387
Cash and cash equivalents, July 1, 1996.......................................... 25,970
---------
Cash and cash equivalents, May 31, 1997.......................................... $ 230,357
=========
Supplemental disclosure of cash flow information -- cash paid for interest....... $ 41,262
=========
</TABLE>
See accompanying notes to financial statements.
F-98
<PAGE> 160
SOUTHERN MAUSOLEUMS, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income...................................................................... $ 68,394
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization................................................................. 633
Depreciation................................................................. 47,814
(Increase) decrease in assets:
Trade receivables.......................................................... 3,181
Related party receivables.................................................. (10,596)
Inventory.................................................................. (80,754)
Prepaid expenses........................................................... (913)
Increase (decrease) in liabilities:
Accounts payable........................................................... (46,347)
Accrued expenses........................................................... 42,789
Customer deposits.......................................................... 260,855
--------
Net cash provided by operating activities............................... 285,056
--------
Cash flows used in investing activities -- purchase of property and equipment..... (1,628)
--------
Cash flows from financing activities:
Payments on notes payable....................................................... (70,199)
Loan proceeds................................................................... 5,000
--------
Net cash used in financing activities................................... (65,199)
--------
Net increase in cash and cash equivalents......................................... 218,229
Cash and cash equivalents, July 1, 1996........................................... 25,970
--------
Cash and cash equivalents, April 30, 1997......................................... $244,199
========
Supplemental disclosure of cash flow information -- cash paid for interest........ $ 38,243
========
</TABLE>
See accompanying notes to financial statements.
F-99
<PAGE> 161
SOUTHERN MAUSOLEUMS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 AND APRIL 30, 1997
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented
to assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Nature of Business
The Company saws and polishes granite into dimensional blocks for mausoleum
assembly at a plant located in northeast Georgia. The completed mausoleums are
sold nationwide.
Use of Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Basis of Accounting
Assets, liabilities, revenues, and expenses are recognized on the accrual
method of accounting.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents. The Company has a money market account in the amount of
$179,767 at May 31, 1997 and $104,543 at April 30, 1997.
Trade Receivables
The Company accounts for uncollectible trade receivables on the reserve
method.
Inventory
Inventories are stated at lower of cost or market, with cost determined as
follows:
<TABLE>
<S> <C>
Finished goods....................... First-in first-out (FIFO) method
Materials and work in process........ Average cost
</TABLE>
See accountants' report.
F-100
<PAGE> 162
SOUTHERN MAUSOLEUMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Property and Equipment
Property and equipment are stated at acquisition cost. Depreciation is
computed under the straight-line method for financial reporting purposes over
the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings........................................................... 31 1/2
Building improvements............................................... 31 1/2
Vehicles............................................................ 5
Machinery and equipment............................................. 2 1/2 - 7
Office fixtures and equipment....................................... 7
</TABLE>
Major renewals and betterments are added to the property accounts while
maintenance and repairs are charged against earnings as incurred.
Intangibles
Intangibles consist of start-up costs and loan costs. Amortization of the
intangibles is computed using the straight-line method over terms ranging from
five years for start-up costs to six years for loan costs.
Income Taxes
The Company with the consent of its stockholders has elected to be an "S"
Corporation under the Internal Revenue Code. Instead of paying corporate income
taxes the stockholders of an "S" Corporation are taxed individually on their
proportionate share of the Company's taxable income. Therefore, no provision or
liability for federal income taxes has been included in these financial
statements.
NOTE B -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
--------- ---------
<S> <C> <C>
Land................................................. $ 20,105 $ 20,105
Land improvements.................................... 7,180 7,180
Buildings............................................ 180,945 180,945
Building improvements................................ 11,904 11,904
Vehicles............................................. 3,208 3,208
Machinery and equipment.............................. 342,559 342,559
Office fixtures and equipment........................ 41,119 41,119
--------- ---------
607,020 607,020
Accumulated depreciation............................. (336,575) (332,665)
--------- ---------
$ 270,445 $ 274,355
========= =========
</TABLE>
Depreciation expense for the eleven months ended May 31, 1997 was $51,724.
Depreciation expense for the ten months ended April 30, 1997 was $47,814.
See accountants' report.
F-101
<PAGE> 163
SOUTHERN MAUSOLEUMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE C -- NOTES PAYABLE
Notes payable are as follows:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
--------- ---------
<S> <C> <C>
Bank loan, payable $11,100 monthly (principal and
interest at prime + 1%) with a maturity date of
February 2000; the mortgage balance is secured by
substantially all of the Company's assets and
guarantees by the stockholders. ................... $ 373,656 $ 381,739
Individual, payable on demand at 10% interest.
Principal and accrued interest were paid in full on
June 27, 1997. .................................... 55,000 55,000
--------- ---------
428,656 436,739
Current portion...................................... (157,068) (156,267)
--------- ---------
$ 271,588 $ 280,472
========= =========
</TABLE>
The following is a schedule of maturities of notes payable due as of:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
-------- ---------
<S> <C> <C>
1998........................................... $157,068 $ 156,267
1999........................................... 112,200 111,320
2000........................................... 159,388 169,152
-------- --------
$428,656 $ 436,739
======== ========
</TABLE>
NOTE D -- RELATED-PARTY TRANSACTIONS
The Company is affiliated with numerous other companies through common
control and stock ownership. The stockholders and other joint venture companies
have made unsecured non-interest bearing advances to the Company for working
capital purposes.
Accounts payable to affiliates are classified as long-term liabilities
based upon the intent of the related parties.
NOTE E -- CONCENTRATION OF CREDIT RISK
The Company's cash is located in a single financial institution. Cash
accounts are insured by the FDIC for up to $100,000. Amounts in excess of
insured limits were approximately $79,767 at May 31, 1997 and $57,391 at April
30, 1997.
Sales to a major customer represented 44% of total revenues for both the
eleven and ten months ended May 31, 1997 and April 30, 1997. There were no
outstanding trade accounts receivable from the Company's major customer at May
31, 1997 and April 30, 1997.
NOTE F -- SUBSEQUENT EVENTS
Subsequent to the date of these financial statements, the Company joined in
a merger with its affiliates and other unrelated granite companies. As of the
effective date of the merger, the Company's election to be an "S" corporation
under the Internal Revenue Code will terminate.
See accountants' report.
F-102
<PAGE> 164
SOUTHERN MAUSOLEUMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- RESTRICTED CASH
Restricted cash balances at May 31, 1997 and April 30, 1997 were $7,115 and
$6,265, respectively. These cash balances are employee savings accounts and are
restricted for that purpose.
NOTE H -- INVENTORY
Inventory consisted of the following as of:
<TABLE>
<CAPTION>
MAY 31, APRIL 30,
1997 1997
-------- ---------
<S> <C> <C>
Materials.............................................. $165,858 $ 154,169
Work in process........................................ 76,836 71,303
Finished goods......................................... 59,578 55,287
-------- --------
$302,272 $ 280,759
======== ========
</TABLE>
NOTE I -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all financial
instruments at May 31, 1997 and April 30, 1997, does not differ materially from
the aggregate carrying values of its financial instruments recorded in the
accompanying balance sheets. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
See accountants' report.
F-103
<PAGE> 165
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 8
Use of Proceeds..................... 13
Dividend Policy..................... 13
Capitalization...................... 14
Dilution............................ 15
Selected Consolidated Financial
Data.............................. 16
Unaudited Pro Forma Combined and
Condensed Financial Data.......... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 23
The Death Care Industry and Granite
Memorialization................... 28
Business............................ 31
Management.......................... 41
Certain Relationships and Related
Transactions...................... 48
Principal and Selling
Stockholders...................... 51
Description of Capital Stock........ 53
Shares Eligible for Future Sale..... 56
Underwriting........................ 58
Legal Matters....................... 59
Experts............................. 59
Available Information............... 59
Index to Financial Statements....... F-1
</TABLE>
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A
COMMON STOCK OFFERED HEREBY, 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.
======================================================
======================================================
[ ] SHARES
[LOGO]
ROCK OF AGES
CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
RAYMOND JAMES &
ASSOCIATES, INC.
, 1997
======================================================
<PAGE> 166
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate (except for the Securities and Exchange
Commission Registration Fee) of the fees and expenses all of which are payable
by the Company, other than any underwriting discounts and commissions, in
connection with the registration and sale of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee....................... 17,273
National Association of Securities Dealers, Inc. Filing Fee............... 6,200
Nasdaq National Market Listing Fee........................................ 20,000
Transfer Agent and Registrar Fees and Expenses............................ 10,000
Blue Sky Fees and Expenses................................................ 5,000
Legal Fees and Expenses................................................... *
Accounting Fees and Expenses.............................................. *
Printing, Engraving and Mailing Expenses.................................. 150,000
Miscellaneous............................................................. *
----------
Total........................................................... $ *
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law, as amended, allows a
corporation to eliminate the personal liability of directors of a corporation to
the corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except where the director breached his duty of
loyalty, failed to act in good faith, engaged in intentional misconduct or
knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at its request in such capacity in another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Article Ninth of the Registrant's Amended and Restated Certificate of
Incorporation provides for elimination of directors' personal liability and
indemnification as follows:
"(Nine) No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty
as a director, except to the extent such exemption from liability or
limitation thereto is not permitted under the DGCL as the same exists or
may hereafter be amended. If the DGCL is amended hereafter to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent authorized by the DGCL, as so amended. Any repeal or
modification of this Article NINTH shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification with respect to acts or omissions occurring prior to
such repeal or modification."
II-1
<PAGE> 167
In addition, Article VIII of the By-Laws of the Registrant provides for
indemnification of officers and directors of the Company and certain other
persons against liabilities and expenses incurred by any of them in certain
stated proceedings and under certain stated conditions.
Section 9 of the Underwriting Agreement between the Company and the
Representative provides for indemnification by the Company of the
Representative, the Underwriters and each person, if any, who controls the
Representative or any Underwriter, against certain liabilities under the
Securities Act. The Underwriting Agreement also provides that the Representative
and the Underwriters shall similarly indemnify the Company, its directors,
officers, and controlling person, as set forth therein.
The Registrant has purchased directors' and officers' liability insurance
which would indemnify the directors and officers of the Company against damages
arising out of certain kinds of claims which might be made against them based on
their negligent acts or omissions while acting in their capacity as such.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information is furnished with regard to all securities sold
by the Company within the past three years which were not registered under the
Securities Act.
1. As of June 27, 1997, Rock of Ages Quarries, Inc., a predecessor of the
Company ("ROAQ"), and Royalty Granite Corporation, a wholly owned subsidiary of
the Company, entered into an Agreement and Plan of Reorganization with KSGM,
Inc. ("KSGM") and Missouri Red Quarries, Inc. ("Missouri Red") pursuant to
which, effective June 28, 1997, KSGM was merged with and into Rock of Ages
Corporation, a Vermont corporation and the immediate predecessor of the Company
("ROA Vermont"), and all outstanding shares of capital stock of KSGM were
converted into 526,882 shares (263,441 shares after giving effect to the 1-for-2
reverse stock pursuant to the merger of ROA Vermont with and into the Company as
described in 5. below) of common stock of ROA Vermont, which shares were issued
to Missouri Red, as the sole stockholder of KSGM (the "Keystone Merger Shares").
The Keystone Merger Shares were not registered under the Securities Act in
reliance on the exemption provided by Section 4(2) thereof as an offer and sale
of securities which does not involve a public offering.
2. As of June 27, 1997, ROAQ entered into a Stock Purchase Agreement with
Robert Otis Childs, Jr., Robert Otis Childs, III, and Timothy Carroll Childs,
pursuant to which the Company will issue to Robert Otis Childs, III,
contemporaneously with the consummation of the offering $200,000 in shares of
Class A Common Stock (valued at the initial public offering price per share)
(the "Childs Shares") as a portion of the consideration payable in connection
with the C&C Acquisition. The Childs Shares will not be registered under the
Securities Act in reliance on the exemption provided by Section 4(2) thereof as
an offer and sale of securities which does not involve a public offering.
3. Effective June 27, 1997, ROA Vermont merged with and into ROAQ and ROAQ
changed its name to Rock of Ages Corporation. In connection therewith, each
outstanding share of Class A Common Stock of ROAQ was converted into 72.8347276
shares of Common Stock of ROAQ ("ROAQ Shares"). The ROAQ Shares were not
registered under the Securities Act in reliance on the exemption provided by
Section 3(a)(9) thereof with respect to securities exchanged by the issuer with
its existing security-holders exclusively.
4. As of July 30, 1997, ROA Vermont entered into an Asset Purchase
Agreement with Keith Monument, pursuant to which the Company will issue to Keith
Monument, contemporaneously with the consummation of the offering, $1.5 million
in shares of Class A Common Stock (valued at the initial public offering price
per share) (the "Keith Monument Shares") as a portion of the consideration
payable in connection with the Keith Acquisition. The Keith Monument Shares will
not be registered under the Securities Act in reliance on the exemption provided
by Section 4(2) thereof as an offer and sale of securities which does not
involve a public offering.
5. Effective August 12, 1997, ROA Vermont became a Delaware corporation
pursuant to a reincorporation merger into a newly formed Delaware company. In
the merger, each outstanding share of ROA Vermont was converted into one half of
one share of Class B Common Stock of the Company. In connection therewith, an
aggregate of 3,763,441 shares of Class B Common Stock of the Company were issued
(the "Reincorpora-
II-2
<PAGE> 168
tion Merger Shares"). The Reincorporation Merger Shares were not registered
under the Securities Act in reliance on the exemption provided by Section 4(2)
thereof as an offer and sale of securities which does not involve any public
offering.
6. On August 13, 1997, the Company entered into an Agreement of Merger and
Plan of Reorganization with Swenson Granite Company, Inc., Kurt M. Swenson and
Kevin C. Swenson, pursuant to which, immediately prior to consummation of the
offering, each share of Swenson Granite Company, Inc. will be converted into
1,618.23 shares of Class B Common Stock of the Company (the "Reorganization
Merger Shares"). The Reorganization Merger Shares will not be registered under
the Securities Act in reliance on the exemption provided by Section 4(2) thereof
as an offer and sale of securities which does not involve any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C>
1.* Form of Underwriting Agreement by and between the Company and Raymond James &
Associates, Inc.
2.1 Agreement and Plan of Reorganization dated as of June 27, 1997 by and among Rock of
Ages Quarries, Inc., to be known as Rock of Ages Corporation, KSGM, Inc., Royalty
Granite Corporation and Missouri Red Quarries, Inc.
2.2 Stock Purchase Agreement dated as of June 27, 1997 by and among Rock of Ages
Quarries, Inc., to be known as Rock of Ages Corporation, Robert Otis Childs, Jr.,
Robert Otis Childs, III and Timothy Carroll Childs
2.3 Asset Purchase Agreement dated as of July 30, 1997 by and among the Company, John
E. Keith, Roy H. Keith, Jr., Glasgow Monument Co., Inc., Keith Lettering and
Setting Corporation, Keith Monument Company, National Memorial Corporation,
Riehm-Gerlack Monument Co. and The Snyder Corporation
2.4 Agreement and Plan of Merger and Reorganization dated as of August 13, 1997, by and
among Rock of Ages Corporation, Swenson Granite Company, Inc., Kurt M. Swenson and
Kevin G. Swenson.
3.1 Form of Amended and Restated Certificate of Incorporation of the Company
3.2 By-laws of the Company
4.* Specimen Certificate representing the Class A Common Stock
5.* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the
Company, regarding the legality of the shares of Class A Common Stock
10.1 Rock of Ages Corporation Amended and Restated 1994 Stock Plan
10.2* Employment Agreement of Kurt M. Swenson
10.3 Employment Agreement of Paula Plante
10.4 Employment Agreement of Peter Friberg
10.5 Employment Agreement of Albert Gherardi, Jr.
10.6 Employment Agreement of Mark Gherardi
10.7 Form of Acquisition Employment Agreement with G. Thomas Oglesby, Jr., George T.
Oglesby, III, Robert Otis Childs, III, John E. Keith and Roy H. Keith
10.8* Form of Officer Employment Agreement with each of Richard C. Kimball, George R.
Anderson, Jon M. Gregory and Edward E. Haydon
10.9+ Supply and Distribution Agreement dated as of June 27, 1997 by and among Keystone
Granite Company, Inc., The Estate of George T. Oglesby, Sr., Rock of Ages
Corporation and Missouri Red Quarries, Inc.
10.10+ Supply and Distribution Agreement dated as of June 27, 1997 by and among Missouri
Red Quarries, Inc., George T. Oglesby, Jr. and Rock of Ages Corporation.
10.11+ Letter Agreement dated as of July 25, 1997 between Rock of Ages Corporation and
Dakota Granite Company
</TABLE>
II-3
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C>
10.12 Stock Subscription Agreement and Continuity of Interest Agreement dated June 27,
1997 between Rock of Ages Corporation and Missouri Red Quarries, Inc.
10.13 Stock Subscription Agreement dated as of July 30, 1997 between Rock of Ages
Corporation and National Memorial Corporation
10.14 Stock Subscription Agreement dated as of June 27, 1997 between Rock of Ages
Corporation and Robert Otis Childs, III
10.15 Form of Salary Continuation Agreement
10.16 Salary Continuation Agreement dated January 3, 1996 between Rock of Ages
Corporation and Mark Gherardi
10.17 Salary Continuation Agreement dated January 3, 1996 between Rock of Ages
Corporation and Melvin Friberg
10.18* Form of Custody Agreement and Power of Attorney
10.19* Financing Agreement dated as of August 25, 1994 between the CIT Group/Business
Credit, Inc. and Rock of Ages Corporation
10.20* Credit Facility dated as of June 25, 1997 between Royal Bank of Canada and Rock of
Ages Canada Inc., Rock of Ages Quarries Inc. and Rock of Ages Canada Inc.
11. Statement re. computation of per share earnings
21. Subsidiaries of the Company
23.1* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of KPMG Peat Marwick LLP
23.6 Consent of Greene and Company, L.L.P.
23.7 Consent of Greene and Company, L.L.P.
23.8 Consent of Greene and Company, L.L.P.
23.9 Consent of Greene and Company, L.L.P.
23.10 Consent of Frederick E. Webster
23.11 Consent of John E. Keith
23.12 Consent of James L. Fox
23.13 Consent of CA Rich Consultants, Inc.
24.* Power of Attorney (set forth on the signature page of this Registration Statement)
27. Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
(b) Financial Statement Schedules:
<TABLE>
<S> <C>
Schedule II -- Valuation and Qualifying Accounts and Reserves......... S-1
</TABLE>
All other schedules for which provision is made by the applicable
accounting regulation of the Commission are not required under the related
instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Restated Articles of Incorporation, By-Laws, by
agreement or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange
II-4
<PAGE> 170
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The Company 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 on Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or Rule 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
II-5
<PAGE> 171
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Barre, Vermont on August 14, 1997.
ROCK OF AGES CORPORATION
By: /s/ KURT M. SWENSON
------------------------------------
Name: Kurt M. Swenson
Title: President, Chief Executive
Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kurt M. Swenson and Richard C. Kimball
and each of them, as such person's true and lawful attorney-in-fact and agent
with full power of substitution and revocation for such person and in such
person's name, place and stead, in any and all capacities, to execute any and
all amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 14, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ---------------------------------------------------
<S> <C>
KURT M. SWENSON President, Chief Executive Officer and Chairman of
- ---------------------------------------- the Board of Directors (Principal Executive
Kurt M. Swenson Officer)
GEORGE R. ANDERSON Senior Vice President, Chief Financial Officer,
- ---------------------------------------- Treasurer and Director (Principal Financial
George R. Anderson Officer)
RICHARD C. KIMBALL Vice Chairman and President, Memorials Division,
- ---------------------------------------- and Director
Richard C. Kimball
JON M. GREGORY President, Quarry Division and Director
- ----------------------------------------
Jon M. Gregory
MARK A. GHERARDI Senior Vice President, Barre and Canada
- ---------------------------------------- Manufacturing Operations and Director
Mark A. Gherardi
President, Keystone Memorials, Inc. and Director
- ----------------------------------------
G. Thomas Oglesby, Jr.
PETER A. FRIBERG Senior Vice President -- Memorial Sales, Director
- ----------------------------------------
Peter A. Friberg
CHARLES M. WAITE Director
- ----------------------------------------
Charles M. Waite
</TABLE>
II-6
<PAGE> 172
ROCK OF AGES CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. E COL. F
- ------------------------------------------------------ ---------- ---------- ---------- ----------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Allowances for possible losses on accounts
receivable....................................... $446 $181 $ 63 $564
Year ended December 31, 1995
Allowances for possible losses on accounts
receivable....................................... $464 $ 62 $ 80 $446
Year ended December 31, 1994
Allowances for possible losses on accounts
receivable....................................... $378 $216 $130 $464
</TABLE>
S-1
<PAGE> 173
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<S> <C>
1.* Form of Underwriting Agreement by and between the Company and Raymond James &
Associates,
2.1 Agreement and Plan of Reorganization dated as of June 27, 1997 by and among Rock of
Ages Quarries, Inc., to be known as Rock of Ages Corporation, KSGM, Inc., Royalty
Granite Corporation and Missouri Red Quarries, Inc.
2.2 Stock Purchase Agreement dated as of June 27, 1997 by and among Rock of Ages
Quarries, Inc., to be known as Rock of Ages Corporation, Robert Otis Childs, Jr.,
Robert Otis Childs, III and Timothy Carroll Childs
2.3 Asset Purchase Agreement dated as of July 30, 1997 by and among the Company, John E.
Keith, Roy H. Keith, Jr., Glasgow Monument Co., Inc., Keith Lettering and Setting
Corporation, Keith Monument Company, National Memorial Corporation, Riehm-gerlack
Monument Co., and the Snyder Corporation.
2.4 Agreement and Plan of Merger and Reorganization dated as of August 13, 1997 by and
among Rock of Ages Corporation, Swenson Granite Company, Inc., Kurt M. Swenson and
Kevin C. Swenson
3.1 Form of Amended and Restated Certificate of Incorporation of the Company
3.2 By-laws of the Company
4.* Specimen Certificate representing the Class A Common Stock
5.* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company,
regarding the legality of the shares of Class A Common Stock
10.1 Rock of Ages Corporation Amended and Restated 1994 Stock Plan
10.2* Employment Agreement of Kurt M. Swenson
10.3 Employment Agreement of Paula Plante
10.4 Employment Agreement of Peter Friberg
10.5 Employment Agreement of Albert Gherardi, Jr.
10.6 Employment Agreement of Mark Gherardi
10.7 Form of Acquisition Employment Agreement with G. Thomas Oglesby, Jr., George T.
Oglesby, III, Robert Otis Childs, III, John E. Keith and Roy H. Keith
10.8* Form of Officer Employment Agreement with each of Richard C. Kimball, George R.
Andersen, Jon M. Gregory and Edward E. Haydon
10.9+ Supply and Distribution Agreement dated as of June 27, 1997 by and among Keystone
Granite Company, Inc., the Estate of George T. Oglesby, Sr., Rock of Ages
Corporation and Missouri Red Quarries, Inc.
10.10+ Supply and Distribution Agreement dated as of June 27, 1997 by and among Missouri
Red Quarries, Inc., George T. Oglesby, Jr. and Rock of Ages Corporation.
10.11+ Letter Agreement dated as of July 25, 1997 between Rock of Ages Corporation and
Dakota Granite Company
10.12 Stock Subscription Agreement and Continuity of Interest Agreement dated June 27,
1997 between Rock of Ages Corporation and Missouri Red Quarries, Inc.
10.13 Stock Subscription Agreement dated as of July 30, 1997 between Rock of Ages
Corporation and National Memorial Corporation
10.14 Stock Subscription Agreement dated as of June 27, 1997 between Rock of Ages
Corporation and Robert Otis Childs, III
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<S> <C>
10.15 Form of Salary Continuation Agreement
10.16 Salary Continuation Agreement dated January 3, 1996 between Rock of Ages Corporation
and Mark Gherardi
10.17 Salary Continuation Agreement dated January 3, 1997 between Rock of Ages Corporation
and Melvin Friberg
10.18* Form of Custody Agreement and Power of Attorney
10.19* Financing Agreement dated as of August 25, 1994 between the CIT Group/Business
Credit, Inc. and Rock of Ages Corporation
10.20* Credit Facility dated as of June 25, 1997 between Royal Bank of Canada and Rock of
Ages Canada Inc., Rock of Ages Quarries Inc. and Rock of Ages Canada Inc.
11. Statement re. computation of per share earnings
21. Subsidiaries of the Company
23.1* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of KPMG Peat Marwick LLP
23.6 Consent of Greene and Company, L.L.P.
23.7 Consent of Greene and Company, L.L.P.
23.8 Consent of Greene and Company, L.L.P.
23.9 Consent of Greene and Company, L.L.P.
23.10 Consent of Frederick E. Webster
23.11 Consent of John E. Keith
23.12 Consent of James L. Fox
23.13 Consent of CA Rich Consultants, Inc.
24. Power of Attorney (set forth on the signature page of this Registration Statement)
27. Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION made this 27th day of June, 1997, by
and among ROCK OF AGES QUARRIES, INC. (to be known as ROCK OF AGES CORPORATION
as set forth below), a Vermont corporation with its principal office located in
Concord, New Hampshire (hereinafter referred to as "Acquiror"), KSGM, INC., a
Georgia corporation with its principal office in Elberton, Georgia (hereinafter
referred to as "Target"), ROYALTY GRANITE CORPORATION, a Georgia corporation
with its principal place of business in Elberton, Georgia and a wholly owned
subsidiary of Acquiror (hereinafter referred to as "Sub"), and MISSOURI RED
QUARRIES, INC., a Georgia corporation, with its principal office in Elberton,
Georgia, and the sole shareholder of Target (hereinafter sometimes referred to
as "Missouri Red") (Missouri Red is sometimes referred to herein as the
"Shareholder").
RECITALS:
1. The Boards of Directors of Acquiror and Target have approved the
acquisition of Target by Acquiror using common stock of Acquiror as
consideration for such acquisition.
2. The Boards of Directors of Acquiror and Target have recommended the
approval of the Merger of Target into Acquiror (the "Merger") to their
respective shareholders, pursuant to the Plan of Merger set forth in EXHIBIT A
attached hereto (the "Plan of Merger") and the transactions contemplated
thereby, in accordance with the applicable provisions of the Vermont Business
Corporation Act, Title 11A of Vermont Statutes Annotated (the "VBCA") and the
Georgia Business Corporation Code, O.C.G.A 14-2 -101 ET SEQ. (the "GCC") which
permit said Merger.
3. The Board of Director of Acquiror has approved the transfer of the
operating assets and liabilities of Target acquired in the Merger to Sub.
4. For federal income tax purposes it is intended that the acquisition and
Merger shall qualify as a merger under ss.368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended (the "Code") using common stock of Acquiror followed by
Acquiror transferring all or a part of the assets and liabilities of Target
obtained in the Merger to Sub pursuant to ss.368(a)(2)(C) of thE Code.
5. Acquiror and Sub (hereinafter sometimes collectively referred to as the
"Rock of Ages Group") and Target and Shareholder believe the acquisition and the
Merger will accomplish among other purposes, the following significant business
purposes: (a) Target's historic and successful business of manufacturing and
selling granite memorials will be enhanced as a part of the Rock of Ages Group;
and (b) the Rock of Ages Group will obtain the manufacturing, business and sales
expertise of certain key employees and the granite
<PAGE> 2
memorial manufacturing facilities of Target which will allow it to expand its
business of manufacturing and selling granite memorials.
6. At 5:05 P.M., June 27, 1997 Acquiror: (a) will merge its wholly owned
subsidiary Rock of Ages Corporation into it; (b) will be the surviving
corporation in the merger (the "Prior Merger"); (c) will as a part of the merger
amend its Articles of Incorporation to change its name to Rock of Ages
Corporation; and (d) to convert its capital structure and its outstanding shares
of capital stock as represented in Section 5.2(b) hereof.
7. Various of the parties to this agreement desire to make the
representations, warranties and agreements as hereinafter set forth and to
prescribe certain conditions thereto.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
----------
1.1 THE MERGER.
(a) At the Effective Time (as defined in Section 1.2), subject to the
terms hereof and the Plan of Merger, Target shall be merged into Acquiror, the
separate existence of Target shall thereupon cease pursuant to the applicable
provisions of the VBCA and the GCC and as soon as possible after the Effective
Time substantially all of the operating assets and liabilities of Target
acquired in the Merger will be transferred by Acquiror to Sub.
(b) Acquiror will be the surviving corporation in the Merger
(sometimes referred to herein as the "Surviving Corporation") and will continue
to be governed by the laws of the State of Vermont, and the separate corporate
existence of Acquiror and all of its rights, privileges, immunities and
franchises, public or private, and all its duties and liabilities as a
corporation organized under the VBCA will continue unaffected by the Merger.
(c) The Merger will have the effects specified under the VBCA.
1.2 EFFECTIVE TIME AND EFFECTIVE DATE. Provided that this agreement has not
been terminated or abandoned pursuant to Article VIII hereof, Acquiror and
Target will cause Articles of Merger complying with Section 11.05 VBCA to be
filed with the Secretary of State of the State of Vermont and a Certificate of
Merger complying with Section 14-2-1105 of the GCC to be filed with the
Secretary of State of the State of Georgia. Such Articles of Merger and the
Certificate of Merger will provide that the merger will be effective at 11:59
P.M. on June 28, 1997. The date the Merger becomes effective is referred to
herein as the
-2-
<PAGE> 3
"Effective Date" and the time on the Effective Date the Merger becomes effective
is referred to herein as the "Effective Time".
ARTICLE II
ACQUIROR AS THE SURVIVING CORPORATION
-------------------------------------
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of Acquiror in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of Acquiror after the Effective Time.
2.2 BY-LAWS. The By-Laws of Acquiror in effect immediately prior to the
Effective Time shall be the By-Laws of Acquiror from and after the Effective
Time.
2.3 BOARD OF DIRECTORS. After the Effective Time, the Board of Directors of
Acquiror shall be and continue as the Board of Directors of Acquiror.
ARTICLE III
CONVERSION OF SHARES
--------------------
3.1 CONVERSION OF TARGET SHARES IN THE MERGER. Pursuant to the Plan of
Merger at the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of Target, the holders of issued and
outstanding shares of common stock, no par value of Target (the "Target Common
Stock") shall be entitled to receive shares of validly issued, fully paid and
non-assessable Common Stock of Acquiror (the "Acquiror Common Stock") determined
as follows: five hundred twenty-six thousand eight hundred eighty-two (526,882)
shares of Target Common Stock which constitutes all of the issued and
outstanding capital stock of Target will be converted on a one (1) for one (1)
basis into total of five hundred twenty-six thousand eight hundred eighty-two
(526,882) shares of Acquiror Common Stock so that upon the Effective Date the
total number of issued and outstanding shares of the Acquiror Common Stock will
be seven million five hundred twenty-six thousand eight hundred eighty-two
(7,526,882).
3.2 STATUS OF ACQUIROR SHARES. Subject to Section 3.3(b), at the Effective
Time, each issued and outstanding share of common stock of Acquiror common stock
shall continue unchanged and shall remain outstanding.
3.3 EXCHANGE OF TARGET STOCK CERTIFICATES.
-3-
<PAGE> 4
(a) On the Effective Date, subject to Section 3.3(b), Acquiror shall
make available to Shareholder the certificates representing the shares of
Acquiror Common Stock required to effect the conversion and exchange referred to
in Section 3.3(b).
(b) On or after the Effective Date, Shareholder agrees to surrender to
Acquiror Shareholder's certificate(s) which prior to the Effective Date
represented all the outstanding shares of Target Common Stock, and Shareholder
shall receive in exchange therefor a certificate or certificates representing
the shares of Acquiror Common Stock into which Shareholder's shares of Target
Common Stock were converted pursuant to Section 3.1.
3.4 SHAREHOLDER VOTE. Shareholder agrees to vote in favor of the Merger.
3.5 CLOSING OF TRANSFER BOOKS. From and after the Effective Date, the stock
transfer books of Target shall be closed and no transfer of Target Common Stock
shall be thereafter made.
3.6 CLOSING. The closing (the "Closing") of the transactions contemplated
by this agreement shall take place at the offices of Phelps & Campbell, LLP, 313
Heard Street, Elberton, Georgia at 2:00 P.M. on June 27, 1997 or at such other
time and place and such other date as Acquiror and Target shall agree (the
"Closing Date").
ARTICLE IV
FURTHER AGREEMENTS
------------------
4.1 EMPLOYMENT AGREEMENT. At the Closing, as the same may be extended or as
soon thereafter as possible, Acquiror and the other parties thereto, shall
execute employment agreements (the "Employment Agreements"). The Employment
Agreement for George T. Oglesby, Jr. shall be substantially in the form thereof
attached as EXHIBIT 4.1(a) hereto, with such additional terms and conditions as
may be mutually agreed to by the various parties thereto and the Employment
Agreement for George T. Olgesby, III shall be substantially in the form thereof
attached as EXHIBIT 4.1(b) hereto, with such additional terms and conditions as
may be mutually agreed to by the various parties thereto.
4.2 STOCK SUBSCRIPTION AND CONTINUITY OF INTEREST AGREEMENT. Concurrently
with the execution and delivery of this agreement, Shareholder and Acquiror
shall execute the stock subscription and continuity of interest agreement (the
"Stock Subscription and Continuity of Interest Agreement") substantially in the
form attached hereto as EXHIBIT 4.2 .
ARTICLE V
-4-
<PAGE> 5
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 GENERAL STATEMENT. The parties make the representations and warranties
to each other which are set forth in this Article V. The survival of all such
representations and warranties shall be in accordance with Section 10.1 hereof.
All representations and warranties of the parties are made subject to the
exceptions, if any, which are noted in the respective schedules delivered by the
parties to each other and accepted by the receiving party concurrently herewith
and identified as, in the case of Section 5.2, the "Rock of Ages Group
Disclosure Schedule," and in the case of Section 5.3, the "Target Disclosure
Schedule."
5.2 REPRESENTATIONS AND WARRANTIES OF THE ROCK OF AGES GROUP. Each member
of the Rock of Ages Group, jointly and severally, makes the following
representations and warranties to the Target and the Shareholder with the
intention that the Target and the Shareholder may rely upon the same, and
acknowledges that the same are true and correct and shall be true and correct at
the Effective Time:
(a) ORGANIZATION, POWER, ETC. Each member of the Rock of Ages Group is
a corporation, existing and in good standing under the laws of its respective
state of incorporation. Each member of the Rock of Ages Group has all requisite
corporate power and authority to own and lease its respective properties and to
carry on the business in which it is presently engaged (herein sometimes
referred to as the "Business" of that Group member or members or as the
"Businesses" of the Rock of Ages Group). Each member of the Rock of Ages Group
to the best of its knowledge is registered to do business in each state where
the nature of its business and activities or the location of its assets or
employees makes such registration necessary. A list of the Acquiror's direct and
indirect subsidiaries is attached as EXHIBIT 5.2(A).
(b) ACQUIROR COMMON STOCK. The authorized capital stock of Acquiror
will, subsequent to the effective time of the Prior Merger, consists of
20,000,000 shares of voting common stock and 1,000,000 shares of serial
preferred stock, and after the effective time of the Prior Merger and prior to
the Effective Time, 7,000,000 shares of voting common stock will be issued and
outstanding and zero (0) shares of the Serial Preferred Stock will be issued and
outstanding. All stock of Acquiror, including specifically the Acquiror Common
Stock to be issued in the merger, shall at the Effective Time be duly
authorized, validly issued, fully paid and non-assessable.
(c) CORPORATE AUTHORITY. The execution, delivery and performance of
this agreement by each member of the Rock of Ages Group and consummation by them
of the transactions contemplated herein have been duly authorized by all
necessary corporate action and this agreement constitutes the legal, valid and
binding obligation of each member of the Rock of Ages Group in accordance with
its terms.
-5-
<PAGE> 6
(d) BINDING NATURE AND EFFECT OF AGREEMENT. The execution, delivery
and performance of this agreement by each member of the Rock of Ages Group and
consummation by each of them of the transactions contemplated herein do not, to
the best of their knowledge, require the consent, waiver, approval, license or
authorization of any person or public authority which will not be obtained prior
to or at the Effective Time; to the best of the Rock of Ages Group's knowledge,
after due inquiry, this agreement does not violate, with or without the giving
of notice and/or the passage of time, any provision of law applicable to the
Rock of Ages Group and does not conflict with or result in a breach or
termination of any provision of, or constitute a default in or under, or result
in the creation of any lien, charge or encumbrance upon any of the property or
assets of the Rock of Ages Group pursuant to any corporate charter provision,
bylaw, mortgage, deed of trust, indenture or other agreement or instrument, or
any order, judgment, and, to the best of the Rock of Ages Group's knowledge,
after due inquiry, any decree, statute, regulation or any other restriction of
any kind or character to which the Rock of Ages Group is a party or by which the
Rock of Ages Group or any of its assets and properties are bound.
(e) FINANCIAL STATEMENTS. Acquiror has furnished to the Target and to
the Shareholder comparative consolidated balance sheets and income statements of
Acquiror and Rock of Ages Corporation as of December 31, 1995, as of December
31, 1996 and projected as of December 31, 1997 for the purposes (the foregoing
financial data shall be collectively referred to as the "Financial Statements"
and are attached hereto as EXHIBIT 5.2(e). The 1997 Financials will be impacted
by the proposed transactions. The Financial Statements were furnished to Target
and Shareholders solely for the purposes set forth therein.
(f) TAX MATTERS. The Rock of Ages Group has duly filed with the
appropriate federal, state and local governmental agencies, and all foreign
countries and political subdivisions thereof, all Returns (as defined in Section
5.3(e)(i) hereof) required to be filed and has paid in full all Taxes (as
defined in Section 5.3(e)(xiii) hereof), assessments or deficiencies shown to be
due on such Returns or claimed to be due by any taxing authority and all such
Returns as filed or as amended or to be amended prior to the Effective Time
accurately and completely report the Taxes due to any such taxing authority. The
Rock of Ages Group has not executed or filed with the Internal Revenue Service
or any other taxing authority (domestic or foreign) any agreement extending the
period for assessment or collection of any Taxes. The Rock of Ages Group is not
a party to any pending action or proceeding nor, to the best of its knowledge,
is any action or proceeding threatened by any governmental authority for
assessment or collection of Taxes, and no claim for assessment or collection of
Taxes has been asserted against it. The provisions for Taxes shown in the
Financial Statements (if any) are and will be adequate to cover the respective
liabilities of the Rock of Ages Group as of the Effective Time for all Taxes of
the Rock of Ages Group.
(g) TITLE TO ASSETS, ABSENCE OF LIENS AND ENCUMBRANCES. The Rock of
Ages Group has good and marketable title to all of its assets, and, except as
set forth in the Financial Statements, such title is free and clear of all
liens, claims and encumbrances and rights of other parties relating to its
assets or its business.
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(h) LITIGATION. Except as set forth on EXHIBIT 5.2(h) the Rock of Ages
Group has not been notified of, and no member of said Group is a party to, any
actions, suits, proceedings or investigations (including any environmental,
building or safety investigation) pertaining to their assets or Businesses; nor
does the Rock of Ages Group have any knowledge of, nor reasonable grounds to
have knowledge of, any claim or state of facts which may lead to, or constitute
a threat of, any material investigation, claim, proceeding, or litigation,
against the Rock of Ages Group or their assets or Businesses. There are no
orders, judgments or decrees of any court or governmental agency relating to the
Rock of Ages Group which would prevent, impede or make illegal the consummation
of the transactions contemplated herein or which would have a material adverse
effect upon a member of the Rock of Ages Group.
(i) LABOR CONTROVERSIES. To the best of the Rock of Ages Group's
knowledge, there are no material controversies between any member of the Rock of
Ages Group and any of its employees, no material unresolved labor practice
proceedings or disputes and no material labor arbitration proceedings pending or
threatened, and there are no organizational efforts presently being made or, to
the best of the Rock of Ages Group's knowledge, after due inquiry, threatened
involving any of the Rock of Ages Group members' non-union employees. The
members of the Rock of Ages Group have complied in all material respects with
all federal, state and local laws and orders relating to the employment of
labor, and all laws governing wages, hours, collective bargaining, the payment
of social security, withholding and similar taxes, equal employment opportunity,
employment discrimination and immigration and naturalization; and no member of
the Rock of Ages Group is liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing. There is no claim of
employment discrimination or sexual harassment pending or, to the best of the
Rock of Ages Group's knowledge, after due inquiry, threatened against it, or any
strike, dispute, slowdown or stoppage pending or, to the best of the Rock of
Ages Group's knowledge, threatened against or involving it.
(j) PATENTS, TRADEMARKS, ETC. No one has made or, to the best of the
Rock of Ages Group's knowledge, after due inquiry, threatened to make any claims
that any member of the Rock of Ages Group has wrongfully used or appropriated,
or infringed upon any patent, patent license, trade name, trademark,
servicemark, brandmark, brand name, copyright, know-how, trade secret or other
proprietary or trade rights of any third party. No director, officer,
shareholder or employee of any member of the Rock of Ages Group owns or has
owned, directly or indirectly, in whole or in part, any patents, trademarks,
trade names, servicemarks, brandmarks, brand names, copyrights, registrations or
applications thereof or interests therein which any member of the Rock of Ages
Group has used or is using or the use of which is necessary for their respective
Businesses.
(k) BOOKS AND RECORDS. The books, records and working papers of the
members of the Rock of Ages Group, to the extent such books and records relate
to their Businesses, are in all material respects complete and correct, have
been maintained in
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accordance with sound business practices, and accurately reflect the basis for
the financial condition and results of operations of the members of the Rock of
Ages Group.
(l) PERMITS, AUTHORIZATIONS, ETC. The members of the Rock of Ages
Group have all approvals, authorizations, consents, licenses, orders and other
permits of all governmental agencies, whether federal, state or local,
reasonably required to permit the operation of their Businesses as heretofore
and as presently conducted, and all of the same will survive the consummation of
the transactions contemplated by this agreement. The Rock of Ages Group has not
received any written notice of any license or permit which will have to be
acquired in the future in order for their Businesses to be operated by any
member thereof as heretofore and presently conducted.
(m) COMPLIANCE WITH APPLICABLE LAW. The members of the Rock of Ages
Group, have not received any written notice that they are in material violation
of any foreign or domestic (federal, state or local) law, ordinance, regulation,
order or requirement including without limitation Environmental Laws (as defined
in EXHIBIT 5.2(m)) relating to their Businesses. None of the Rock of Ages Group
have received any written notice that they or their assets used in the operation
of the Businesses of each member of the Rock of Ages Group are in violation of
any state and local building, zoning, subdivision, land use, Environmental Laws
and other laws, ordinances and regulations. There are no federal, state,
municipal, public zoning or other restrictions that will prevent the utilization
of any property owned or leased by the members of the Rock of Ages Group in
connection with their Businesses for the purposes presently used, and there are
no condemnation proceedings pending or, to the best of their knowledge,
threatened against any such property.
(n) EMPLOYEE PLANS. The Rock of Ages Group will make made available
upon request for examination by Target and Shareholder true, correct and
complete copies of:
(i) the most recent Internal Revenue Service determination letter
relating to each of the Rock of Ages Group's pension, profit-sharing,
stock bonus or other deferred compensation arrangements, if any, for
which a letter was obtained except for any multi-employer plans
sponsored by any number of the Rock of Ages Group, (each a "Plan" and
collectively the "Plans");
(ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedules of each Plan sponsored by the Rock of Ages
Group with respect to which the same are required, as filed pursuant
to applicable law; and
(iii) all plan documents, as amended to date, summary plan
descriptions and summaries of material modifications with respect to
each Plan sponsored by a member of the Rock of Ages Group, as well as
the most recent financial statements of each of such plans.
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<PAGE> 9
With respect to each of such Plans as to which an Annual Report (Form 5500
series) is required to be filed, no liabilities as of the date of such Annual
Report exist unless specifically referred to in the most recent such Annual
Report, and no material change has occurred with respect to the matters covered
by the last Annual Report since the date thereof. The Rock of Ages Group does
not know, nor have any reasonable grounds to know, of any "prohibited
transaction," as such term is defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended, ("ERISA") and Section 4975 of the Code,
which has been engaged in by any member of the Rock of Ages Group or by any Plan
sponsored by any member of the Rock of Ages Group, any trust created thereunder
or any trustee, administrator or other fiduciary thereof, or which would subject
such Plan or any such entity, or any party dealing with such Plan or any such
trust, to the sanctions imposed by ERISA or the tax on prohibited transactions
imposed by Section 4975 of the Code. There are no actions, suits or claims
pending or, to the best of the Rock of Ages Group's knowledge, after due
inquiry, threatened against any of the Plans or any administrator or fiduciary
thereof. Neither any of the Plans nor any said trust have incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA or Section 412(a) of the Code (whether or not waived), since the Effective
Time of ERISA. The terms and operation of each of the Plans have complied to the
extent required with the provisions of Section 401(a) of the Code and with
ERISA, and all reports and notices required by ERISA or the Code have been duly
filed or given. The Rock of Ages Group shall make available for examination by
Target and Shareholder a list of all of the Rock of Ages Group's Plans subject
to Title IV of ERISA and all trusts created thereunder which have been
terminated, and all "reportable events," as that term is defined in Section 4043
of ERISA, if any. Except as may be specified in Rock of Ages Group Disclosure
Schedule hereto, none of the Rock of Ages Group's Plans and no such trust has
been terminated, nor has any such "reportable event" occurred with respect to
any such as a share of common stock of Acquiror. Plans since the effective date
of ERISA. The present value, on a plan termination basis, of all benefits
accrued under each Plan sponsored or contributed to by a member of the Rock of
Ages Group and subject to Title IV of ERISA did not, as of the most recent
valuation date, exceed the fair market value of the assets of such plan as of
such date.
(o) INVENTORY. All of the inventory of each member of the Rock of Ages
Group consists of materials of a quality and quantity usable and salable in
accordance with such member's normal pricing and sales practices.
(p) LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. Prior to the
execution of this agreement or concurrently herewith, the Rock of Ages Group
will deliver on the written request of Target or Shareholder a true and complete
list, which list shall be updated and amended as of the Closing Date if
requested, setting forth the following:
(i) all material intellectual property and all other material
proprietary information owned by Rock of Ages Group members, and
copies of all other material agreements to which Rock of Ages Group
members are parties which relate to any material proprietary rights
affecting their assets;
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<PAGE> 10
(ii) all policies of insurance insuring the Rock of Ages Group's
assets; and
(iii) all material contracts, agreements, leases, understandings
and commitments to which members of the Rock of Ages Group are a
party, or to which any of their assets are subject.
True and complete copies of all documents referred to in such list or will be
provided to Target and Shareholder and their counsel upon their request as part
of Target's due diligence. All such material contracts, agreements, rights,
leases, obligations and commitments are valid and enforceable in accordance with
their respective terms, except as such enforceability may be affected by
bankruptcy or similar laws affecting the rights of creditors generally and by
general principles of equity, for the periods stated therein and there is not,
to the Rock of Ages Group's knowledge, under any of them any existing default or
event of default or any event which with notice and/or lapse of time would
constitute a default.
(q) INDUSTRY AND GOVERNMENTAL EVENTS. The Rock of Ages Group is not
aware of any future events, loss of customers or suppliers that may materially
affect them and/or their Businesses and financial affairs either prior to or
subsequent to the Effective Time. The Rock of Ages Group has received no written
notice of any change or any pending or contemplated condemnation or change of
zoning, subdivision, land use, environmental or other statutes, or regulations
or court or administrative rulings or other governmental action affecting the
Rock of Ages Group.
(r) NO DEFAULTS. There currently are no defaults by the Rock of Ages
Group or acts or events which, with the passage of time or giving of notice, or
both, could become defaults by them under any indebtedness, indenture, mortgage,
deed of trust, security deed, security agreement or other instrument.
(s) ACCURACY AND OMISSIONS. None of the information and documents
furnished or to be furnished or made available for inspection by the Rock of
Ages Group pursuant to the provisions of this agreement is or will be false or
misleading, or contains or will contain any material misstatement of fact or
omits or will omit to state any material fact required to be stated to make the
statements therein not misleading.
5.3 REPRESENTATIONS AND WARRANTIES OF TARGET AND SHAREHOLDER. Target and
Shareholder, jointly and severally, make the following representations and
warranties to each member of the Rock of Ages Group, with the intention that
they may rely upon the same and acknowledge that the same are true and correct
and shall be true and correct at the Effective Time:
(a) ORGANIZATION, POWER, ETC. Each member of the Target Group (as
hereinafter defined) is a corporation existing and in good standing under the
laws of the state of incorporation. Each member of the Target Group has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business (hereinafter the
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<PAGE> 11
business of each member of the Target's Group is sometimes referred to as its
"Business" and all their businesses are sometimes collectively referred to as
the "Businesses"). The copies of Articles of Incorporation and By-Laws, as
amended to date of each member of the Target Group, which have been delivered by
Target to the Rock of Ages Group, are complete and correct. Target owns fifty
percent (50%) of all of the issued and outstanding capital stock of: (i)
Pennsylvania Granite Corp., a Pennsylvania corporation (herein referred to as
"Pennsylvania") and Pennsylvania owns one hundred percent (100%) of the issued
and outstanding capital stock of Carolina Quarries, Inc., a Georgia corporation,
(herein sometimes referred to as "Carolina"); (ii) Southern Mausoleums, Inc, a
Georgia corporation (herein sometimes referred to as "Mausoleum"); (iii) Caprice
Blue Quarry, Inc., a Georgia corporation (herein sometimes referred to as
"Caprice"); and (iv) Autumn Rose Quarry, Inc., a Georgia corporation (herein
sometimes referred to as "Autumn") (herein Pennsylvania, Carolina, Mausoleum,
Caprice and Autumn are collectively referred to as the "Joint Venture
Companies"). Shareholder on June 13 completed a merger with its parent
corporation named Keystone Memorials, Inc., a Georgia corporation (herein
sometimes referred to as "KMI") and is the surviving corporation of that merger.
Target and the Joint Venture Companies are herein sometimes collectively
referred to as the "Target Group". Other than the Joint Venture Companies,
Target has no subsidiaries and other than Target, Shareholder has no
subsidiaries. To the best of the Shareholder and Target's knowledge, after due
inquiry, each of the Joint Venture Companies are registered to do business in
each state where the nature of its business activities or the location of its
assets or employees makes such registration necessary.
(b) BINDING NATURE, EFFECT OF AGREEMENT AND AUTHORITY. Except as set
forth on Target's Disclosure Schedule, the execution, delivery and performance
of this agreement by Target and Shareholder and consummation by each of them of
the transactions contemplated herein do not and will not (i) require the
consent, waiver, approval, license or authorization of any person or public
authority which will not be obtained prior to or at the Effective Date; (ii) to
the best of Target and Shareholder's knowledge, after due inquiry, violate, with
or without the giving of notice and/or the passage of time, any provision of law
applicable to Shareholder or any member of the Target Group and does not
conflict with or result in a breach or termination of any provision of, or
constitute a default or violation under, or result in the creation of any lien,
charge or encumbrance upon any of the property or assets of Shareholder or any
member of the Target Group pursuant to, any corporate charter provision, bylaw,
mortgage, deed of trust, indenture or other agreement or instrument, or any
order or judgment, or, to the best of their knowledge, after due inquiry, any
decree, statute, regulation or any other restriction of any kind or character,
to which Shareholder or any member of the Target Group are or were a party or by
which Shareholder or any member of the Target Group or any of their assets and
properties are bound. The execution, delivery and performance of this agreement
by Target and Shareholder and consummation by them of the transactions
contemplated herein have been duly authorized by all necessary corporate actions
(including without limitations afforded in this agreement and the merger by
requisite actions of the sole shareholder of Target) and this agreement as
constitutes the legal, valid and binding obligation of each target in accordance
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<PAGE> 12
with its terms and constitutes the legal, valid and binding obligation of
Shareholder in accordance with its terms.
(c) OUTSTANDING SECURITIES. The authorized capital stock of Target
consists of one million (1,000,000) shares of no par value common stock (the
"Target Common Stock"), of which five hundred twenty-six thousand eight hundred
eighty-two (526,882) shares are duly issued and outstanding, fully paid and
non-assessable, Shareholder presently owns five hundred twenty-six thousand
eight hundred eighty-two (526,882) duly issued and outstanding shares being all
of the issued and outstanding shares of capital stock of Target; and no other
person or entities own Target Common Stock or any securities convertible into
such stock and no warrants, options or other rights to purchase any shares of
such stock are issued and outstanding and there are no agreements in existence
under which any such stock or any such warrants, options or rights may be issued
and no shares of such stock are held in Target's treasury. Shareholder has good
and marketable title to all Shareholder's Target Common Stock, free and clear of
all pledges, adverse claims, liens, charges or encumbrances of any kind,
including, but not limited to, any claims of any former or present shareholders
of Target. Except as specifically disclosed in Target's Disclosure Schedule,
there is no other Target class of stock, common or preferred, authorized or
issued, and there are no options, warrants, calls, rights, commitments or any
agreements of any character obligating Target or the Shareholder to issue, sell
or otherwise dispose of or, except as set forth herein, redeem, purchase or
otherwise acquire any shares of Target Common Stock or any other class of
capital stock. All of the outstanding shares of Target Common Stock are duly
authorized, validly issued, fully paid and non-assessable. There are no voting
trusts or other agreements or understandings with any other entity concerning
the Target Common Stock to which the Shareholder or Target or any other person
or entity are a party the authorized, issued, and outstanding capital of each of
the Joint Venture Companies is set forth in Sections 5.3(c) of the Target
disclosure schedules. Target owns fifty percent (50%) of all of the issued and
outstanding capital stock of each of the Joint Venture Companies, except for
Carolina, and Pennsylvania owns all of the issued and outstanding capital stock
of Carolina, all of said capital stock is duly issued and outstanding, fully
paid and non-assessable; there are no persons or entities which own any
securities convertible into such capital stock and no warrants, options or other
rights to purchase any shares of such capital stock are issued and outstanding;
there are no agreements in existence under which any such capital stock or any
such warrants, options or rights may be issued or sold, redeemed, purchased or
otherwise acquired (other than this agreement); and no shares of such stock are
held in the treasury of any Joint Venture Company. Target has good and
marketable title to all its capital stock in the Joint Venture Companies, except
for Carolina, and Pennsylvania has good and marketable title to all of the
capital stock of Carolina, in each case free and clear of all pledges, adverse
claims, liens, agreements, charges or encumbrances of any kind, including, but
not limited to any claims of former or present shareholders; there is no class
of capital stock in the Joint Venture Companies other than the class of stock
currently issued and outstanding to Target and Pennsylvania respectively, and
there are no agreements, commitments, options, warrants, calls or rights in
existence obligating the Joint Venture Companies to issue any class of capital
stock other than the class currently issued.
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(d) FINANCIAL STATEMENTS. Target has furnished to the Rock of Ages
Group a true and complete balance sheet of Target's predecessor, Keystone
Memorials, Inc. as of December 31, 1996 and the related statements of
operations, stockholders equity and cash flows each dated as of December 31,
1996, including in each case the notes thereto, and similar financial statements
for its fiscal years 1993 to 1995. (the foregoing financial data shall be
collectively referred to as the "Target Financial Statements" and are attached
hereto as EXHIBIT 5.3(d)). The balance sheet dated as of December 31, 1996 (the
"Balance Sheet Date") makes full and adequate provision for all direct and
indirect material obligations and liabilities (fixed or contingent) as of such
date and Target and Target's predecessor has no direct or indirect material
obligation or liability (fixed or contingent) not reflected or reserved against
on such balance sheet. The Target Financial Statements, taken as a whole, fairly
and accurately present the financial position and results of operations of
Target's predecessor, in all material respects, as of the dates and for the
periods indicated and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis. Target has also furnished
to Acquiror its audited balance sheet of Target as of April 30, 1997 and the
audited related statement of operations for the period then ended and the notes
related thereto (the "Target Audited Financial Statements"). The Target Audited
Financial Statements are materially complete and correct, taken as a whole,
fairly present the consolidated financial position and results of operations of
Target in all material respects, as of the date and for the period indicated and
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis except as may be stated in the notes thereto.
Except as disclosed in the Target Disclosure Schedule, elsewhere herein or in
the Target Audited Financial Statements, there have been no material changes
(other than in the ordinary course of business) in its said obligations and
liabilities since April 30, 1997. Target has furnished to the Rock of Ages Group
the balance sheets dated as of December 31, 1996 or s of the most recent fiscal
year end and the related statements of operations, stockholders equity and cash
flows for the Joint Venture Companies listed on EXHIBIT 5.3(d) (the "JV
Financial Statements"). The most recent balance sheets for each of said
corporations make full and adequate provision for all direct and indirect
material obligations and liabilities (fixed or contingent) as of their date and
said corporations have no direct or indirect material obligation or liability
(fixed or contingent) not reflected or reserved against on said balance sheets.
The JV Financial Statements, taken as a whole, fairly and accurately present the
financial position and results of operations of said corporations, in all
material respects, as of the dates and periods indicated and have been prepared
on a consistent basis except for Pennsylvania, in which case they were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis. Target has also furnished the Rock of Ages Group the Joint
Venture Companies' unaudited internally generated balance sheets as of May 31,
1997 and the Joint Venture Companies' unaudited internally generated related
statements of operations for the period then ended (the "JV Companies May
Financial Statements"). Subject to year end adjustments, the JV Companies May
Financial Statements are materially complete and correct, taken as a whole,
fairly present the financial position and results of operations of each said
corporation in all material respects, as of the date and for the period
indicated and have been prepared on a consistent basis, except for Pennsylvania,
in which case they were prepared in accordance
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with generally accepted accounting principles applied on a consistent basis.
Except as disclosed in the Target Disclosure Schedule, elsewhere herein or in
the JV Companies May Financial Statements, there have been no material changes
(other than in the ordinary court of business) in each said corporation's
obligations and liabilities since the date of the JV Financial Statements.
(e) TAX MATTERS. With respect to Taxes (as defined in Clause (xiii)
hereof):
(i) Each member of the Target Group has filed, within the time
and in the manner prescribed by law, all returns, declarations,
reports, estimates, information returns and statements ("Returns")
required to be filed under federal, state, local or any foreign laws
by each such member, and all such Returns are true, correct and
complete in all material respects.
(ii) Except as set forth in Target's Disclosure Schedule, each
member of the Target Group has within the time and in the manner
prescribed by law, paid (and until the Effective Time will, within the
time and in the manner prescribed by law, pay) all Taxes that are due
and payable.
(iii) Each member of the Target Group has established (and until
the Effective Time will establish) on their respective books and
records and on Target's Unaudited Financial Statements, reserves (to
be specifically designated as an increase to current liabilities) that
are adequate for the payment of all Taxes not yet due and payable.
(iv) There are no liens for Taxes upon the assets of any member
of the Target Group except liens for Taxes not yet due.
(v) No member of the Target Group has filed (and they will not
file prior to the Effective Time) any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of any "subsection (f) asset" (as such term
is defined in Section 341(f)(4) of the Code) owned by any such member.
(vi) Except as set forth in Target's Disclosure Schedule (which
shall set forth the type of return, date filed, and date of expiration
of the statute of limitations), no deficiency for any Taxes has been
proposed, asserted or assessed against any member of the Target Group
which has not be resolved and paid in full.
(vii) There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect
to any Taxes or Returns that have been given by any member of the
Target Group.
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(viii) Except as set forth in Target's Disclosure Schedule (which
shall set forth the nature of the proceeding, the type of return, the
deficiencies proposed or assessed and the amount thereof, and the
taxable year in question), no federal, state, local or foreign audits
or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Returns.
(ix) No member of the Target Group is a party to any tax-sharing
or allocation agreement, nor does Target or any such subsidiary owe
any amount under any such agreement.
(x) No amounts payable under the Plans (as defined in Section
5.3(m)) will fail to be deductible for federal income tax purposes by
virtue of Section 2808G of the Code.
(xi) Each member of the Target Group has complied (and until the
Effective Time will comply) in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to
Sections 1441 or 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed
by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and
paid over under all applicable laws.
(xii) No member of the Target Group has ever been (nor has any
liability for unpaid Taxes because any of them once was) a member of
an "affiliated group" within the meaning of Section 1502 of the Code
during any part of any consolidated return year within any part of
which year any corporation other than Target, Missouri Red or Missouri
was also a member of such affiliated group.
(xiii) For purposes of this agreement, "Taxes" shall mean all
taxes, charges, fees, levies or other assessments of whatever kind or
nature, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated,
severance, stamp, occupancy or property taxes, customs duties, fees,
assessments or charges of any kind whatsoever (together within any
interest and any penalties, additions to tax or additional amounts)
imposed by any taxing authority (domestic or foreign) upon or payable
by the party in question or any subsidiary thereof.
(xiv) Target has no liability for any Taxes of Shareholder or
Missouri nor will Target have any such liability in the future.
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(f) TITLE TO ASSETS, ABSENCE OF LIENS AND ENCUMBRANCES. Target and
each of the Joint Venture Companies have good and marketable title to all of
their respective assets, and except as set forth in the Financial Statements or
on the Target Group Disclosure Schedule, such title is free and clear of all
liens, claims and encumbrances and rights of other parties relating to its
assets or its Business. EXHIBIT 5.3(f) sets forth an accurate and complete
description of all of Target and each Joint Venture Company's real estate and
interests therein ("Target Group's Realty"). Target and each Joint Venture
Company owns or leases all assets and property required to operate its Business
in the ordinary course and to the extent any thereof are leased, EXHIBIT 5.3(f)
sets forth the terms of such lease and the other parties thereto, except leases
which in the aggregate do not call for lease payments in excess of $1,000 per
year. No director, officer, shareholder, or employee of Shareholder, Target or
the Joint Venture Companies, or any relative of any of them, owns or has owned,
directly or indirectly, in whole or in part, or leases or has leased, to
Shareholder, Target or the Joint Venture Companies any asset which Target or the
Joint Venture Companies uses or has used or the use of which is necessary for
their Businesses.
(g) LITIGATION. Except as set forth in Target's Disclosure Schedule,
Target has not been notified of, and none of Shareholder, Target or the Joint
Venture Companies are a party to, any actions, suits, proceedings or
investigations (including any environmental, building or safety investigation)
pertaining to them or their assets or Businesses, nor does Shareholder or Target
have any knowledge of, nor reasonable grounds to have knowledge of, any claim or
state of facts which may lead to, or constitute a threat of, any investigation,
claim, proceeding, or litigation, relating to Target, Shareholder or any member
of the Target Group or their assets or Business. There are no orders, judgments
or decrees of any court or governmental agency relating to Shareholder or any
member of the Target Group, which would prevent, impede or make illegal the
consummation of the transactions contemplated herein or which would have a
material adverse effect on Target, Shareholder or the Joint Venture Companies.
(h) LABOR CONTROVERSIES. Target and the Joint Venture Companies are
parties to certain collective bargaining agreements, labor agreements,
affirmative action programs and other agreements and programs affecting their
employees all of which are listed on EXHIBIT 5.3(h) and copies of which are in
writing have been delivered to the Rock of Ages Group. To the best of Target's
knowledge, there are no material controversies between Target or the Joint
Venture Companies and any of their employees, no material unresolved labor
practice proceedings or disputes and no material labor arbitration proceedings
pending or threatened, and there are no organizational efforts presently being
made or, to the best of Target's knowledge after due inquiry, threatened,
involving any of Target's or any of the Joint Venture Companies' non-union
employees. Target and each of the Joint Venture Companies are in compliance with
all federal, state and local laws and orders relating to the employment of
labor, and all laws governing wages, hours, collective bargaining, the payment
of social security, withholding and similar taxes, equal employment opportunity;
employment discrimination and immigration and naturalization, and none of them
is liable for any arrears of wages or any taxes or penalties for failure to
comply with
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any of the foregoing. There is no claim of employment discrimination or sexual
harassment pending or to the best of the Target's and Shareholder's knowledge,
after due inquiry, threatened against Shareholder, Target, or any of the Joint
Venture Companies or any of their officers, directors and employees nor any
strike, dispute, slowdown or stoppage pending or, to the best of Target's
knowledge, threatened against or involving any of them.
(i) PATENTS, TRADEMARKS, ETC. No one has made or, to the best of the
Target's knowledge, after due inquiry, threatened to make any claims that Target
or any of the Joint Venture Companies have wrongfully used or appropriated or
infringed upon, any patent, patent license, trade name, trademark, servicemark,
brandmark, brand name, copyright, know-how, trade secret or other proprietary or
trade rights of any third party. No director, officer, shareholder or employee
of Shareholder, Target or any of the Joint Venture Companies owns or has owned,
directly or indirectly, in whole or in part, any patents, trademarks, trade
names, servicemarks, brandmarks, brand names, copyrights, registrations or
applications thereof or interests therein which Target and the Joint Venture
Companies have used or are using or the use of which is necessary for their
Businesses.
(j) BOOKS AND RECORDS. The financial books, records and working papers
of Target are to the best of Target's knowledge, in all material respects
complete and correct, have been maintained in accordance with sound business
practices, and accurately reflect the basis for the financial condition and
results of its operations as set forth in the financial statements described in
Section 5.3(d) above. Each of the Joint Venture Companies maintains financial
books, records and working papers which are in all material respects complete
and correct, have been maintained in accordance with sound business practices
and accurately reflect the financial condition and results of their operations
as set forth in the financial statements described in Section 5.3(d) above.
(k) PERMITS, AUTHORIZATIONS, ETC. Target and each of the Joint Venture
Companies have all approvals, authorizations, consents, licenses, orders and
other permits of all governmental agencies, whether federal, state or local,
reasonably required to permit the operation of their Businesses as heretofore
and as presently conducted, and all of the same will survive the consummation of
the transactions contemplated by this agreement. Target has not received any
written notice of any license or permit which will have to be acquired in the
future in order for its Business or the Joint Venture Companies' Businesses to
be operated as heretofore and as presently conducted. Set forth in EXHIBIT
5.3(k) is a list of all licenses, permits and approvals necessary for Target to
conduct its Business as presently being conducted, including all licenses and
permits as are required by any federal, state and local law, rule and
regulation.
(l) COMPLIANCE WITH APPLICABLE LAW. Shareholder and Target have not
received any written notice that they are and none of the Joint Venture
Companies have received any written notice that they are in violation of any
foreign or domestic (federal, state or local) law, ordinance, regulation, order
or requirement including Environmental Laws, relating to their Businesses.
Neither Target nor any of the Joint Venture Companies
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have received any written notice that, Target Group's Realty or their assets are
in violation of any state and local building, zoning, subdivision, land use,
Environmental Laws and other laws, ordinances and regulations. Neither
Shareholder, Target nor any of the Joint Venture Companies have received any
written notice of any federal, state, municipal, public zoning or other
restrictions that will prevent the utilization of any property owned or leased
by them for the purposes presently used, and there are no condemnation
proceedings pending or, to the best of its knowledge, threatened against any
such property. Target is not in violation of any foreign or domestic (federal,
state, or local) law, ordinance, regulation, order or requirement including
environmental laws relating to its business.
(m) EMPLOYEE PLANS. Target has heretofore delivered to the Rock of
Ages Group true, correct and complete copies of:
(i) the most recent Internal Revenue Service determination letter
relating to each of Target's and each Joint Venture Company's pension,
profit-sharing, stock bonus or other deferred compensation
arrangements, if any, listed in EXHIBIT 5.3(m) hereto for which a
letter was obtained except for any multi-employer plans sponsored by
any of them (each a "Plan" and collectively the "Plans");
(ii) the most recent Annual Report (Form 5500 series) and
accompanying schedules of each Plan currently sponsored by any of
them, with respect to which the same are required, as filed pursuant
to applicable law; and
(iii) all plan documents, as amended to date, summary plan
descriptions and summaries of material modifications and all plan
termination documentation with respect to each Plan and employee
welfare plan presently or in the past sponsored by Shareholder, Target
or any of the Joint Venture Companies, as well as the most recent
financial statements of each of such plans, except for the
multi-employer plans referred to below.
With respect to each of such Plans as to which an Annual Report (Form 5500
series) is required to be filed, no liabilities as of the date of such Annual
Report exist unless specifically referred to in the most recent such Annual
Report, and no material change has occurred with respect to the matters covered
by the last Annual Report since the date thereof. Target does not know, nor have
any reasonable grounds to know, of any "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, which has ever
been engaged in by Shareholder, Target or any of the Joint Venture Companies, or
by any Plan sponsored by Target, Shareholder or any such company, any trust
created thereunder or any trustee, administrator or other fiduciary thereof, or
which would subject such Plan or any such entity, or any party dealing with such
Plan or any such trust, to the sanctions imposed by ERISA or the tax on
prohibited transactions imposed by Section 4975 of the Code. There are no
actions, suits or claims pending or, to the best of
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Target's knowledge after due inquiry, threatened, against any of the Plans or
any administrator or fiduciary thereof. Neither any of the Plans nor any of said
trusts have incurred any "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA or Section 412(a) of the Code (whether or not
waived), since the Effective Time of ERISA. The terms and operation of each of
the Plans have complied to the extent required with the provisions of Section
401(a) of the Code and with ERISA, and all reports and notices required by ERISA
or the Code have been duly filed or given. Target shall deliver to the Rock of
Ages Group a list of all of Shareholder, Target and all the Joint Venture
Companies Plans subject to Title IV of ERISA and all trusts created thereunder
which have been terminated, and all "reportable events," as that term is defined
in Section 4043 of ERISA. Except as may be specified in EXHIBIT 5.3(m) hereto,
none of such Plans and no such trust has been terminated, nor has any such
"reportable event" occurred with respect to any such Plans since the effective
date of ERISA. The present value, on a plan termination basis, of all benefits
accrued under each Plan sponsored or contributed to by Shareholder, Target or
any of the Joint Venture Companies and subject to Title IV of ERISA did not, as
of the most recent valuation date, exceed the fair market value of the assets of
such Plan as of such date.
Shareholder, Target and the Joint Venture Companies have never been sponsors of,
and/or a contributing employer to, a multi-employer pension plan subject to the
provisions of Section 4201, ET SEQ., of ERISA; or if they have, they have never
incurred any withdrawal liability thereunder, nor will they incur any such
liability as a result of the consummation of any of the transactions
contemplated by this agreement; or if they will, Target will, at or prior to the
Closing Date, pay or otherwise satisfy such liability in full and/or establish
an escrow fund or secure a bond in an appropriate amount with respect to the
same with an escrow agent and/or a bonding company reasonably satisfactory to
the Rock of Ages Group and in a manner agreeable to applicable law. Neither
Shareholder, Target nor any of the Joint Venture Companies have ever been a
sponsor of, or a contributing employer to, a single employer pension plan
subject to the provisions of Section 4041, ET SEQ., of ERISA; nor have they ever
incurred any liability thereunder or under Section 4062, ET SEQ., of ERISA, nor
will any of them incur any such liability as a result of the consummation of any
of the transactions contemplated by this agreement; or if any of them will,
Target will, at or prior to the Closing Date, pay or otherwise satisfy such
liability in full and/or establish an escrow fund or secure a bond with respect
to the same as provided in the preceding sentence.
(n) INVENTORY. All of the inventory of Target and of each of the Joint
Venture Companies consists of materials of a quality and quantity usable and
salable in accordance with each corporation's normal pricing and sales
practices.
(o) LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. Prior to the
execution of this agreement or concurrently herewith, Target has delivered or
will deliver to the Rock of Ages Group a true and complete list (designated for
purposes of this agreement as EXHIBIT 5.3(o)), which list shall be updated and
amended as of the Closing Date, setting forth the following:
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(i) all intellectual property and all other proprietary
information owned by Target and each of the Joint Venture Companies,
and copies of all other material agreements to which Target and each
of the Joint Venture Companies are a party which relate to any
proprietary rights affecting their assets;
(ii) all policies of insurance insuring Target's and each of the
Joint Venture Companies' assets; and
(iii) all contracts, agreements, leases, understandings and
commitments to which Target and each of the Joint Venture Companies
are a party, or to which it or any of their assets are subject, except
those involving not more than $5,000 on an annual basis.
True and complete copies of all documents referred to in such list have been or
will be provided to the Rock of Ages Group and its counsel upon their request as
part of Rock of Ages Group's due diligence. All such documents, rights, leases,
obligations and commitments are valid and enforceable in accordance with their
respective terms, except as such enforceability may be affected by bankruptcy,
or similar laws affecting the rights of creditors generally and by general
principles of equity, for the periods stated therein and there is not, under any
of them any existing default or event of default or any event which with notice
and/or lapse of time would constitute a default.
(p) INDUSTRY AND GOVERNMENTAL EVENTS. Shareholder, Target and the
Joint Venture Companies are not aware of any future events, loss of customers or
suppliers, that may materially affect them or any of the Joint Venture Companies
and/or their Businesses and financial affairs either prior to or subsequent to
the Effective Date. Neither Shareholder nor Target has received any written
notice of any change or any pending or contemplated condemnation or change of
zoning, subdivision land use, environmental or other statutes, or regulations or
court or administrative rulings or other governmental action affecting Target
Group's Realty.
(q) NO DEFAULTS. Except as disclosed in Exhibit 5.3(q), for a certain
bank loan to Pennsylvania, there currently are no defaults by Shareholder,
Target or any of the Joint Venture Companies or acts or events which, with the
passage of time or giving of notice, or both, could become defaults by any of
them under any indebtedness, indenture, mortgage, deed of trust, security deed,
security agreement or other instrument.
(r) ACCURACY AND OMISSIONS. None of the information and documents
furnished or to be furnished or made available for inspection by Shareholder,
Target or any of the Joint Venture Companies pursuant to the provisions of this
agreement is or will be false or misleading, or contains or will contain any
material misstatement of fact or omits or will omit to state any material fact
required to be stated to make the statements therein not misleading.
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ARTICLE VI
PRE-MERGER AND POST MERGER COVENANTS
------------------------------------
6.1 CONDUCT OF TARGET'S BUSINESS PENDING CLOSING. For the period commencing
from and after the date hereof until the Effective Date or the earlier
termination of this agreement (hereinafter referred to as the "Interim Period"),
Shareholder and Target covenant and agree as follows:
(a) FULL ACCESS AND DUE DILIGENCE. Rock of Ages Group and its
respective agents and representatives (including legal counsel and accountants)
shall have full access during normal business hours, to inspect all properties,
books, records, contracts and documents of Target and each of the Joint Venture
Companies used in or associated with their Businesses and to all of their
executive employees (including the opportunity to meet with and discuss their
Businesses with such employees) and to otherwise conduct such due diligence (the
"Rock of Ages Group Due Diligence") regarding its examination of them, their
Business and financial affairs as the Rock of Ages Group may deem reasonably
necessary and appropriate; provided, however, that the Rock of Ages Group and
its representatives shall not unreasonably interfere with their operations; and
Target and each of the Joint Venture Companies shall furnish or cause to be
furnished to the Rock of Ages Group and its authorized representatives all
information with respect to their Businesses as the Rock of Ages Group or its
representatives may reasonably request. Furthermore, the Rock of Ages Group, its
agents and representatives, shall have the opportunity to inspect and test any
or all of Target's and each Joint Venture Company's equipment and properties as
it determines in its sole discretion, at any reasonable time, and from time to
time, up to the Closing Date provided that the Rock of Ages Group makes
reasonable efforts not to disrupt their Businesses and operations when
conducting such tests.
(b) BUSINESS IN THE ORDINARY COURSE. Except as specifically permitted
or required herein, during the Interim Period, Target's Business shall be
conducted in the ordinary course consistent with past practices. Except as
specifically permitted or required herein, it shall not enter into any contract
or commitment or engage in any transaction that could reasonably be anticipated
to (separately or in the aggregate) materially adversely affect the Merger
contemplated herein. If it desires to engage in any transaction not in the
ordinary course of business and such transaction involves consideration equal to
or greater than Ten Thousand Dollars ($10,000.00), unless such transaction is
necessary to the Merger, Target shall first obtain the prior written consent of
the Rock of Ages Group before entering into such transaction (which consent
shall not be unreasonably withheld).
(c) PRESERVATION OF ORGANIZATION. During the Interim Period, Target
(i) shall not make or voluntarily suffer any change in its Articles of
Incorporation or By-Laws; (ii) shall make a reasonable and diligent effort to in
the ordinary course of business and to the extent consistent with its reasonable
business judgment, preserve its Business intact; (iii)
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shall keep available, to the extent feasible, its present employees and
representatives; (iv) shall preserve its present relationships with its
suppliers, customers, governmental agencies, and others having business
relations with it; (v) shall not increase the compensation of any of its
employees or representatives or the rate of any commission that may be paid to
any such employee or representatives, nor will it make any promise or undertake
to increase such compensation or rate of commission without the prior written
consent of Acquiror; (vi) shall not issue any capital stock or warrants, options
or rights to purchase or acquire such stock nor incur any new indebtedness; and
(vii) shall not pay any dividends nor make any distribution on its capital
stock.
(d) NO DEFAULT. During the Interim Period, Target shall not breach any
contract, commitment or obligation to which it is a party.
(e) COMPLIANCE WITH LAWS. Target shall comply with all applicable
laws, rules, regulations and ordinances, as are required for the conduct of its
Business and the Merger.
(f) NO ENCUMBRANCES. Target shall not create, voluntarily suffer, or
permit to become effective any encumbrance of any kind upon its assets, except
as specifically authorized or contemplated by this agreement.
(g) NO DISPOSITION OF ASSETS. Target shall not transfer, sell,
abandon, destroy, or otherwise dispose of, or enter into any contract or
agreement to sell or otherwise transfer, any of its property or assets other
than in the ordinary course of business consistent with past practices.
(h) INSURANCE. Target shall keep all of its assets and properties
insured against any loss, either by fire, other casualty or theft to the extent
of present coverage under present enforceable policies of insurance coverage.
(i) TERMINATION OF EMPLOYEE PENSION BENEFIT PLANS. Prior to Closing
Target shall commence all requisite action to (a) terminate any employee pension
benefit plans (within the meaning of ERISA) sponsored by Target; and (b) upon
the written request of the Rock of Ages Group, withdraw from, or cease all
contributions to, any multiple-employer or multiemployer employee pension
benefit plans (within the meaning of ERISA) in which Target may participate or
to which it may contribute for the benefit of some or all of its employees; all
such action to be taken in accordance with the provisions of the respective
plans and of applicable law (including, without limitation, the Code and ERISA)
and in a timely manner.
(j) NO TERMINATION OF KEY EMPLOYEES. Target will not without the prior
written consent of Acquiror terminate the employment of any of its officers or
any of its other key employees.
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(k) CONTRIBUTION OF JOINT VENTURE COMPANY DEBT. Shareholder will cause
any amounts due, including without limitations, those totaling approximately
Seven Hundred and Eight Thousand Dollars ($708,000.00) to George T. Oglesby,
Jr., Oglesby Farms or KSGM, Inc. (collectively the "Lender"), by any of the
Joint Venture Companies to have been contributed by each of the Lenders to the
capital of the Joint Venture Company which owes the same to the Lender in
question all on or before the Closing Date.
Target will not agree to any actions by the Joint Venture Companies
which are described in subparagraphs (a) through (j) above, which if taken by
Target would cause Target to be in violation of said subparagraphs and Target
will use its reasonable best efforts to prevent each Joint Venture Company from
taking any actions or failing to take any actions which would violate said
subparagraphs as if each Joint Venture Company was bound thereby in the same
manner as Target is bound thereby.
6.2 REAL PROPERTY COVENANTS. During the Interim Period, Target will refrain
from:
(a) performing any grading or excavation, construction, or removal of
or from its real estate, or making any other material change or improvement upon
or about its real estate, without the consent of the Rock of Ages Group, other
than those required to bring the same into compliance with applicable laws,
rules or regulations, or as specifically provided herein;
(b) committing or allowing any third party to commit any waste or
nuisance upon its real estate; and
(c) violating or allowing any third party to violate any Environmental
Laws with respect to its real estate.
Target will not agree to any actions by the Joint Venture Companies
which are described in subparagraph (a) through (c) above, which if taken by
Target would cause Target to be in violation of said subparagraphs and Target
will use its reasonable best efforts to prevent each Joint Venture Company from
taking any actions or failing to take any actions which would violate said
subparagraphs as if each Joint Venture Company was bound thereby in the same
manner as Target is bound thereby.
6.3 CONDUCT OF THE ROCK OF AGES GROUP'S BUSINESS PENDING CLOSING. During
the Interim Period, Acquiror covenants and agrees as follows:
(a) FULL ACCESS AND DUE DILIGENCE. Target and Shareholder and their
agents and representatives (including legal counsel and accountants) shall have
full access during normal business hours, to inspect all material properties,
books, records, contracts and documents of the Rock of Ages Group used in or
associated with the Businesses and to all of its executive employees (including
the opportunity to meet with and discuss its
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Businesses with such employees) and to otherwise conduct such due diligence (the
"Target and Shareholder Due Diligence") regarding their examination of Rock of
Ages Group's Businesses and financial affairs as they may deem reasonably
necessary and appropriate, provided, however, that they and their
representatives shall not unreasonably interfere with Rock of Ages Group's
operations and Rock of Ages Group shall furnish or cause to be furnished to them
and their authorized representatives all information they may reasonably
request.
(b) BUSINESSES IN THE ORDINARY COURSE. Except as specifically
permitted or required herein, during the Interim Period, the Rock of Ages
Group's Businesses shall be conducted in the ordinary course consistent with
past practices. Except as specifically permitted or required herein, the Rock of
Ages Group shall not enter into any contract or commitment or engage in any
transaction that could reasonably be anticipated to (separately or in the
aggregate) materially adversely affect the Merger contemplated herein; provided,
however, that the Rock of Ages Group is specifically permitted (without the
prior consent of Target or Shareholder) to continue other mergers and
acquisitions, including without limitation the Prior Merger, the acquisition of
Childs & Childs Granite Company, Inc., C & C Granite Company, Inc. and the
capital stock of each Joint Venture Company not owned by Target and retail
monument dealers, (along with the Merger, collectively referred to as the
"Acquisitions"), to restructure and refinance its credit facilities with its
lenders, as necessary to consummate the Acquisitions, to pursue other debt and
equity financing it deems appropriate, , including without limitation, the IPO
(as hereinafter defined), and otherwise to engage in any transaction necessary
and appropriate to consummate the Acquisitions, including internal
reorganizations, asset dispositions, dividends, mergers, and recapitalizations
(all of the Acquisitions and the foregoing being herein sometimes, including
without limitation a possible public offering of its stock and securities,
referred to as the "Proposed Transactions").
(c) PRESERVATION OF ORGANIZATION. During the Interim Period the Rock
of Ages Group: (i) shall not make or voluntarily suffer any change in any of its
Articles of Incorporation or By-Laws except as necessary or convenient to effect
the Proposed Transactions; (ii) shall make a reasonable effort to in the
ordinary course of business and to the extent consistent with its reasonable
business judgment, preserve its Businesses intact; (iii) shall keep available,
to the extent, reasonably feasible, its present executive employees; and (iv)
shall use reasonable efforts to preserve Rock of Ages Group's present
relationships with its suppliers, customers, governmental agencies, and others
having business relations with the Rock of Ages Group.
(d) NO DEFAULT. The Rock of Ages Group shall not breach any contract,
commitment or obligation to which it is a party.
(e) COMPLIANCE WITH LAWS. The Rock of Ages Group shall comply with all
applicable laws, rules, regulations and ordinances, as are required for the
conduct of its Businesses and the Merger.
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(f) NO ENCUMBRANCES. The Rock of Ages Group shall not create,
voluntarily suffer, or permit to become effective any encumbrance of any kind
upon its assets, except as necessary or required to effect the Proposed
Transactions.
(g) NO DISPOSITION OF ASSETS. The Rock of Ages Group shall not
transfer, sell, abandon, destroy, or otherwise dispose of, or enter into any
contract or agreement to sell or otherwise transfer, any of its assets other
than in the ordinary course consistent with past practices, or except as
necessary or required to effect the Proposed Transactions.
(h) INSURANCE. The Rock of Ages Group shall keep all of its assets and
properties insured against any loss, either by fire, other casualty or theft, to
the extent of present coverage under present, enforceable policies of insurance
coverage.
6.4 REAL PROPERTY COVENANTS. During the Interim Period, the Rock of Ages
Group will refrain from:
(a) performing any material excavation, construction, or removal of or
from any real property, in which any member of the Rock of Ages Group owns any
interest (the "Rock of Ages Realty"), or making any other material change or
improvement upon the Rock of Ages Realty, without the consent of Target, other
than existing quarry operations in the ordinary course of business or as
required to bring the same into compliance with applicable laws, rules or
regulations;
(b) committing or allowing any third party to commit any waste or
nuisance upon the Rock of Ages Realty; and
(c) violating or allowing any third party to violate any Environmental
Laws with respect to the Rock of Ages Realty.
6.5 ACCESS TO AND INFORMATION CONCERNING REAL PROPERTY. Target and the Rock
of Ages Group shall, during the Interim Period, allow the other and the other's
agents access to each of their real property and Target will allow the Rock of
Ages Group access to the Target Realty during regular business hours upon
reasonable prior notice, for purposes of inspecting and testing the same or any
part thereof as the other shall reasonably request. Target and the Rock of Ages
Group agree to furnish to the other any and all information regarding ownership
of Rock of Ages Group Realty or Target Realty and their Businesses that the
other shall reasonably request from time to time. Each agrees to indemnify and
hold the other harmless from all claims, suits, damages, and losses arising from
the its inspection or testing of the said real property, which indemnity shall
survive termination of this agreement.
6.6 ENVIRONMENTAL AND ENGINEERING MATTERS. The Rock of Ages Group may,
prior to the Closing Date, perform whatever environmental and engineering tests,
searches or inspections of the Target Group's Realty which it desires to perform
and Target may do
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likewise with respect to the Rock of Ages Realty. In addition to any testing
which may be performed:
(a) Upon or prior to the execution of this agreement Acquiror shall
hire a certified environmental engineering firm at its own cost and expense
("Environmental Engineer"), to perform a Level I environmental audit of Target
Group's Realty and at its option a Level II environmental audit of Target
Group's Realty. Such Environmental Engineer shall address and certify his
environmental report to the Rock of Ages Group. If the report issued by the
Environmental Engineer recommends or requires further testing and/or the removal
or treatment of any Hazardous Material (as defined in EXHIBIT 5.2(m)), or if any
engineer hired by the Rock of Ages Group determines an environmental problem
exists on Target Group's Realty, or recommends further testing and/or the
removal or treatment of any Hazardous Material on any portion of Target Group's
Realty, such testing, removal, repair or treatment of Hazardous Material or the
correction of the environmental problem shall be at the sole cost and expense of
Target or the Joint Venture Company involved (the "Environmental Work"), and
shall be completed to the sole satisfaction of the Rock of Ages Group and its
engineers and financing institutions as evidenced by a report from an engineer
acceptable to them which indicates that the Hazardous Materials have been
brought into compliance with Environmental Laws, or the environmental problem
has been corrected. If Target or the Joint Venture Company involved fails to
perform the Environmental Work, to the satisfaction of the Rock of Ages Group
and its financing institutions, the Rock of Ages Group shall have the right to
terminate this agreement. Target shall use its best efforts to complete any of
its Environmental Work, and shall use its reasonable best efforts to cause any
Joint Venture Company involved to complete its Environmental Work, as
expeditiously as possible, but in any event, the Environmental Work shall be
completed within thirty (30) days from receipt of written notice from the Rock
of Ages Group that it requires the performance of Environmental Work.
Notwithstanding the foregoing, if the Environmental Engineer estimates that the
cost for completing the Environmental Work would be equal to or greater than Two
Hundred Thousand Dollars ($200,000.00), in the aggregate, including one-half
(1/2) of the cost of any work for the Joint Venture Companies, Target may by ten
(10) days prior written notice terminate this agreement without incurring any
obligation or liability to the Rock of Ages Group as a result of such
termination; provided, however that Target shall have no such right of
termination if a member of the Rock of Ages Group agrees in writing within ten
(10) days of receipt of Target's said notice to reimburse Target or the Joint
Venture Company involved for the portion of the Environmental Work exceeding Two
Hundred Thousand Dollars ($200,000.00).
(b) The Rock of Ages Group has previously had Level I environmental
audits conducted on the Rock of Ages Realty. The Rock of Ages Group will provide
Target with copies of the same upon Target's request.
6.7 Intentionally Left Blank.
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6.8 SECURITIES LAW COMPLIANCE.
(a) Acquiror shall promptly cause to be prepared and filed such
applications, forms, statements, if any, as are required under Federal
securities laws to cover the issuance of Acquiror Common Stock into which Target
Common Stock outstanding at the Effective Time of the Merger is to be converted.
(b) Acquiror will take any action required to be taken under
applicable state securities laws and Acquiror will also take action to secure
all necessary exemptions or clearances under all state securities laws
applicable to (i) the Merger and (ii) the issuance of Acquiror Common Stock
pursuant thereto.
(c) Acquiror will promptly deliver to Target copies of any filings
made by Acquiror pursuant to this Section 6.8.
(d) Target will take any action required to be taken under applicable
state securities laws and will promptly deliver to Acquiror copies of any
filings made by Target pursuant to this Section 6.8.
6.9 THIRD PARTY CONSENTS. Each party to this agreement shall use its best
efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and approvals from third parties or
governmental authorities necessary to consummate this agreement and the Plan of
Merger and the transactions contemplated hereby or thereby, including, without
limitation, any permits, authorizations, consents, waivers and approvals
required in connection with the Merger.
6.10 TARGET EMPLOYEES.
(a) Acquiror and Sub do not accept or assume the terms of any
collective bargaining agreements of Target. Acquiror and Sub do not, by reason
of this agreement, agree to hire any specified number or percentage of Target's
hourly or salaried work force.
(b) All hourly employees from whom applications will be solicited will
also be provided with a document setting forth the essential terms and
conditions of employment. Target will be provided with a copy of such document.
Sub will consider employing said employees under such terms and conditions of
employment. If applications acceptable to Sub are received from Target's
employees, offers of employment shall be extended on or about the Effective
Date.
(c) Sub shall, as soon as practical following the distribution of the
materials referred to in paragraph (b) above, make themselves available for
meetings and discussions with the current collective bargaining agent of
Target's employees (the "Union"), PROVIDED, HOWEVER, that such collective
bargaining agent agrees in writing that such meetings
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and discussions do not constitute recognition of the collective bargaining agent
as the bargaining representative for any prospective employees of Sub.
(d) If, as a result of processing applications under paragraph (b)
above, a majority of the employees to whom Sub extend offers of employment are
from Target's bargaining unit, Sub anticipates that said employees will come
within the jurisdiction of Sub's existing collective bargaining agreement.
ARTICLE VII
CONDITIONS TO COMPLETION OF CLOSING
-----------------------------------
7.1 CONDITIONS TO TARGET'S OBLIGATIONS. The obligation of Target under this
agreement to consummate the Merger is subject to the fulfillment of each of the
following conditions prior to the completion of the Closing, except to the
extent Target may, in its absolute discretion, waive anyone or more thereof, in
whole or in part:
(a) The representations and warranties by the Rock of Ages Group in
this agreement shall be true and correct in all material respects as of the
Closing, with the same force and effect as though such representations and
warranties had been made on the Closing Date, the Rock of Ages Group shall have
performed in all material respects all its obligations, covenants and agreements
set forth herein, the Rock of Ages Group shall not have breached any of its
covenants or agreements set forth herein, and Target shall have received a
certificate of an executive officer of Acquiror to such effect.
(b) There shall have been delivered to Target an opinion of counsel
for the Rock of Ages Group, reasonably satisfactory in form and substance to
counsel for Target, to the effect that Acquiror, Sub and the Joint Venture
Companies are corporations existing and in good standing under the laws of their
states of incorporation; that all necessary corporate proceedings of each member
of the Rock of Ages Group have been duly taken to authorize this agreement and
the transactions contemplated hereby; that this agreement has been duly executed
and delivered by each member of the Rock of Ages Group and constitutes their
respective legal, valid, and binding obligations; that the shares of Acquiror
Common Stock when delivered in the Merger pursuant to this agreement will be
duly authorized, validly issued, fully paid, and nonassessable shares of
Acquiror Common Stock; that this agreement does not, and the carrying out of the
transaction herein provided for will not, to the best of such counsel's
knowledge, violate any charter or other corporate restriction to which Acquiror
or Sub is subject or any other agreement or instrument to which they are a party
or by which they are bound.
(c) The Employment Agreements, substantially in the form attached as
EXHIBIT 4.1 shall be executed by Acquiror.
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(d) The Stock Subscription and Continuity of Interest Agreement
substantially in the form attached as EXHIBIT 4.2 shall be executed by Acquiror.
(e) Acquiror and Sub shall have delivered to Target Secretary's
Certificates having attached thereto copies of their Articles of Incorporation
and Bylaws, as amended to date and a list of their officers and directors.
(f) Any guaranties by Shareholder, Missouri and Keystone Granite,
Inc., a Georgia corporation ("Keystone Granite") and George T. Oglesby, Jr. of
any indebtedness of Target or any of the Joint Venture Companies indebtedness
shall have been released and discharged or provisions for the future release and
discharge thereof, satisfactory to Shareholder and George T. Oglesby, Jr., in
their sole discretion, shall have been made.
(g) All Schedules and Exhibits to be attached to their agreement were
attached to this agreement upon its execution or have been attached pursuant to
Section 10.11.
7.2 CONDITIONS TO THE ROCK OF AGES GROUP'S OBLIGATIONS. The obligation of
Acquiror under this agreement to consummate the merger are subject to the
fulfillment of each of the following conditions prior to the completion of the
Closing, except to the extent that Acquiror may, in its absolute discretion,
waive any one or more hereof, in whole or in part:
(a) The representations and warranties by Target and Shareholder shall
be true and correct, as of the Closing, with the same force and effect as though
such representations and warranties had been made on the closing, Target and
Shareholder shall have performed all their obligations, covenants and agreements
set forth herein, Target and Shareholder have not breached any of their
covenants or agreements set forth herein, and Acquiror shall have received
certificates from Target and Shareholder to such effect.
(b) There shall have been delivered to Acquiror an opinion of counsel
for Target and the Shareholder, reasonably satisfactory in form and substance to
counsel for the Rock of Ages Group, to the effect that:
(i) Target and the Joint Venture Companies are corporations duly
organized validly existing and in good standing under the laws of
their respective states of incorporation and are duly qualified to do
business as foreign corporations in any jurisdiction in which the
nature of their businesses would require such qualification; that this
agreement has been duly executed and delivered by Target and the
Shareholder and constitutes their legal, valid and binding
obligations, enforceable against Target and Shareholder in accordance
with its terms, that the capitalization of Target and of each of the
Joint Venture Companies are set forth in Section 5.3 and Section 5.3
of the Target Disclosure Schedule, respectively; that all outstanding
shares of Target
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and the shares of capital stock of the Joint Venture Companies to be
acquired by Acquiror in the Merger are duly authorized, validly
issued, fully paid and nonassessable, are free and clear of all liens,
claims, pledges, encumbrances, charges, options, proxies or
restrictions of any kind or nature, and upon consummation of the
transactions contemplated by this agreement, Acquiror will acquire
good, valid and marketable title to said shares, free and clear of all
liens, claims, pledges, charges, options, proxies or restrictions of
any kind or nature; and that this agreement does not, and the carrying
out of the transactions herein provided for will not, to the best of
such counsel's knowledge, violate or conflict with any charter or
other corporate restriction to which Target or any of the Joint
Venture Companies are subject, or any law or regulation applicable to
Target and Shareholder, or, to the best of Counsel's knowledge, any
agreement or instrument to which they or the Shareholder are a party
or by which they are bound:
(ii) Each member of the Target Group's capital stock has been
duly authorized, validly issued, and is fully paid and non-assessable,
this agreement and the transactions contemplated hereby do not
conflict with, breach, or constitute a default under, the
organizational documents of any member of the Target Group or any
corporate restrictions, contracts, laws or regulations applicable to
any member of the Target Group, the capital stock of which is being
acquired pursuant to this agreement, and no consents or approvals of
any governmental entity or other third party are required for the
valid execution, delivery or performance of this agreement or the
transactions contemplated by this agreement, and to counsel's best
knowledge, there is no pending or threatened litigation which would
have a material adverse effect on this agreement, the transactions
contemplated by this agreement, or would have a material adverse
effect on the business, operations, or financial condition of any
member of the Target Group.
(c) George T. Oglesby, Jr. shall have executed his Employment
Agreement substantially in the form attached as EXHIBIT 4.1(a);
(d) George T. Oglesby, III, shall have executed his Employment
Agreement substantially in the form attached as EXHIBIT 4.1(b);
(e) The Shareholder shall have executed the Stock Subscription and
Continuity of Interest Agreement substantially in the form attached as EXHIBIT
4.2.
(f) George T. Oglesby, Jr. and George T. Oglesby, III shall each have
executed his Acquisition Noncompete, Nonsolicitation and Nondisclosure
Agreements substantially in the forms thereof attached as Exhibit 7.2(f).
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(g) Shareholder shall have voted Shareholder's Target Common Stock to
approve the Merger.
(h) Prior to the Closing Date, the Rock of Ages Group shall have
received the consent of CIT Group/Business Credit, Inc. ("CIT/BC") to this
agreement and the Merger and the transactions contemplated herein and thereby.
(i) There shall be no uncompleted Environmental work on Target Group's
Realty.
(j) Target shall have delivered to Acquiror a Secretary's Certificate
having attached thereto copies of Target and the Joint Venture Companies
Articles of Incorporation and Bylaws, as amended to date, a list of their
officers and directors and certified copies of the votes of Target's Board of
Directors, and Shareholder's Board of Directors approving and consenting to this
agreement, the Merger and all the transactions contemplated herein or in any
document or agreement referenced herein and a copy of the certified unanimous
written consent or the vote of Missouri Red, in its capacity as sole shareholder
of Target, approving this agreement and the Merger.
(k) Target shall own, prior to the Closing Date fifty percent (50%) of
the issued and outstanding capital stock of each of the Joint Venture Companies
except that Pennsylvania will on the Closing Date own all of the issued and
outstanding capital stock of Carolina.
(l) The Rock of Ages Group shall have entered into a binding agreement
with the other owners of capital stock in the Joint Venture Companies (excluding
Carolina) under which the Rock of Ages Group will acquire all of the capital
stock of them not owned by Target on terms and conditions satisfactory to
Acquiror, in its sole discretion.
(m) The Rock of Ages Group shall have entered into a binding agreement
with the owners of Childs & Childs Granite Company, Inc., a Georgia corporation,
and C&C Granite, Inc., a Georgia corporation, under which the Rock of Ages Group
will acquire said corporations on terms and conditions satisfactory to Acquiror
in its sole discretion.
(n) Missouri Red and Keystone Granite, Inc., a Georgia corporation
("Keystone Granite") shall, prior to or simultaneously with the Closing, have
entered into guaranteed granite Supply and Distribution Agreements with Acquiror
substantially in the form thereof attached hereto as Exhibit 7.2(n).
(o) Any guaranties by Target or the Joint Venture Companies of any
Missouri Red or Keystone Granite indebtedness or their obligation to pay any
such indebtedness shall have been released or discharged or provisions for the
future release and discharge thereof, satisfactory to Acquiror, in its sole
discretion, shall have been made.
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(p) Target shall not have any debt outstanding at the Closing Date and
the Effective Date except for debt not to exceed Eight Hundred Thousand Dollars
($800,000.00) to George T. Oglesby, Jr. and members of his family and debt not
to exceed One Million Six Hundred Thousand Dollars ($1,600,000.00) to banks and
other institutional lenders, and said lenders shall have agreed that all of said
debt may be paid after the Effective Date by Acquiror according to its terms in
effect on the date hereof and the repayment terms of the Eight Hundred Thousand
Dollars ($800,000.00) are satisfactory to Acquiror in its sole discretion.
(q) The Bank Debt and the obligations to Anderson Company of the Joint
Venture Companies, at the Closing Date and the Effective Date, shall not exceed
Five Million Four Hundred Eighty-Four Thousand ($5,484,000.00).
(r) All Schedules and Exhibit to be attached to this agreement were
attached to this agreement upon its execution or have been attached pursuant to
Section 10.11.
7.3 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party to this agreement to consummate the Merger are subject to the
fulfillment of all of the following conditions at or prior to its completion of
the closing:
(a) The Merger shall have been approved by the Shareholder pursuant to
the requirements of GCC.
(b) The Merger shall, if required, have been approved by Acquiror's
shareholders pursuant to the requirements of VBCA.
(c) No injunction or other or decree shall have been issued by any
competent Federal or state court which prevents the consummation of Merger and
no inquiry shall have been received from, nor shall any investigation or
proceeding have been instituted by, any governmental agency seeking to prohibit
the Merger and the transactions contemplated herein or asserting that the same
breach of violate any material statute, rule or regulation.
(d) No statute or regulation has been enacted which would prevent
consummation of Merger.
(e) All governmental consents, approvals and filings required to
consummate the Merger shall have been obtained or made.
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ARTICLE VIII
TERMINATION
-----------
8.1 TERMINATION OF AGREEMENT. This agreement and the transactions
contemplated herein may be terminated by mutual written consent of Acquiror and
Target.
8.2 CONSEQUENCES OF TERMINATION. In the event of termination of this
agreement, it shall forthwith become void and there shall be no liability on the
part of Acquiror, Sub, Target or Shareholder, or their respective officers and
directors (except as set forth below in this Section 8.2 or Section 10.2 hereof)
and each party hereto shall return to the others all documents and materials
obtained from it or them in connection with the transactions contemplated by
this agreement. In the event of termination under Section 8.1, the parties shall
be deemed to have released each other from any liability arising from the
termination of this agreement.
ARTICLE IX
INDEMNIFICATION
---------------
9.1 SHAREHOLDER GENERAL INDEMNIFICATION COVENANTS. Subject to the
provisions of Sections 9.3 and 9.4, Shareholder shall indemnify, save and keep
Acquiror and its parent, subsidiaries, affiliates, successors and permitted
assigns (including Target and the Surviving Corporation as defined in the Plan
of Merger) (the "Acquiror Indemnitees"), harmless against and from all
liability, demands, claims, actions or causes of action, assessments, losses,
fines, penalties, costs, damages and expenses, including reasonable attorneys'
fees, disbursements and expenses (collectively, "Damages"), sustained or
incurred by any of the Acquiror Indemnitees as a result of, arising out of or by
virtue of any misrepresentation, breach of any warranty or representation, or
non-fulfillment of any agreement or covenant on the part of Target or
Shareholder, whether contained in this agreement or the Plan of Merger or any
exhibit or schedule hereto or thereto or any written statement or certificate
furnished or to be furnished to Acquiror or Sub pursuant hereto or in any
closing document delivered by Target or Shareholder in connection herewith.
9.2 SHAREHOLDER TAX INDEMNITY.
(a) Shareholder hereby agrees to pay, indemnify, defend and hold the
Acquiror Indemnities harmless from and against any and all Taxes of Target,
Shareholder, and their subsidiaries with respect to any period (or any portion
thereof) up to and including the Effective Time, except for Taxes of Target and
its subsidiaries which are reflected as current liabilities for Taxes that exist
as of the Effective Time ('Current Tax Liabilities') on the Target Unaudited
Financial Statements, together with all reasonable legal fees, disbursements and
expenses incurred by the Acquiror Indemnities in connection therewith.
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(b) Acquiror shall prepare and file any Return of Target which is
required to be filed after the Effective Time and which relates to any period
(or portion thereof) up to and including the Effective Time, and Acquiror shall,
within forty-five (45) days prior to the due date of any such Return, deliver a
draft copy to Shareholder. Within thirty (30) days of the receipt of any such
Return, Shareholder may reasonably request changes, in which event Acquiror and
Shareholder shall attempt to agree on a mutually acceptable resolution of the
issues in dispute. If a resolution is reached, such Return shall be filed in
accordance therewith. If a resolution is not reached, then at the expense of
Acquiror and Shareholder (such expense to be shared equally), such Return shall
be submitted to a firm of independent certified public accountants selected by
Acquiror and reasonably acceptable to Shareholder, which shall be directed to
resolve the issues in dispute and prepare the Return for filing. As soon as is
practicable after notice from Acquiror to Shareholder at any time prior to the
date any payment for Taxes attributable to any such Return is due, provided such
Return is prepared for filing in accordance with the foregoing, an amount equal
to the excess, if any, of (i) Taxes that are due with respect to any taxable
period ending on or before the Effective Time, or taxes that would have been due
with respect to a taxable period beginning before and ending after the Effective
Time if such period has ended on the Effective Time over (ii) the amount of such
Taxes of Target, Shareholder and their subsidiaries with respect to such taxable
period which are reflected as Current Tax Liabilities on the Target Unaudited
Financial Statement shall be paid by Shareholder to Acquiror by wire transfer of
immediately available funds within three (3) business days after the
determination of said amount is made.
(c) The indemnity provided for in this Section 9.2 shall be
independent of any other indemnity provision hereof and, anything in this
agreement to the contrary notwithstanding, shall survive until the expiration of
the applicable statutes of limitation for the Taxes referred to herein, and any
Taxes subject to the indemnification for Taxes set forth in this Section 9.2
shall not be subject to the provisions of Sections 9.1 or 9.4 hereof.
Notwithstanding anything in this agreement to the contrary, Shareholder will not
be obligated to indemnify Acquiror and Sub under any provisions of this
agreement with respect to Taxes or other liabilities that arise as a direct
result of the failure of the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code, provided that Shareholder is not in
breach of any of Shareholder's representations, covenants or agreements
contained in the Stock Subscription and Continuity of Interest Agreement.
9.3 LIMITATIONS ON SHAREHOLDER INDEMNIFICATION. The obligations of
Shareholder pursuant to Sections 9.1 and 9.2 are subject to the following
limitations:
(a) In no event shall the obligation of Shareholder to indemnify the
Acquiror Indemnitees pursuant to Section 9.1 exceed $750,000.00 in the
aggregate; provided, however, that such limitation shall not apply to any
indemnification obligations of Shareholder under Section 9.2; and
(b) Shareholder shall not have any indemnification obligation with
respect to the first $50,000.00 of total liabilities incurred under Sections 9.1
and 9.2, unless the total
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aggregate liabilities of Shareholder under Sections 9.1 and 9.2 equal or exceed
such amount, in which case the indemnification obligations of Shareholder will
include all liabilities in excess of One Dollar ($1.00) incurred under Sections
9.1 and 9.2 (subject only, in the case of liabilities incurred under Section
9.1, to the maximum aggregate amount set forth in Section 9.3(a) above).
9.4 CONDITIONS OF SHAREHOLDER INDEMNIFICATION PURSUANT TO SECTION 9.1.
(a) Promptly following the receipt by an Acquiror Indemnitee of notice
of a demand, claim, action, assessment or proceeding made or brought by a third
party, including a governmental agency (a "Third Party Claim"), the Acquiror
Indemnitee receiving the notice of the Third Party Claim (i) shall notify
Shareholder of its existence, setting forth the facts and circumstances of which
such Acquiror Indemnitee has received notice, and (ii) if the Acquiror
Indemnitee giving such notice is a person entitled to indemnification under this
Article IX (an "Indemnified Party"), specifying the basis hereunder upon which
the Indemnified Party's claim for indemnification is asserted.
(b) The Indemnified Party shall, upon reasonable notice by
Shareholder, tender the defense of a Third Party Claim to Shareholder. If
Shareholder accepts responsibility for the defense of a Third Party Claim, then
Shareholder shall have the exclusive right to contest, defend and litigate the
Third Party Claim and shall have the exclusive right, in Shareholder's
discretion exercised in good faith and upon the advice of counsel, to settle any
such matter, either before or after the initiation of litigation, at such time
and upon such terms as Shareholder deems fair and reasonable, provided that at
least ten (10) days prior to any such settlement, Shareholder shall give written
notice of Shareholder's intention to settle to the Indemnified Party. The
Indemnified Party shall have the right to be represented by counsel at its own
expense in any defense conducted by Shareholder.
(c) Notwithstanding the foregoing, in connection with any settlement
negotiated by Shareholder, no Indemnified Party shall be required to (i) enter
into any settlement (A) that does not include the delivery by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim or litigation, (B) if the Indemnified Party shall, in writing to
Shareholder within the ten (10) day period prior to such proposed settlement,
disapprove of such settlement proposal and desire to have Shareholder tender the
defense of such matter back to the Indemnified Party, or (C) that requires an
Indemnified Party to take any affirmative actions as a condition of such
settlement, or (ii) consent to the entry of any judgment that does not include a
full dismissal of the litigation or proceeding against the Indemnified Party
with prejudice; provided, however, that should the Indemnified Party disapprove
of a settlement proposal pursuant to Clause (B) above, the Indemnified Party
shall thereafter have all of the responsibility for defending, contesting and
settling such Third Party Claim but shall not be entitled to indemnification by
Shareholder to the extent that, upon final resolution of such Third Party Claim,
Shareholder's liability to the Indemnified Party but for this proviso exceeds
what
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Shareholder's liability to the Indemnified Party would have been if Shareholder
were permitted to settle such Third Party Claim in the absence of the
Indemnified Party exercising its right under Clause (B) above.
(d) If, in accordance with the foregoing provisions of this Section
9.4, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if Shareholder shall fail to accept the defense of a Third
Party Claim which has been tendered in accordance with this Section 9.4, the
Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle is given to Shareholder.
If, pursuant to this Section 9.4, the Indemnified Party so defends or settles a
Third Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by Shareholder
for the reasonable attorneys' fees and other expenses of defending the Third
Party Claim which are incurred from time to time, forthwith following the
presentation to Shareholder of itemized bills for said attorneys' fees and other
expenses. No failure by Shareholder to acknowledge in writing Shareholder's
indemnification obligations under this Article IX shall relieve Shareholder of
such obligations to the extent they exist.
9.5 CERTAIN TAX AND OTHER MATTERS.
(a) If, in connection with the audit of any Return, a proposed
adjustment is asserted in writing with respect to any Taxes of Target for which
Shareholder is required to indemnify a Acquiror Indemnitee pursuant to Section
9.2(a) hereof, Acquiror shall notify Shareholder of such proposed adjustment
within twenty (20) days after the receipt thereof. Upon notice to Acquiror
within twenty (20) days after receipt of the notice of such proposed adjustment
from Acquiror, Shareholder may assume (at Shareholder's own cost and expense)
control of and contest such proposed adjustment.
(b) Alternatively, if Shareholder requests within twenty (20) days
after receipt of notice of such proposed adjustment from an Acquiror Indemnitee,
Acquiror or the Acquiror Indemnitee involved, at Acquiror's option, as the case
may be, shall contest such proposed adjustment. Shareholder shall be obligated
to pay all reasonable out-of-pocket costs and expenses (including legal fees and
expenses) which Acquiror or Sub may incur in so contesting such proposed
adjustment as such costs and expenses are incurred, and Acquiror shall have the
full right to contest such proposed adjustment and shall be entitled to settle
or agree to pay in full such proposed adjustment (in its sole discretion) and
thereafter pursue its rights under this agreement. Shareholder shall pay to
Acquiror all indemnity amounts in respect of any such proposed adjustment within
thirty (30) days after written demand to Shareholder therefor, or, if
Shareholder has assumed control of the contest of such proposed adjustment as
provided above (or has requested Acquiror or Sub to contest such proposed
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adjustment within the time provided above), within thirty (30) days after such
proposed adjustment is settled or a Final Determination has been made with
respect to such proposed adjustment.
(c) For purposes of this Section 9.5, a "Final Determination" shall
mean (i) the entry of a decision of a court of competent jurisdiction at such
time as an appeal may no longer be taken from such decision or (ii) the
execution of a closing agreement or its equivalent between the particular
taxpayer and the Internal Revenue Service, as provided in Section 7121 and
Section 7122, respectively, of the Internal Revenue Code of 1986, as amended, or
a corresponding agreement between the particular taxpayer and the particular
state or local taxing authority. The obligation of Shareholder to make any
indemnity payment pursuant to Section 9.2(a) shall be premised on the receipt by
Shareholder from Acquiror or Sub of a written notice setting forth the relevant
portion of any Final Determination, and in cases where the amount of the
indemnity payment exceeds $100,000.00, a certified statement by Acquiror's
nationally recognized accounting firm setting forth the amount of the indemnity
payment (and in all other cases, a similar statement certified by the chief
financial officer of Acquiror) and describing in reasonable detail the
calculation thereof.
9.6 CERTAIN TARGET INFORMATION. Acquiror, Shareholder and Target agree to
furnish or cause to be furnished to each other (at reasonable times and at no
charge) upon request as promptly as practicable such information (including
access to books and records) pertinent to Target and assistance relating to
Target as is reasonably necessary for the preparation, review and audit of
financial statements, the preparation, review, audit and filing of any Return,
the preparation for any audit or the prosecution or defense of any claim, suit
or proceeding relating to any proposed adjustment or which may result in
Shareholder being liable under the indemnification provisions of this Article
IX, provided, that access shall be limited to items pertaining solely to Target.
Shareholder shall grant to Acquiror access to all Returns filed with respect to
Target and its parent and their subsidiaries, current or past.
9.7 RELEASE OF ACQUIROR BY SHAREHOLDER. Shareholder hereby releases and
discharges Acquiror and Sub and each of its officers and directors from, and
agrees and covenants that in no event will Shareholder commence any litigation
or other legal or administrative proceeding against, Acquiror, Sub their
subsidiaries, parents and affiliates or any of their officers or directors,
whether in law or equity, relating to any and all claims and demands, known or
unknown, suspected and unsuspected, disclosed and undisclosed, for damages,
actual or consequential, past, present and future, arising out of or in any way
connected with Shareholder's ownership or alleged ownership of Target Common
Stock or G. Thomas Oglesby's ownership of capital stock in Shareholder prior to
the Effective Time, other than claims or demands arising out of the transactions
contemplated by this agreement.
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9.8 ACQUIROR GENERAL INDEMNIFICATION COVENANTS. Subject to the provisions
of Sections 9.9 and 9.10, Acquiror shall indemnify, save and keep Shareholder,
its and successors (the "Shareholder Indemnitees"), harmless against and from
all Damages sustained or incurred by any of the Shareholder Indemnitees as a
result of, arising out of or by virtue of any misrepresentation, breach of any
warranty or representation, or non- fulfillment of any agreement or covenant of
the part of Acquiror, whether contained in this agreement or the Plan of Merger
or any exhibit or schedule hereto or thereto or any written statement or
certified furnished or to be furnished to Shareholder hereto or in any closing
document delivered by Acquiror or Sub in connection herewith; provided that
Acquiror's indemnification covenants and obligations in this agreement shall
terminate upon the of a Registrations Statement of Acquiror under the Securities
Act of 1933, as amended (the "Securities Act") with respect to an initial public
offering of Acquiror's securities (an "IPO").
9.9 LIMITATION ON ACQUIROR INDEMNIFICATION. The obligations of Acquiror
pursuant to Section 9.8 is subject to the following limitations:
(a) In no event shall the obligation of Acquiror to indemnify the
Shareholder Indemnitees pursuant to Section 9.8 exceed $140,000.00 in the
aggregate.
(b) Acquiror shall not have any indemnification obligation with
respect to the first $10,000.00 of total liabilities incurred under Section 9.8,
unless the total aggregate liabilities of Acquiror under Section 9.8 equal or
exceed such amount, in which case the indemnification obligations of Acquiror
will include all liabilities in excess of One Dollar ($1.00) incurred under
Section 9.8 (subject only, to the maximum aggregate amount set forth in Section
9.9(a) above).
9.10 CONDITIONS OF INDEMNIFICATION PURSUANT TO SECTION 9.8.
(a) Promptly following the receipt by a Shareholder Indemnitee of
notice of a demand, claim, action, assessment or proceeding made or brought by a
third party, including a governmental agency (a "Third Party Claim"), the
Shareholder Indemnitee receiving the notice of the Third Party Claim (i) shall
notify Acquiror of its existence, setting forth the facts and circumstances of
which such Shareholder Indemnitee has received notice, and (ii) if the
Shareholder Indemnitee giving such notice is a person entitled to
indemnification under this Section IX (an "Indemnified Party"), specifying the
basis hereunder upon which the Indemnified Party's claim for indemnification is
asserted.
(b) The Indemnified Party shall, upon reasonable notice by Acquiror,
tender the defense of a Third Party Claim to Acquiror. If Acquiror accepts
responsibility for the defense of a Third Party Claim, then Acquiror shall have
the exclusive right to contest, defend and litigate the Third Party Claim and
shall have the exclusive right, in its discretion exercised in good faith and
upon the advice of counsel, to settle any such matter, either before or after
the initiation of litigation, at such time and upon such terms as it deems fair
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and reasonable, provided that at least ten (10) days prior to any such
settlement, it shall give written notice of its intention to settle to the
Indemnified Party. The Indemnified Party shall have the right to be represented
by counsel at its own expense in any defense conducted by Acquiror.
(c) Notwithstanding the foregoing, in connection with any settlement
negotiated by Acquiror, no Indemnified Party shall be required to (i) enter into
any settlement (A) that does not include the delivery by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim or litigation, (B) if the Indemnified Party shall, in writing to
Acquiror within the ten (10) day period prior to such proposed settlement,
disapprove of such settlement proposal and desire to have Acquiror tender the
defense of such matter back to the Indemnified Party, or (C) that requires an
Indemnified Party to take any affirmative actions as a condition of such
settlement, or (ii) consent to the entry of any judgment that does not include a
full dismissal of the litigation or proceeding against the Indemnified Party
with prejudice; provided, however, that should the Indemnified Party disapprove
of a settlement proposal pursuant to Clause (B) above, the Indemnified Party
shall thereafter have all of the responsibility for defending, contesting and
settling such Third Party Claim but shall not be entitled to indemnification by
Acquiror to the extent that, upon final resolution of such Third Party Claim,
Acquiror's liability to the Indemnified Party but for this proviso exceeds what
Acquiror's liability to the Indemnified Party would have been if Acquiror were
permitted to settle such Third Party Claim in the absence of the Indemnified
Party exercising its right under Clause (B) above.
(d) If, in accordance with the foregoing provisions of this Section
9.10, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if Acquiror shall fail to accept the defense of a Third Party
Claim which has been tendered in accordance with this Section 9.10, the
Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle is given to Acquiror. If,
pursuant to this Section 9.10, the Indemnified Party so defends or settles a
Third Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by Acquiror for
the reasonable attorneys' fees and other expenses of defending the Third Party
Claim which are incurred from time to time, forthwith following the presentation
to Acquiror of itemized bills for said attorneys' fees and other expenses. No
failure by Acquiror to acknowledge in writing its indemnification obligations
under this Article IX shall relieve it of such obligations to the extent they
exist.
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ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. All
representations, warranties, covenants and agreements made by any party in this
agreement or pursuant hereto shall survive the Merger until the expiration of
the applicable statutes of limitations with respect to the matters covered
thereby; provided that, notwithstanding anything to the contrary set forth in
this Agreement and Plan of Reorganization, the representations, warranties,
covenants and agreements of Acquiror and Sub shall terminate, and be of no
further force or effect, upon the effectiveness of Acquiror's registration
statement of Acquiror under the Securities Act with respect to an IPO.
10.2 CONFIDENTIALITY. Subject to the last sentence of this Section and
regardless of whether the Merger shall take place, or this agreement is
terminated, Acquiror, Sub, Target and Shareholder all agree to keep the
negotiation, execution and Closing of this agreement and the Merger confidential
and not to disclose the same or any documents prepared or delivered in
connection therewith to any person without the prior written consent of Acquiror
and Target; except that each such party may advise their accountants, attorneys,
appraisers, surveyors, engineers and other advisors, agents, employees,
shareholders, investment advisors, underwriters, bankers, lenders and banks
(collectively the "Agents") of the same as necessary in order to carry out and
consummate the transactions contemplated herein; provided that they inform them
of this confidentiality agreement and require them to keep the subject matter of
it confidential; and provided further, however, that Acquiror may make any
disclosure of or with respect to this agreement in connection with the Proposed
Transactions, and no party hereto shall be liable for any breach or violation of
this Section 10.2 confidentiality agreement because of disclosure of this
agreement to any governmental agency as required for such party to fulfill its
obligations under this agreement and to consummate the transactions contemplated
by this agreement or as otherwise required by law.
After the Effective Date and subsequent to the disclosure to the
employees of Target and the Rock of Ages Group and their subsidiaries and
affiliates, Acquiror may, at its election, publicly disclose the execution and
delivery of this agreement and the other agreements referenced herein and in the
Exhibits hereto and the details of the transactions consummated hereunder.
10.3 BROKERS OR FINDERS. Each party represents to the other that no broker
or agent has been involved on its behalf in the Merger or other transactions
contemplated herein, and agrees that if any claim for a commission or fee is
asserted, it will be paid by the party which the broker or agent claims is
represented by such broker or agent.
10.4 ARTICLE AND SECTION HEADINGS. Article and Section headings are
employed in this agreement for reference purposes only and shall not affect the
interpretation or meaning of this agreement.
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<PAGE> 41
10.5 ASSIGNMENT, SUCCESSORS AND ASSIGNS. No party may assign or
transfer any of its rights or obligations hereunder without the prior written
consent of all other parties hereto, given or withheld in their sole discretion.
This agreement shall be binding upon and inure to the benefit of each party
hereto and their respective heirs, personal representatives, successors and
permitted assigns.
10.6 NOTICES. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier services, fee prepaid,
return receipt or other confirmation of delivery requested or (iv) when
telecopied or sent by facsimile transmission if an additional notice is also
given under (i), (ii) or (iii) above within three days thereafter. Any such
notice or communication shall be directed to a party at its address set forth
below or at such other address as may be designated by a part in a notice given
to all other parties hereto in accordance with the provisions of this Section.
If to Shareholder: Missouri Red Quarries, Inc.
P. O. Box 6077
Elberton, GA 30635
Phone: (706) 283-5402
Telecopy: (706) 283-4758
If to Target: KSGM, Inc.
P. O. Box 6077
Elberton, GA 30635
Phone: (706) 283-5402
Telecopy: (706) 283-4758
with, in the case of notice R. Chris Phelps, Esq.
to Shareholder Phelps & Campbell, LLP
or Target, a copy to P. O. Drawer 1056
(which shall not constitute Elberton, GA 30635
notice): Phone: 706-283-5000
Fax: 706-283-5002
If to any member of
the Rock of Ages Group: Kurt M. Swenson, Chairman
and Chief Executive Officer
Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Phone: 603-225-8397
Fax: 603-225-4801
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<PAGE> 42
with a copy to: John R. Monson, Esq.
(which shall not Wiggin & Nourie, P.A.
constitute notice) P.O. Box 808
Manchester, NH 03105
Phone: 603-669-2211
Fax: 603-623-8442
10.7 COMPLETE AGREEMENT, WAIVERS. Neither this agreement nor any provision
hereof may be changed, waived, modified, discharged, amended or terminated
orally but only by an instrument in writing signed by all parties hereto;
provided however that there shall be no material amendment to this agreement
after the approval of it by Shareholder. No action taken by any party after the
date hereof, including without limitation any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance by any other party with any representations, warranties,
covenants or agreements contained in this agreement. The waiver by any party
hereto of a breach of any provision of this agreement shall not operate or be
construed as a waiver of any other or any subsequent breach. The failure of any
party at any time or times to require performance of any provision hereof shall
in no manner affect its right at a later time to enforce the same. This
agreement, together with the Exhibits and Schedules attached hereto or
incorporated herein pursuant to Section 10.11 hereof constitutes the only
agreement among the parties hereto concerning the subject matter hereof and
supersedes all prior agreements whether written or oral, relating thereto.
10.8 GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of Vermont.
10.9 TAX CONSEQUENCES. Each party represents and warrants that it has made
an independent evaluation of the tax consequences resulting to such party as a
result of the terms and effect of this agreement and of the Merger. No party
shall have any recourse against any other party to this agreement nor shall this
agreement be affected in any way by reason of the fact that the consummation of
this agreement, the transactions contemplated thereby and the Merger do not have
the tax consequences anticipated by such party; provided that the foregoing
shall not limit a party's liability for breach of any representation, warranty,
covenant or agreement contained herein.
10.10 COUNTERPARTS. This agreement may be executed in counterparts and by
different parties on different counterparts with the same effect as if the
signatures were on the same instrument. This agreement shall be effective and
binding upon all parties hereto as of the time when all parties have executed a
counterpart of this agreement.
10.11 EXHIBITS. Each Exhibit or Schedule delivered pursuant to the terms of
this agreement shall be in writing and shall constitute a part of this
agreement. The parties may agree with respect to any Schedule or Exhibit
required to be attached to this agreement, that such Schedule or Exhibit, if
mutually satisfactory, may be attached to this agreement after the date of
execution hereof and prior to the Closing and, after mutual approval thereof,
such subsequently attached Schedule or Exhibit shall be treated as if it were
attached to this
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<PAGE> 43
agreement as of the date of execution of this agreement. All Exhibits and
Schedules attached hereto are specifically incorporated herein by reference and
made a part hereof. The words "agreement," "herein" and "hereof" as used herein
shall in all respects include the entirety of this agreement together with all
Exhibits and Schedules attached hereto and all documents required or permitted
to be delivered hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this agreement all as
of the 27th day of June, 1997.
WITNESS: ROCK OF AGES QUARRIES, INC.
/s/ By: /S/ KURT M. SWENSON
- ------------------------------- -------------------------------
Kurt M. Swenson, Chairman
and Chief Executive Officer
ROYALTY GRANITE CORPORATION
/s/ By: /S/ KURT M. SWENSON
- ------------------------------- -------------------------------
Kurt M. Swenson, Chairman of
the Board and Chief
Executive Officer
KSGM, INC.:
/s/ By: /S/ GEORGE T. OGLESBY, JR.
- ------------------------------- -------------------------------
George T. Oglesby, Jr., President
MISSOURI RED QUARRIES, INC.,
Shareholder
/s/ By: /S/ GEORGE T. OGLESBY, JR.
- ------------------------------- -------------------------------
George T. Oglesby, Jr., President
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<PAGE> 44
LIST OF EXHIBITS TO AGREEMENT AND PLAN OF REORGANIZATION
--------------------------------------------------------
Exhibit A Plan of Merger
Exhibit 4.1(a) Employment Agreement
Exhibit 4.1(b) Employment Agreement
Exhibit 4.2 Stock Subscription and Continuity of Interest Agreement
Exhibit 5.2(a) Direct and Indirect Subsidiaries as of June 27, 1997
Exhibit 5.2(e) Swenson Group Financial Statements
Exhibit 5.2(h) Litigation
Exhibit 5.2(m) Environmental Laws and Hazardous Materials (Environmental
Definitions)
Exhibit 5.3(a) Target Subsidiaries
Exhibit 5.3(c) Authorized and Outstanding Capital Stock of Joint Venture
Companies
Exhibit 5.3(d) Financial Statements for JV Companies, Keystone, KSGM
Exhibit 5.3(f) Target Group Realty and Lease Terms
Exhibit 5.3(h) Labor Agreements, if any
Exhibit 5.3(k) Licenses, Permits for Target Business
Exhibit 5.3(m) Employee Plans, Pension, Profit Sharing and Deferred
Compensation
Exhibit 5.3(o) List of Intellectual Property, All Insurance Policies, All
Agreements Involving More Than $5,000 on Annual Basis
Exhibit 5.3(q) Defaults, E.G., Pensylvania Bank Loan
Schedule to Rock of Ages Group Disclosure Schedule under Section 5.1
Agreement and Plan and 5.2
of Reorganization
Schedule to Target Disclosure Schedule Under Section 5.1 and 5.3
Agreement and Plan
of Reorganization
Rock of Ages Corporation agrees to furnish supplementally to the Commission a
copy of any omitted schedule upon request.
<PAGE> 1
Exhibit 2.2
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT made as of this 27th day of June, 1997, by and
among ROCK OF AGES QUARRIES, INC. (to be known as ROCK OF AGES CORPORATION as
set forth below), with a principal office located in Concord, New Hampshire
(hereinafter referred to as the "Buyer"), ROBERT OTIS CHILDS, JR., ROBERT OTIS
CHILDS, III, and TIMOTHY CARROLL CHILDS, individuals residing in Elberton,
Georgia (said Robert Otis Childs, Jr., Robert Otis Childs, III and Timothy
Carroll Childs being hereinafter sometimes collectively referred to together as
the "Sellers" or the "Shareholders" and individually referred to as a "Seller"
or as a "Shareholder") , being all of the stockholders of CHILDS & CHILDS
GRANITE COMPANY, INC., a Georgia corporation ("CC") and of C&C GRANITE COMPANY,
INC., a Georgia Corporation ("CCT") (hereinafter each of said corporations are
sometimes collectively referred to as the "Companies" and each corporation is
sometimes referred to as a "Company") and BERNITA Y. CHILDS, an individual
residing in Elberton, Georgia.
RECITALS:
1. The Sellers own all of the issued and outstanding shares of capital
stock of the Companies (the "Companies Shares"), fifty percent (50%) of the
outstanding capital stock of : (a) Pennsylvania Granite Corporation, a
Pennsylvania corporation (herein referred to as "Pennsylvania") and Pennsylvania
owns one hundred percent (100%) of the issued and outstanding capital stock of
Carolina Quarries, Inc., a Georgia corporation, (herein sometimes referred to as
"Carolina"); (b) Southern Mausoleums, Inc, a Georgia corporation (herein
sometimes referred to as "Mausoleum"); (c) Caprice Blue Quarry, Inc., a Georgia
corporation (herein sometimes referred to as "Caprice"); and (d) Autumn Rose
Quarry, Inc., a Georgia corporation (herein sometimes referred to as "Autumn").
The capital stock owned by Shareholders in Pennsylvania, in Mausoleum, in
Caprice and in Autumn is sometimes referred to as the "Joint Venture Companies
Shares" and the Companies Shares and the Joint Venture Companies Shares are
sometimes collectively referred to as the "Shares". Pennsylvania, Carolina,
Mausoleum, Caprice and Autumn are sometimes collectively referred to herein as
the "Joint Venture Companies". The Companies and the Joint Venture Companies are
herein sometimes collectively referred to as the "Childs Group."
2. At 5:05 P.M., June 27, 1997 Buyer: (a) will merge its wholly owned
subsidiary Rock of Ages Corporation into it; (b) will be the surviving
corporation in the merger (the "Prior Merger"); and (c) will as a part of the
merger amend its Articles of Incorporation to change its name to Rock of Ages
Corporation.
3. The Buyer desires to purchase, and the Sellers desire to sell, the
Shares upon the terms and subject to the conditions of this agreement.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the Sellers and Buyer
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE. Upon the terms and subject to the conditions of this
agreement, Sellers agree to sell, transfer and assign to Buyer and Buyer agrees
to purchase from Sellers all right, title and interest in the Shares, at an
aggregate purchase price(the "Purchase Price"), determined as provided in
Section 1.4 below.
1.2 CLOSING. The closing of the purchase and sale of the Shares (the
"Closing") shall take place at Phelps & Campbell, LLP, 313 Heard Street,
Elberton, Georgia, 30635, at 11:00 A.M., Eastern Standard Time, on or before
November 1, 1997, after all of the conditions set forth in Article IV hereof
shall be fulfilled or waived in accordance with this agreement and applicable
law or at such other time, date and/or place as Sellers and Buyer may agree. The
date and time at which the Closing actually occurs is referred to as the
"Closing Date". The Closing Date can be extended automatically by Buyer for an
additional thirty (30) days to November 30, 1997, if an S-1 Registration for
Buyer's IPO has been filed with the Securities and Exchange Commission on or
before November 1, 1997 and on or before November 1, 1997 Buyer makes an
additional FIFTY THOUSAND AND no/100 ($50,000.00) DOLLARS addition to the
Deposit with the Escrow Agent .
1.3 DETERMINATION OF THE PURCHASE PRICE.
(a) Certain Sellers have loaned certain amounts to and have borrowed
certain amounts from the Childs Group, the net amount equal to Four Hundred
Sixty-Three Thousand and Twenty-Six ($463,026) Dollars as shown on Exhibit
1.3(a) (the "Childs' Family Loans"). At or immediately after the Closing, Buyer
will cause the members of the Childs Group owing any Childs' Family Loans to pay
the principal and interest owed on said loans to the Maker of each of said
loans. The aggregate amount so paid is herein referred to as the "Childs' Family
Loans Repayment Amount". The Purchase Price has been determined by subtracting
the Child's Family Loan amount from Six Million Eight Hundred Thousand Dollars
($6,800,000.00) and the amount of the difference, Six Million Three Hundred
Thirty Six Thousand Nine Hundred Seventy-Four Thousand ($6,336,974.00) Dollars
is the Total Purchase Price of the Shares shall be the Purchase Price (herein
the "Purchase Price"). The Purchase Price shall be allocated as set forth in
Section 1.4 below. Neither Sellers nor Buyer expect any change in the amount of
the Childs Family Loans, but if the loans increase or decrease prior to closing
the Purchase Price and allocation will be modified accordingly.
(b) Two Hundred Fifty Thousand Dollars ($250,000.00) shall be
deposited upon execution of this agreement by Buyer as an earnest money deposit
(the "Deposit") in
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<PAGE> 3
escrow with Phelps & Campbell, LLP (the "Escrow Agent"). The Deposit shall be
held by the Escrow Agent in accordance with the terms of the escrow agreement
(the "Escrow Agreement"), a copy of which is attached hereto as EXHIBIT 1.3(b),
and paid by the Escrow Agent to Sellers as part of the Purchase Price at the
Closing; provided that the Deposit shall (i) be immediately returned to the
Buyer if the transaction contemplated by this agreement does not close because
any of the Sellers are in default of or have breached any of their
representations, warranties, covenants or agreements set forth herein or any of
the conditions to Closing for the benefit of Buyer are not met or waived in
writing on the Closing Date; or (ii) paid to Sellers in accordance with the
terms and conditions of the Escrow Agreement upon the failure by Buyer to close
on the Closing Date (unless such failure is due to the nonfulfillment of any of
Buyer's conditions to Closing set forth in Section 5.2 of this agreement),
provided that Sellers on the Closing Date are not in default of, nor have they
breached any of, their representations, warranties, covenants or agreements set
forth herein and all the conditions to Closing for the benefit of Buyer have
been met or waived in writing on the Closing Date.
1.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated as
follows:
(a) $875,000.00 in cash, to Robert Otis Childs, Jr. in full payment
for all of his capital stock in CC;
(b) $675,000.00 in cash and a number of shares of Buyer's Common Stock
(as hereinafter defined) having an aggregate value of $200,000.00 (the "Common
Stock Consideration Amount", determined as provided in Section 1.6), to Robert
Otis Childs, III in full payment for all of his capital stock in CC;
(c) $875,000.00 in cash, to Timothy Carroll Childs in full payment for
all of his capital stock in CC;
(d) $166,667.00 in cash, to Robert Otis Childs, Jr. in full payment
for all of his capital stock in CCT;
(e) $166,667.00 in cash, to Robert Otis Childs, III, in full payment
for all of his capital stock in CCT;
(f) $166,667.00 in cash, to Timothy Carroll Childs in full payment for
all of his capital stock in CCT;
(g) $1.00 in cash, to Robert Otis Childs, Jr. in full payment for all
of his capital stock in Autumn;
(h) $1.00 in cash, to Robert Otis Childs, III in full payment for all
of his capital stock in Autumn;
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<PAGE> 4
(i) $1.00 in cash, to Timothy Carroll Childs in full payment for all
of his capital stock in Autumn;
(j) $1.00 in cash, to Robert Otis Childs, Jr. in full payment for all
of his capital stock in Caprice;
(k) $1.00 in cash, to Robert Otis Childs, III in full payment for all
of his capital stock in Caprice;
(l) $1.00 in cash, to Timothy Carroll Childs in full payment for all
of his capital stock in Caprice;
(m) $970,655.67 in cash, to Robert Otis Childs, Jr.. in full payment
for all of his capital stock in Pennsylvania;
(n) $970,665.67 in cash, to Robert Otis Childs, III in full payment
for all of his capital stock in Pennsylvania;
(o) $970,665.67 in cash, to Timothy Carroll Childs in full payment for
all of his capital stock in Pennsylvania;
(p) $100,000.00 in cash, to Robert Otis Childs, Jr. in full payment
for all of his capital stock in Mausoleum;
(q) $100,000.00 in cash, to Robert Otis Childs, III in full payment
for all of his capital stock in Mausoleum; and
(r) $100,000.00 in cash, to Timothy Carroll Childs in full payment for
all of his capital stock in Mausoleum.
1.5 PAYMENT OF PURCHASE PRICE. Upon the terms and subject to the conditions
of this agreement, at the Closing:
(a) Buyer shall deliver to each of the Sellers on the Closing Date by
wire transfer in immediately available funds to a bank account designed in
writing by each of the Sellers no later than three (3) business days prior to
the Closing Date the amount of the Purchase Price payable in cash as set forth
in Section 1.4, to each Seller, less the amount of each Seller's Contribution to
the Indemnity Fund (as hereinafter defined in Section 7.6 hereof).
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<PAGE> 5
(b) Buyer shall deliver to Robert Otis Childs, III, the Common Stock
equal to the Common Stock Share Amount (as defined in Section 1.6 below),
registered in his name.
(c) Sellers shall deliver to Buyer (i) certificates representing the
Shares duly endorsed in blank with stock powers attached duly executed in blank,
in proper form for transfer, with signatures properly guaranteed, free and clear
of all liens, claims pledges, encumbrances, charges, options proxies or
restrictions of any kind or nature, (ii)each Seller's Employment Agreement or
Consulting Agreement, and (iii) funds for the payment of all transfer, stamp and
similar taxes, if any, in respect to the sale, transfer and assignment of the
Shares pursuant to this agreement, including without limitation, any transfer or
gains taxes to which the transactions contemplated hereby may be subject under
the laws of the State of Georgia.
(d) Bernita Y. Childs shall deliver to Buyer her Consulting Agreement.
1.6 STOCK OF BUYER. Robert Otis Childs, III agrees to acquire from Buyer
and accept, in full payment of the Common Stock Consideration Amount a number of
shares of common stock of the Buyer ("Common Stock") having an aggregate value
equal to the Common Stock Consideration Amount, with each share of the Common
Stock to be valued for this purpose at the price per share of the Common Stock
to the public in the Buyer's contemplated initial public offering (the "IPO") or
the fair market value per share as determined on the Closing Date in good faith
by the Buyer's Board of Directors if the IPO has not occurred on or before the
Closing Date (the "Common Stock Price"). The number of such shares to be
delivered to Robert Otis Childs, III by Buyer and accepted by Robert Otis
Childs, III above shall be the quotient (the "Common Stock Share Amount")
determined by dividing the Common Stock Consideration Amount by the Common Stock
Price. If the IPO occurs within one (1) year after the Closing, then the Common
Stock Price will be recalculated using the IPO price per share of the Common
Stock to the public, the Common Stock Share Amount will be recalculated and the
Buyer will deliver any additional shares of Common Stock required by said
recalculated Common Stock Share Amount to Robert Otis Childs, III or Robert Otis
Childs, III will return to the Buyer any shares he has received which exceed the
recalculated Common Stock Share Amount.
ARTICLE II
FURTHER AGREEMENTS
2.1 EMPLOYMENT AGREEMENT FOR ROBERT OTIS CHILDS, III. At the Closing, Buyer
and Robert Otis Childs, III shall execute an employment agreement (the
"Employment Agreement") substantially in the form thereof attached as EXHIBIT
2.1 hereto, with such additional terms and conditions as may be mutually agreed
to by the parties thereto.
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<PAGE> 6
2.2 STOCK SUBSCRIPTION AGREEMENT. If Sections 1.4(b) and 1.6 provide for
Robert Otis Childs, III to receives shares of Buyer's Common Stock, then
concurrently with the execution and delivery of this agreement, Robert Otis
Childs, III and Buyer shall execute the stock subscription agreement (the "Stock
Subscription Agreement") substantially in the form attached hereto as EXHIBIT
2.2.
2.3 CONSULTING AGREEMENTS. At the Closing, Buyer and each of Robert Otis
Childs, Jr. and Bernita Y. Childs shall execute respective Consulting Agreements
substantially in the respective forms attached hereto as EXHIBIT 2.3.
2.4 EMPLOYMENT AGREEMENT FOR TIMOTHY CARROLL CHILDS. At the Closing,
Timothy Carroll Childs shall execute the Employment Agreement substantially in
the form attached hereto as EXHIBIT 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 GENERAL STATEMENT. The parties make the representations and warranties
which are set forth in this Article III. The survival of all such
representations and warranties shall be in accordance with Section 8.1 hereof.
All representations and warranties of the parties are made subject to the
exceptions, if any, which are noted in the respective schedules delivered by the
parties to each other and accepted by the receiving party concurrently herewith
and identified as, in the case of Section 3.2, the "Buyer's Disclosure
Schedule," and in the case of Section 3.3, the "Shareholders Disclosure
Schedule."
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. Except as set forth below
where certain representations and warranties are specifically made to all
Shareholders, Buyer makes the following representations and warranties only to
Robert Otis Childs, III and only if Sections 1.4(b)(ii) and 1.6 provide that
Robert Otis Childs, III will receive shares of the Buyer's Common Stock with the
intention that Robert Otis Childs, III (if he is receiving Common Stock hereto)
and all the Shareholders, as applicable, may rely upon the same, and
acknowledges that the same are true and correct in all material respects and
shall be true and correct in all material respects at the Closing Date, subject
to changes therein occurring because of Buyer's conduct of its business in the
ordinary course or occurring because of the Proposed Transactions as defined in
Exhibit 3.2 attached hereto.
(a) ORGANIZATION, POWER, ETC. Buyer represents and warrants to all
Shareholders that each member of the Rock of Ages Group (the Rock of Ages Group,
being defined herein as Buyer and Buyer's wholly owned subsidiary, Royalty
Granite Corporation, a Georgia Corporation) is a corporation, existing and in
good standing under the laws of the State of Vermont. Each member of the Rock of
Ages Group has all requisite corporate power and authority to own and lease its
respective properties and to carry on the business in which
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<PAGE> 7
it is presently engaged (herein sometimes referred to as the "Business" of that
Group member or members or as the "Businesses" of the Rock of Ages Group).
(b) BUYER CAPITAL STOCK. Immediately after the effective date of the
Prior Merger, the authorized capital stock of Buyer will consist of 20,000,000
shares of Common Stock, 7,000,000 shares will be issued and outstanding and of
1,000,000 shares of Serial Preferred Stock of which zero (0) shares will be
issued and outstanding. All stock of Buyer to be issued to Robert Otis Childs,
III, shall at the Closing Date, be duly authorized, validly issued, fully paid
and non-assessable.
(c) CORPORATE AUTHORITY. Buyer represents and warrants to all
Shareholders that the execution, delivery and performance of this agreement by
it and consummation by it of the transactions contemplated herein have been duly
authorized by all necessary corporate action and this agreement constitutes the
legal, valid and binding obligation of Buyer in accordance with its terms.
(d) BINDING NATURE AND EFFECT OF AGREEMENT. Buyer represents and
warrants to all Shareholders that the execution, delivery and performance of
this agreement by it and consummation by it of the transactions contemplated
herein do not, to the best of its knowledge, require the consent, waiver,
approval, license or authorization of any person or public authority which will
not be obtained prior to or at the Closing Date; to the best of its knowledge,
after due inquiry, this agreement does not violate, with or without the giving
of notice and/or the passage of time, any provision of law applicable to it and
does not conflict with or result in a breach or termination of any provision of,
or constitute a default in or under, or result in the creation of any lien,
charge or encumbrance upon any of its property or assets pursuant to any
corporate charter provision, bylaw, mortgage, deed of trust, indenture or other
agreement or instrument, or any order, judgment, and, to the best of its
knowledge, after due inquiry, any decree, statute, regulation or any other
restriction of any kind or character to which the it is a party or by which it
or any of its assets and properties are bound.
(e) FINANCIAL STATEMENTS. Buyer has furnished to Robert Otis Childs,
III the draft audit of Rock of Ages Corporation and Subsidiaries consolidated
financial statements as of December 31, 1996, 1995, and 1994, together with a
Schedule of Material Inter-Company Transactions (the foregoing financial data
shall be collectively referred to as the "Financial Statements" and are attached
hereto as EXHIBIT 3.2(e). The Financial Statements were furnished to Target and
Shareholders solely for the purposes set forth therein.
(f) TAX MATTERS. The Rock of Ages Group has duly filed with the
appropriate federal, state and local governmental agencies, and all foreign
countries and political subdivisions thereof, all Returns (as defined in Section
3.3(e)(i) hereof) required to be filed and has paid in full all Taxes (as
defined in Section 3.3(e)(xiii) hereof), assessments or deficiencies shown to be
due on such Returns or claimed to be due by any taxing authority
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and all such Returns as filed or as amended or to be amended prior to the
Closing Date accurately and completely report the Taxes due to any such taxing
authority. The Rock of Ages Group has not executed or filed with the Internal
Revenue Service or any other taxing authority (domestic or foreign) any
agreement extending the period for assessment or collection of any Taxes. The
Rock of Ages Group is not a party to any pending action or proceeding nor, to
the best of its knowledge, is any action or proceeding threatened by any
governmental authority for assessment or collection of Taxes, and no claim for
assessment or collection of Taxes has been asserted against it. The provisions
for Taxes shown in the Financial Statements (if any) are and will be adequate to
cover the respective liabilities of the Rock of Ages Group as of the date
thereof for all Taxes of the Rock of Ages Group.
(g) TITLE TO ASSETS, ABSENCE OF LIENS AND ENCUMBRANCES. The Rock of
Ages Group has good and marketable title to all of its assets, and, except as
set forth in the Financial Statements, such title is free and clear of all
liens, claims and encumbrances and rights of other parties relating to its
assets or its business.
(h) LITIGATION. The Rock of Ages Group's Disclosure Schedule, the Rock
of Ages Group has not been notified of, and no member of said Group is a party
to, any material actions, suits, proceedings or investigations (including any
environmental, building or safety investigation) pertaining to their assets or
Businesses; nor does the Rock of Ages Group have any knowledge of, nor
reasonable grounds to have knowledge of, any claim or state of facts which may
lead to, or constitute a threat of, any material investigation, claim,
proceeding, or litigation, against the Rock of Ages Group or their assets or
Businesses. There are no orders, judgments or decrees of any court or
governmental agency relating to the Rock of Ages Group which would prevent,
impede or make illegal the consummation of the transactions contemplated herein
or which would have a material adverse effect upon a member of the Rock of Ages
Group.
(i) LABOR CONTROVERSIES. To the best of Buyer's knowledge, there are
no material controversies between any member of the Rock of Ages Group and any
of its employees, no material unresolved labor practice proceedings or disputes
and no material labor arbitration proceedings pending or threatened, and there
are no organizational efforts presently being made or, to the best of Buyer's
knowledge, after due inquiry, threatened involving any of the Rock of Ages Group
members' non-union employees. The members of the Rock of Ages Group have
complied in all material respects with all federal, state and local laws and
orders relating to the employment of labor, and all laws governing wages, hours,
collective bargaining, the payment of social security, withholding and similar
taxes, equal employment opportunity, employment discrimination and immigration
and naturalization; and no member of the Rock of Ages Group is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing. There is no claim of employment discrimination or sexual harassment
pending or, to the best of Buyer's knowledge, after due inquiry, threatened
against it, or any strike, dispute, slowdown or stoppage pending or, to the best
of Buyer's knowledge, threatened against or involving it.
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(j) PATENTS, TRADEMARKS, ETC. No one has made or, to the best of
Buyer's knowledge, after due inquiry, threatened to make any claims that any
member of the Rock of Ages Group has wrongfully used or appropriated, or
infringed upon any patent, patent license, trade name, trademark, servicemark,
brandmark, brand name, copyright, know-how, trade secret or other proprietary or
trade rights of any third party. No director, officer, shareholder or employee
of any member of the Rock of Ages Group owns or has owned, directly or
indirectly, in whole or in part, any patents, trademarks, trade names,
servicemarks, brandmarks, brand names, copyrights, registrations or applications
thereof or interests therein which any member of the Rock of Ages Group has used
or is using or the use of which is necessary for their respective Businesses.
(k) BOOKS AND RECORDS. The books, records and working papers of the
members of the Rock of Ages Group, to the extent such books and records relate
to their Businesses, are in all material respects complete and correct, have
been maintained in accordance with sound business practices, and accurately
reflect the basis for the financial condition and results of operations of the
members of the Rock of Ages Group as set forth in the Financial Statements.
(l) PERMITS, AUTHORIZATIONS, ETC. The members of the Rock of Ages
Group have all approvals, authorizations, consents, licenses, orders and other
permits of all governmental agencies, whether federal, state or local,
reasonably required to permit the operation of their Businesses as heretofore
and as presently conducted, and all of the same will survive the consummation of
the transactions contemplated by this agreement. No member of the Rock of Ages
Group has received any written notice of any license or permit which will have
to be acquired in the future in order for their Businesses to be operated by any
member thereof as heretofore and presently conducted.
(m) COMPLIANCE WITH APPLICABLE LAW. The members of the Rock of Ages
Group, have not received any written notice that they are in material violation
of any foreign or domestic (federal, state or local) law, ordinance, regulation,
order or requirement including without limitation Environmental Laws (as defined
in EXHIBIT 3.2(m)) relating to their Businesses. None of the Rock of Ages Group
have received any written notice that they or their assets used in the operation
of the Businesses of each member of the Rock of Ages Group are in violation of
any state and local building, zoning, subdivision, land use, Environmental Laws
and other laws, ordinances and regulations. There are no federal, state,
municipal, public zoning or other restrictions that will prevent the utilization
of any property owned or leased by the members of the Rock of Ages Group in
connection with their Businesses for the purposes presently used, and there are
no condemnation proceedings pending or, to the best of their knowledge,
threatened against any such property.
(n) EMPLOYEE PLANS. The Rock of Ages Group will make made available
upon request for examination by Robert Otis Childs, III true, correct and
complete copies of:
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(i) the most recent Internal Revenue Service determination
letter relating to each of the Rock of Ages Group's pension,
profit-sharing, stock bonus or other deferred compensation
arrangements, if any, for which a letter was obtained except for any
multi-employer plans sponsored by any number of the Rock of Ages
Group, (each a "Plan" and collectively the "Plans");
(ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedules of each Plan sponsored by the Rock of Ages
Group with respect to which the same are required, as filed pursuant
to applicable law; and
(iii) all plan documents, as amended to date, summary plan
descriptions and summaries of material modifications with respect to
each Plan sponsored by a member of the Rock of Ages Group, as well as
the most recent financial statements of each of such plans.
With respect to each of such Plans as to which an Annual Report (Form 5500
series) is required to be filed, no liabilities as of the date of such Annual
Report exist unless specifically referred to in the most recent such Annual
Report, and no material change has occurred with respect to the matters covered
by the last Annual Report since the date thereof. Buyer does not know, nor have
any reasonable grounds to know, of any "prohibited transaction," as such term is
defined in Section 406 of the Employee Retirement Income Security Act of 1974,
as amended, ("ERISA") and Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), which has been engaged in by any member of the Rock of
Ages Group or by any Plan sponsored by any member of the Rock of Ages Group, any
trust created thereunder or any trustee, administrator or other fiduciary
thereof, or which would subject such Plan or any such entity, or any party
dealing with such Plan or any such trust, to the sanctions imposed by ERISA or
the tax on prohibited transactions imposed by Section 4975 of the Code. There
are no actions, suits or claims pending or, to the best of Buyer's knowledge,
after due inquiry, threatened against any of the Plans or any administrator or
fiduciary thereof. Neither any of the Plans nor any said trust have incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA or Section 412(a) of the Code (whether or not waived), since the Closing
Date of ERISA. The terms and operation of each of the Plans have complied to the
extent required with the provisions of Section 401(a) of the Code and with
ERISA, and all reports and notices required by ERISA or the Code have been duly
filed or given. Buyer shall make available for examination by Robert Otis
Childs, III a list of all of the Rock of Ages Group's Plans subject to Title IV
of ERISA and all trusts created thereunder which have been terminated, and all
"reportable events," as that term is defined in Section 4043 of ERISA, if any.
Except as may be specified in Rock of Ages Group Disclosure Schedule hereto,
none of the Rock of Ages Group's Plans and no such trust has been terminated,
nor has any such "reportable event" occurred with respect to any such Plans
since the effective date of ERISA. The present value, on a plan termination
basis, of all benefits accrued under each Plan sponsored or contributed to by a
member of the Rock of Ages Group and subject to Title IV of ERISA did not, as of
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the most recent valuation date, exceed the fair market value of the assets of
such plan as of such date.
(o) INVENTORY. All of the inventory of each member of the Rock of Ages
Group consists of materials of a quality and quantity usable and salable in
accordance with such member's normal pricing and sales practices.
(p) LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. Upon the execution
of this agreement, the Rock of Ages Group will deliver on the written request of
Robert Otis Childs, III a true and complete list, which list shall be updated
and amended as of the Closing Date if requested, setting forth the following:
(i) all material intellectual property and all other
material proprietary information owned by Rock of Ages Group members,
and copies of all other material agreements to which Rock of Ages
Group members are parties which relate to any material proprietary
rights affecting their assets;
(ii) all policies of insurance insuring the Rock of Ages
Group's assets; and
(iii) all material contracts, agreements, leases,
understandings and commitments to which members of the Rock of Ages
Group are a party, or to which any of their assets are subject.
True and complete copies of all documents referred to in such list or will be
provided to Robert Otis Childs, III and his counsel upon his request as part of
Robert Otis Childs, III's due diligence. All such material contracts,
agreements, rights, leases, obligations and commitments are valid and
enforceable in accordance with their respective terms, except as such
enforceability may be affected by bankruptcy or similar laws affecting the
rights of creditors generally and by general principles of equity, for the
periods stated therein and there is not, to Buyer's knowledge, under any of them
any existing default or event of default or any event which with notice and/or
lapse of time would constitute a default.
(q) INDUSTRY AND GOVERNMENTAL EVENTS. Buyer is not aware of any future
events, loss of customers or suppliers that may materially affect the Rock of
Ages Group and/or their Businesses and financial affairs either prior to or
subsequent to the Closing Date. The Rock of Ages Group has received no written
notice of any change or any pending or contemplated condemnation or change of
zoning, subdivision, land use, environmental or other statutes, or regulations
or court or administrative rulings or other governmental action affecting the
Rock of Ages Group.
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<PAGE> 12
(r) NO DEFAULTS. There currently are no defaults by the Rock of Ages
Group or acts or events which, with the passage of time or giving of notice, or
both, could become defaults by them under any indebtedness, indenture, mortgage,
deed of trust, security deed, security agreement or other instrument.
(s) ACCURACY AND OMISSIONS. None of the information and documents
furnished or to be furnished or made available for inspection for Robert Otis
Childs, Jr. by the Rock of Ages Group pursuant to the provisions of this
agreement is or will be false or misleading, or contains or will contain any
material misstatement of fact or omits or will omit to state any material fact
required to be stated to make the statements therein not misleading.
3.3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Shareholders, jointly
and severally, make the following representations and warranties to Buyer, with
the intention that it may rely upon the same and acknowledge that the same are
true and correct and shall be true and correct at the Closing Date:
(a) ORGANIZATION, POWER, ETC. Each member of the Childs Group is a
corporation existing and in good standing under the laws of its state of
incorporation. Each member of the Childs Group has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business (hereinafter the business of each member of the Childs' Group is
sometimes referred to as its "Business" and all their businesses are sometimes
collectively referred to as the "Businesses"). The copies of Articles of
Incorporation and By-Laws, as amended to date of each member of the Childs
Group, which have been delivered by Sellers to Buyer, are complete and correct.
Neither CC nor CCT have any subsidiaries. To the best of Sellers' knowledge,
after due inquiry, each of the Joint Venture Companies are registered to do
business in each state where the nature of its business activities or the
location of its assets or employees makes such registration necessary.
(b) BINDING NATURE, EFFECT OF AGREEMENT AND AUTHORITY. Except as set
forth on Shareholders Disclosure Schedule, the execution, delivery and
performance of this agreement by Shareholders and consummation by each of them
of the transactions contemplated herein do not and will not (i) require the
consent, waiver, approval, license or authorization of any person or public
authority which will not be obtained prior to or at the Closing Date, (ii) to
the best of Shareholders' knowledge, after due inquiry, violate, with or without
the giving of notice and/or the passage of time, any provision of law applicable
to Shareholders or any member of the Childs Group, or (iii) conflict with or
result in a breach or termination of any provision of, or constitute a default
or violation under, or result in the creation of any lien, charge or encumbrance
upon any of the property or assets of Shareholders or any member of the Childs
Group pursuant to, any corporate charter provision, bylaw, mortgage, deed of
trust, indenture or other agreement or instrument, or any order or judgment, or,
to the best of Shareholders' knowledge, after due inquiry, any decree, statute,
regulation or any other restriction of any kind or character, to which
Shareholders or any member of the Childs Group are or were a party or by which
Shareholders or any member of the Childs Group or any of their assets and
properties are bound. The execution, delivery and
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<PAGE> 13
performance of this agreement by Shareholders and consummation by them of the
transactions contemplated herein have been duly authorized by all necessary
actions and this agreement constitutes the legal, valid and binding obligation
of the Shareholders enforceable against them in accordance with its terms.
(c) OUTSTANDING SECURITIES; OWNERSHIP; GOOD TITLE. The authorized
capital stock of CC consists of Five Thousand (5,000) shares of $100 par value
common stock (the "CC Common Stock"), of which Two Hundred Ten (210) shares are
duly issued and outstanding, fully paid and non-assessable; each Shareholder
presently owns Seventy (70) duly issued and outstanding shares, being all of the
issued and outstanding shares of capital stock of CC; and no other person or
entities own CC Common Stock or any securities convertible into such stock and
no warrants, options or other rights to purchase any shares of such stock are
issued and outstanding and there are no agreements in existence under which any
such stock or any such warrants, options or rights may be issued and no shares
of such stock are held in CC's treasury. The authorized capital stock of CCT
consists of Five Thousand (5,000) shares of $100 par value common stock (the
"CCT Common Stock"), of which fifteen (15) shares are duly issued and
outstanding, fully paid and non-assessable; each Shareholder presently owns five
(5) duly issued and outstanding shares being all of the issued and outstanding
shares of capital stock of CCT and no other person or entities own CCT Common
Stock or any securities convertible into such stock and no warrants, options or
other rights to purchase any shares of such stock are issued and outstanding and
there are no agreements in existence under which any such stock or any such
warrants, options or rights may be issued and no shares of such stock are held
in CCT's treasury. Shareholders have good and marketable title to all
Shareholders' CC Common Stock and CCT Common Stock, free and clear of all
pledges, adverse claims, liens, charges or encumbrances of any kind, including,
but not limited to, any claims of any former or present shareholders of CC or
CCT and have complete and unrestricted power and the unqualified right to sell,
assign, transfer, and deliver such shares of CC Common Stock and CCT Common
Stock to Buyer. Except as specifically disclosed, there is no other CC or CCT
class of stock, common or preferred, authorized or issued, and there are no
options, warrants, calls, rights, commitments or any agreements of any character
obligating CC, CCT or the Shareholders to issue, sell or otherwise dispose of
or, except as set forth herein, redeem, purchase or otherwise acquire any shares
of CC Common Stock or CCT Common Stock or any other class of capital stock. All
of the outstanding shares of CC Common Stock and CCT Common Stock are duly
authorized, validly issued, fully paid and non-assessable. There are no voting
trusts or other agreements or understandings with any entity concerning the CC
Common Stock and the CCT Common Stock to which the Shareholders or any other
person or entity are a party. The Shareholders own fifty percent (50%) of all of
the issued and outstanding capital stock of the Joint Venture Companies, except
for Carolina and Pennsylvania owns all of the issued and outstanding capital
stock of Carolina, all of said capital stock is duly issued and outstanding,
fully paid and non-assessable; there are no persons or entities which own any
securities convertible into such capital stock and no warrants, options or other
rights to purchase any shares of such capital stock are issued and outstanding;
there are no agreements in existence under which any such capital stock or any
such warrants, options or rights may be issued or sold, redeemed,
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<PAGE> 14
purchased or otherwise acquired (other than this agreement); and no shares of
such stock are held in the treasury of any Joint Venture Company. The
authorized, issued and outstanding capital stock of each of the Joint Venture
Companies is or set forth in Section 3.3 of the Shareholders's Disclosure
Schedule. The Shareholders have good and marketable title to all their capital
stock in the Joint Venture Companies, except for Carolina and Pennsylvania has
good and marketable title to all of the capital stock of Carolina, in each case
free and clear of all pledges, adverse claims, liens, agreements, charges or
encumbrances, proxies or options of any kind, including, but not limited to any
claims of former or present shareholders and have complete and unrestricted
power and the unqualified right to sell, assign, transfer and deliver such
capital stock to Buyer. There is no class of capital stock in the Joint Venture
Companies other than the class of stock currently issued and outstanding to CC
and Keystone Memorials, Inc., and in the case of Carolina to Pennsylvania,
respectively, and there are no agreements, commitments, options, warrants, calls
or rights in existence obligating the Joint Venture Companies to issue any class
of capital stock other than the class currently issued. Upon consummation of the
transactions contemplated by this agreement, Buyer will acquire, good, valid and
marketable title to the Shares, free and clear of all liens, claims, pledges,
encumbrances, charges, options, proxies or restrictions of any kind or nature.
(d) FINANCIAL STATEMENTS. Shareholders have furnished to Buyer true
and complete balance sheets of CC and CCT as of December 31, 1996 and the
related statements of operations, each dated as of December 31, 1996, and
similar financial statements for fiscal years 1994 to 1995 (the foregoing
financial data shall be collectively referred to as the "Childs Financial
Statements" and are attached hereto as EXHIBIT 3.3(d)). The balance sheets dated
as of December 31, 1996 (the "Balance Sheet Date") make full and adequate
provision for all direct and indirect material obligations and liabilities
(fixed or contingent) as of such date and CC and CCT have no direct or indirect
material obligations or liabilities (fixed or contingent) not reflected or
reserved against on such balance sheets. The Childs Financial Statements, taken
as a whole, fairly and accurately present the financial position and results of
operations of CC & CCT, in all material respects, as of the dates and for the
periods indicated and have been prepared on a consistent basis. Shareholders
have also furnished to Buyer CC and CCT's balance sheets as of May 31, 1997 and
the related statements of operations for the period then ended (the "Childs May
Financial Statements"). The Childs May Financial Statements are materially
complete and correct, taken as a whole, fairly present the consolidated
financial position and results of operations of CC and CCT in all material
respects, as of the date and for the period indicated and have been prepared on
a consistent basis. Except as disclosed in the Shareholders Disclosure Schedule,
elsewhere herein or in the Childs May Financial Statements, there have been no
material changes (other than in the ordinary course of business) in their said
obligations and liabilities since May 31, 1997. Shareholders have furnished to
Buyer the balance sheets of the Joint Venture Companies dated as of December 31,
1996, or the most recent fiscal year end and the related statements of
operations for such Companies each dated as of December 31, 1996, or the most
recent fiscal year end, including in the case of Pennsylvania the notes thereto,
and similar financial statements for the Joint Venture Companies' fiscal years
ended in 1994 to 1995 (the "JV Financial Statements"). The most recent balance
sheets for each of said corporations make
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<PAGE> 15
full and adequate provision for all direct and indirect material obligations and
liabilities (fixed or contingent) as of their date and said corporations have no
direct or indirect material obligation or liability (fixed or contingent) not
reflected or reserved against on said balance sheets. The JV Financial
Statements, taken as a whole, fairly and accurately present the financial
position and results of operations of said corporations, in all material
respects, as of the dates and periods indicated and have been prepared on a
consistent basis, except for Pennsylvania, in which case, they were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. Shareholders have also furnished Buyer the Joint Venture Companies'
unaudited internally generated balance sheets as of May 31, 1997 and the Joint
Venture Companies' unaudited internally generated related statements of
operations for the period then ended (the "JV Companies May Financial
Statements"). Subject to year end adjustments, the JV Companies May Financial
Statements are materially complete and correct, taken as a whole, fairly present
the financial position and results of operations of each said corporations in
all material respects, as of the date and for the period indicated and have been
prepared on a consistent basis, except for Pennsylvania, in which case they were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis. Except as disclosed in the Shareholders Disclosure Schedule,
elsewhere herein or in the JV Companies May Financial Statements, there have
been no material changes (other than in the ordinary course of business) in each
said corporation's obligations and liabilities since December 31, 1996.
(e) TAX MATTERS. With respect to Taxes (as defined in Clause (xiii)
hereof):
(i) Each member of the Childs Group has filed, within the
time and in the manner prescribed by law, all returns, declarations,
reports, estimates, information returns and statements ("Returns")
required to be filed under federal, state, local or any foreign laws
by each such member, and all such Returns are true, correct and
complete in all material respects.
(ii) Except as set forth in the Shareholders' Disclosure
Schedule, each member of the Childs Group has within the time and in
the manner prescribed by law, paid (and until the Closing Date will,
within the time and in the manner prescribed by law, pay) all Taxes
that are due and payable.
(iii) There are no liens for Taxes upon the assets of any
member of the Childs' Group except liens for Taxes not yet due.
(iv) No member of the Childs Group has filed (and they will
not file prior to the Closing Date) any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of any "subsection (f) asset" (as such
term is defined in Section 341(f)(4) of the Code) owned by any such
member.
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(v) No deficiency for any Taxes has been proposed, asserted
or assessed against any member of the Childs Group which has not been
resolved and paid in full.
(vi) There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect
to any Taxes or Returns that have been given by any member of the
Childs Group.
(vii) Except as set forth in the Shareholders' Disclosure
Schedule (which shall set forth the nature of the proceeding, the type
of return, the deficiencies proposed or assessed and the amount
thereof, and the taxable year in question), no federal, state, local
or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Returns.
(viii) No member of the Childs Group is a party to any
tax-sharing or allocation agreement, nor does CC, CCT or any Joint
Venture Company owe any amount under any such agreement.
(ix) Each member of the Childs Group has complied (and until
the Closing Date will comply) in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of
Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 or 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed
by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and
paid over under all applicable laws.
(x) No member of the Childs Group has ever been (nor has any
liability for unpaid Taxes because any of them once was) a member of
an "affiliated group" within the meaning of Section 1502 of the Code
during any part of any consolidated return year.
(xi) For purposes of this agreement, "Taxes" shall mean all
taxes, charges, fees, levies or other assessments of whatever kind or
nature, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated,
severance, stamp, occupancy or property taxes, customs duties, fees,
assessments or charges of any kind whatsoever (together within any
interest and any penalties, additions to tax or additional amounts)
imposed by any taxing authority (domestic or foreign) upon or payable
by the party in question or any subsidiary thereof.
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(xii) Neither CC nor CCT have any liability for any Taxes of
any of the Joint Venture Companies.
(f) TITLE TO ASSETS, ABSENCE OF LIENS AND ENCUMBRANCES. CC and CCT and
each of the Joint Venture Companies have good and marketable title to all of
their respective assets, and except as set forth in any of the financial
statements set forth in (d) above or on the Shareholders Group Disclosure
Schedule, such title is free and clear of all liens, claims and encumbrances and
rights of other parties relating to its assets or its Business. EXHIBIT 3.3(f)
sets forth an accurate and complete description of all of CC and CCT and each
Joint Venture Company's real estate and interests therein ("Childs Group's
Realty"). CC and CCT and each Joint Venture Company owns or leases all assets
and property required to operate its Business in the ordinary course and to the
extent any thereof are leased, EXHIBIT 3.3(f) sets forth the terms of such lease
and the other parties thereto, except leases which in the aggregate do not call
for lease payments in excess of $5,000 per year. No director, officer,
shareholder, or employee of CC, CCT or the Joint Venture Companies, or any
relative of any of them, owns or has owned, directly or indirectly, in whole or
in part, or leases or has leased, to CC, CCT or the Joint Venture Companies any
asset which CC, CCT or the Joint Venture Companies uses or has used or the use
of which is necessary for their Businesses.
(g) LITIGATION. Except as set forth in the Shareholders' Disclosure
Schedule, none of the members of the Childs Group nor the Shareholders have been
notified of, and none of the Companies, the Shareholders or the Joint Venture
Companies are a party to, any actions, suits, proceedings or investigations
(including any environmental, building or safety investigation) pertaining to
them or their assets or Businesses, nor do Shareholders have any knowledge of,
nor reasonable grounds to have knowledge of, any claim or state of facts which
may lead to, or constitute a threat of, any investigation, claim, proceeding, or
litigation, relating to Shareholders or any member of the Childs Group or their
assets or Business. There are no orders, judgments or decrees of any court or
governmental agency relating to Shareholders or any member of the Childs Group,
which would prevent, impede or make illegal the consummation of the transactions
contemplated herein or which would have a material adverse effect on
Shareholders or any member of the Childs Group.
(h) LABOR CONTROVERSIES. CC and CCT and the Joint Venture Companies
are not parties to collective bargaining agreements, labor agreements,
affirmative action programs or other agreements and programs affecting their
employees. To the best of Shareholders' knowledge, there are no material
controversies between CC, CCT or the Joint Venture Companies and any of their
employees, no material unresolved labor practice proceedings or disputes and no
material labor arbitration proceedings pending or threatened, and there are no
organizational efforts presently being made or, to the best of Shareholders'
knowledge after due inquiry, threatened, involving any of CC, CCT or any of the
Joint Venture Companies' non-union employees. CC, CCT and each of the Joint
Venture Companies are in compliance with all federal, state and local laws and
orders relating to the employment of labor, and all laws governing wages, hours,
collective bargaining, the payment of social security, withholding and similar
taxes, equal employment opportunity; employment
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discrimination and immigration and naturalization, and none of them is liable
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing. There is no claim of employment discrimination or sexual
harassment pending or to the best of the Shareholders' knowledge, after due
inquiry, threatened against any of the Shareholders, CC, CCT, or any of the
Joint Venture Companies or any of their officers, directors and employees nor
any strike, dispute, slowdown or stoppage pending or, to the best of
Shareholders' knowledge, threatened against or involving any of them.
(i) PATENTS, TRADEMARKS, ETC. No one has made or, to the best of the
Shareholders' knowledge, after due inquiry, threatened to make any claims that
CC, CCT or any of the Joint Venture Companies have wrongfully used or
appropriated or infringed upon, any patent, patent license, trade name,
trademark, servicemark, brandmark, brand name, copyright, know-how, trade secret
or other proprietary or trade rights of any third party. No director, officer,
shareholder or employee of CC, CCT or any of the Joint Venture Companies owns or
has owned, directly or indirectly, in whole or in part, any patents, trademarks,
trade names, servicemarks, brandmarks, brand names, copyrights, registrations or
applications thereof or interests therein which CC, CCT and the Joint Venture
Companies have used or are using or the use of which is necessary for their
Businesses.
(j) BOOKS AND RECORDS. The financial books, records and working papers
of CC and CCT are in all material respects complete and correct, have been
maintained in accordance with sound business practices, and accurately reflect
the basis for the financial condition and results of their operations as set
forth in their financial statements set forth in item (d) above. Each of the
Joint Venture Companies maintains financial books, records and working papers
which are in all material respects complete and correct, have been maintained in
accordance with sound business practices and accurately reflect the basis for
the financial condition and results of their operations as set forth in their
financial statements set forth in item (d) above.
(k) PERMITS, AUTHORIZATIONS, ETC. CC, CCT and each of the Joint
Venture Companies have all approvals, authorizations, consents, licenses, orders
and other permits of all governmental agencies, whether federal, state or local,
reasonably required to permit the operation of their Businesses as heretofore
and as presently conducted, and all of the same will survive the consummation of
the transactions contemplated by this agreement. CC and CCT have not received
any written notice of any license or permit which will have to be acquired in
the future in order for their Businesses or the Joint Venture Companies'
Businesses to be operated as heretofore and as presently conducted. Set forth in
EXHIBIT 3.3(k) is a list of all licenses, permits and approvals necessary for
CC, CCT and the Joint Venture Companies to conduct their Businesses as presently
being conducted, including all licenses and permits as are required by any
federal, state and local law, rule and regulation.
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(l) COMPLIANCE WITH APPLICABLE LAW. CC and CCT have not received any
written notice that they are and none of the Joint Venture Companies have
received any written notice that they are in violation of any foreign or
domestic (federal, state or local) law, ordinance, regulation, order or
requirement including Environmental Laws, relating to their Businesses. Neither
CC or CCT nor any of the Joint Venture Companies have received any written
notice that, Childs Group's Realty or their assets are in violation of any state
and local building, zoning, subdivision, land use, Environmental Laws and other
laws, ordinances and regulations. None of CC, CCT or the Joint Venture Companies
have received any written notice of any federal, state, municipal, public zoning
or other restrictions that will prevent the utilization of any property owned or
leased by them for the purposes presently used, and there are no condemnation
proceedings pending or, to the best of its knowledge, threatened against any
such property. CC, CCT and the Joint Venture Companies are not in violation of
any foreign or domestic (federal, state or local) law, ordinance, regulation,
order or requirement including Environmental Laws relating to their Businesses.
(m) EMPLOYEE PLANS. Shareholders have heretofore delivered to the
Buyer true, correct and complete copies of:
(i) the most recent Internal Revenue Service determination
letter relating to each of CC, CCT and each Joint Venture Company's
pension, profit-sharing, stock bonus or other deferred compensation
arrangements, if any, listed in EXHIBIT 3.3(m) hereto for which a
letter was obtained except for any multi-employer plans sponsored by
any of them (each a "Plan" and collectively the "Plans");
(ii) the most recent Annual Report (Form 5500 series) and
accompanying schedules of each Plan currently sponsored by any of
them, with respect to which the same are required, as filed pursuant
to applicable law; and
(iii) all plan documents, as amended to date, summary plan
descriptions and summaries of material modifications and all plan
termination documentation with respect to each Plan and employee
welfare plan presently or in the past sponsored by CC, CCT or any of
the Joint Venture Companies, as well as the most recent financial
statements of each of such plans, except for the multi-employer plans
referred to below.
With respect to each of such Plans as to which an Annual Report (Form 5500
series) is required to be filed, no liabilities as of the date of such Annual
Report exist unless specifically referred to in the most recent such Annual
Report, and no material change has occurred with respect to the matters covered
by the last Annual Report since the date thereof. Shareholders do not know, nor
have any reasonable grounds to know, of any "prohibited transaction," as such
term is defined in Section 406 of ERISA and Section 4975 of the Code, which has
ever been engaged in by any Shareholder, CC, CCT or any of the Joint Venture
Companies, or by any Plan sponsored by any of them, any trust created thereunder
or any
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trustee, administrator or other fiduciary thereof, or which would subject such
Plan or any such entity, or any party dealing with such Plan or any such trust,
to the sanctions imposed by ERISA or the tax on prohibited transactions imposed
by Section 4975 of the Code. There are no actions, suits or claims pending or,
to the best of Shareholders' knowledge after due inquiry, threatened, against
any of the Plans or any administrator or fiduciary thereof. Neither any of the
Plans nor any of said trusts have incurred any "accumulated funding deficiency,"
as such term is defined in Section 302 of ERISA or Section 412(a) of the Code
(whether or not waived), since the date of ERISA. The terms and operation of
each of the Plans have complied to the extent required with the provisions of
Section 401(a) of the Code and with ERISA, and all reports and notices required
by ERISA or the Code have been duly filed or given. Shareholders shall deliver
to the Buyer a list of all of CC, CCT and all the Joint Venture Companies Plans
subject to Title IV of ERISA and all trusts created thereunder which have been
terminated, and all "reportable events," as that term is defined in Section 4043
of ERISA. Except as may be specified in EXHIBIT 3.3(m) hereto, none of such
Plans and no such trust has been terminated, nor has any such "reportable event"
occurred with respect to any such Plans since the effective date of ERISA. The
present value, on a plan termination basis, of all benefits accrued under each
Plan sponsored or contributed to by CC, CCT or any of the Joint Venture
Companies and subject to Title IV of ERISA did not, as of the most recent
valuation date, exceed the fair market value of the assets of such Plan as of
such date.
CC, CCT and the Joint Venture Companies have never been sponsors of, and/or a
contributing employer to, a multi-employer pension plan subject to the
provisions of Section 4201, ET SEQ., of ERISA; or if they have, they have never
incurred any withdrawal liability thereunder, nor will they incur any such
liability as a result of the consummation of any of the transactions
contemplated by this agreement; or if they will, at or prior to the Closing
Date, they will pay or otherwise satisfy such liability in full and/or establish
an escrow fund or secure a bond in an appropriate amount with respect to the
same with an escrow agent and/or a bonding company reasonably satisfactory to
the Buyer and in a manner agreeable to applicable law. Neither CC, CCT nor any
of the Joint Venture Companies have ever been a sponsor of, or a contributing
employer to, a single employer pension plan subject to the provisions of Section
4041, ET SEQ., of ERISA; nor have they ever incurred any liability thereunder or
under Section 4062, ET SEQ., of ERISA, nor will any of them incur any such
liability as a result of the consummation of any of the transactions
contemplated by this agreement; or if any of them will, at or prior to the
Closing Date, they will pay or otherwise satisfy such liability in full and/or
establish an escrow fund or secure a bond with respect to the same as provided
in the preceding sentence.
(n) INVENTORY. All of the inventory of CC, CCT and of each of the
Joint Venture Companies consists of materials of a quality and quantity usable
and salable in accordance with each corporation's normal pricing and sales
practices.
(o) LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. Prior to the
execution of this agreement or concurrently herewith, Shareholders have
delivered or will deliver to the
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Buyer a true and complete list (designated for purposes of this agreement as
EXHIBIT 3.3(o)), which list shall be updated and amended as of the Closing Date,
setting forth the following:
(i) all intellectual property and all other proprietary
information owned by CC, CCT and each of the Joint Venture Companies,
and copies of all other material agreements to which CC, CCT and each
of the Joint Venture Companies are a party which relate to any
proprietary rights affecting their assets;
(ii) all policies of insurance insuring CC, CCT and each of
the Joint Venture Companies' assets; and
(iii) all contracts, agreements, leases, understandings and
commitments to which CC, CCT and each of the Joint Venture Companies
are a party, or to which any of their assets are subject, except those
involving not more than $5,000 on an annual basis.
True and complete copies of all documents referred to in such list have been or
will be provided to Buyer and its counsel upon their request as part of Buyer's
due diligence. All such documents, rights, leases, obligations and commitments
are valid and enforceable in accordance with their respective terms, except as
such enforceability may be affected by bankruptcy, or similar laws affecting the
rights of creditors generally and by general principles of equity, for the
periods stated therein and there is not, under any of them any existing default
or event of default or any event which with notice and/or lapse of time would
constitute a default.
(p) INDUSTRY AND GOVERNMENTAL EVENTS. Shareholders, CC, CCT and Joint
Venture Companies are not aware of any future events, loss of customers or
suppliers, that may materially affect them and/or their Businesses and financial
affairs either prior to or subsequent to the Closing Date. Neither CC, CCT nor
any Joint Venture Company has received any written notice of any change or any
pending or contemplated condemnation or change of zoning, subdivision land use,
environmental or other statutes, or regulations or court or administrative
rulings or other governmental action affecting Childs Group's Realty.
(q) NO DEFAULTS. There currently are no defaults by Shareholders, CC,
CCT or any of the Joint Venture Companies or acts or events which, with the
passage of time or giving of notice, or both, could become defaults by any of
them under any indebtedness, indenture, mortgage, deed of trust, security deed,
security agreement or other instrument, except as set forth in Exhibit 3.3(q).
(r) ACCURACY AND OMISSIONS. None of the information and documents
furnished or to be furnished or made available for inspection by Shareholders,
CC, CCT or any of the Joint Venture Companies pursuant to the provisions of this
agreement is or will be false or misleading, or contains or will contain any
material misstatement of fact or omits or
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will omit to state any material fact required to be stated to make the
statements therein not misleading.
(s) BANK DEBT OF JOINT VENTURE COMPANIES. The Bank Debt and the
obligations to Anderson Company shall not exceed Five Million Four Hundred
Eighty-Four Thousand and no/100 ($5,484,000.00) Dollars.
ARTICLE IV
PRE-ACQUISITION AND POST-ACQUISITION COVENANTS
----------------------------------------------
4.1 CONDUCT OF COMPANIES' BUSINESSES PENDING CLOSING. For the period
commencing from and after the date hereof until the Closing Date or the earlier
termination of this agreement (hereinafter referred to as the "Interim Period"),
Shareholders covenant and agree as follows:
(a) FULL ACCESS AND DUE DILIGENCE. Buyer and its respective agents and
representatives (including legal counsel and accountants) shall have full access
during normal business hours, to inspect all properties, books, records,
contracts and documents of the Childs Group used in or associated with their
Businesses and to all of their executive employees (including the opportunity to
meet with and discuss their Businesses with such employees) and to otherwise
conduct such due diligence (the "Rock of Ages Group Due Diligence") regarding
its examination of them, their Business and financial affairs as Buyer may deem
reasonably necessary and appropriate; provided, however, that the Buyer and its
representatives shall not unreasonably interfere with their operations; and each
of the Childs Group shall furnish or cause to be furnished to the Rock of Ages
Group and its authorized representatives all information with respect to their
Businesses as the Rock of Ages Group or its representatives may reasonably
request. Furthermore, Buyer, its agents and representatives, shall have the
opportunity to inspect and test any or all of each of the Childs Group's
equipment and properties as it determines in its sole discretion, at any
reasonable time, and from time to time, up to the Closing Date provided that the
Buyer makes reasonable efforts not to disrupt their Businesses and operations
when conducting such tests.
(b) BUSINESS IN THE ORDINARY COURSE. Except as specifically permitted
or required herein, during the Interim Period, the Companies' Businesses shall,
and the Shareholders shall cause the Companies' Businesses to, be conducted in
the ordinary course consistent with past practices. Except as specifically
permitted or required herein, the Companies shall not, and the Shareholders
shall cause the Companies not to, enter into any contract or commitment or
engage in any transaction that could reasonably be anticipated to (separately or
in the aggregate) materially adversely affect their financial condition or their
Businesses. If either Company desires to engage in any transaction not in the
ordinary course of business and such transaction involves consideration equal to
or greater than Ten Thousand Dollars ($10,000.00), they shall first obtain the
prior written consent of Buyer
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before entering into such transaction (which consent shall not be unreasonably
withheld); provided that in no event shall the Companies incur any obligation to
lawyers, accountants, financial advisors, environmental or other engineers,
brokers or finders in connection with the transactions contemplated by this
agreement.
(c) PRESERVATION OF ORGANIZATION. During the Interim Period,
Shareholders shall cause the Companies (i) to not make or voluntarily suffer any
change in their Articles of Incorporation or By-Laws; (ii) to make a reasonable
and diligent effort to in the ordinary course of business and to the extent
consistent with reasonable business judgment, preserve their Businesses intact;
(iii) to keep available, to the extent feasible, their present employees and
representatives; (iv) to preserve their present relationships with their
suppliers, customers, governmental agencies, and others having business
relations with them; (v) to not increase the compensation of any of their
employees or representatives or the rate of any commission that may be paid to
any such employee or representatives, nor to make any promise or undertake to
increase such compensation or rate of commission without the prior written
consent of Buyer; (vi) to not issue any capital stock or warrants, options or
rights to purchase or acquire such stock nor incur any new indebtedness; and
(vii) to not pay any dividends nor make any distributions on their capital
stock, except that Companies may pay cash dividends and make cash distributions
on their capital stock; provided that CC meets the liquidity requirements of
Section 5.2(j) of this agreement and Shareholders agree to cause CC to meet the
liquidity requirements of Section 5.2(j) of this agreement.
(d) NO DEFAULT. During the Interim Period, the Companies shall not
breach any contract, commitment or obligation to which there are a party.
(e) COMPLIANCE WITH LAWS. Each Company shall comply with all
applicable laws, rules, regulations and ordinances, as are required for the
conduct of its Business.
(f) NO ENCUMBRANCES. The Companies shall not create, voluntarily
suffer, or permit to become effective any encumbrance of any kind upon their
assets, except as specifically authorized or contemplated by this agreement.
(g) NO DISPOSITION OF ASSETS. The Companies shall not transfer, sell,
abandon, destroy, or otherwise dispose of, or enter into any contract or
agreement to sell or otherwise transfer, any of their property or assets other
than in the ordinary course of business consistent with past practices.
(h) INSURANCE. Each Company shall keep all of its assets and
properties insured against any loss, either by fire, other casualty or theft to
the extent of present coverage under present enforceable policies of insurance
coverage.
(i) TERMINATION OF EMPLOYEE PENSION BENEFIT PLANS. Prior to Closing
each of the Companies shall commence all requisite action to (a) terminate any
employee pension
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benefit plans (within the meaning of ERISA) sponsored by it; and (b) upon the
written request of Buyer, withdraw from, or cease all contributions to, any
multiple-employer or multiemployer employee pension benefit plans (within the
meaning of ERISA) in which it may participate or to which it may contribute for
the benefit of some or all of its employees; all such action to be taken in
accordance with the provisions of the respective plans and of applicable law
(including, without limitation, the Code and ERISA) and in a timely manner.
(j) NO TERMINATION OF KEY EMPLOYEES. The Companies shall not, without
the prior written consent of Buyer terminate the employment of any of their
officers or any of their other key employees.
(k) AUDIT. Shareholders will and will cause each member of Childs
Group to assist and to cooperate with Buyer's auditors, KPMG Peat Marwick, LLP,
to allow them to expeditiously complete the KPMG Audit (as hereinafter defined)
of each member of the Childs Group as Buyer deems appropriate on or before July
31, 1997.
The Companies and Shareholders will not agree to any actions by the
Joint Venture Companies which are described in subparagraphs (a) through (j)
above, which if taken by the Companies would cause them to be in violation of
said subparagraphs and the Companies' Shareholders and Rock of Ages will use
their reasonable best efforts to prevent each Joint Venture Company from taking
any actions or failing to take any actions which would violate said
subparagraphs as if each Joint Venture Company was bound thereby in the same
manner as the Companies are bound thereby.
4.2 REAL PROPERTY COVENANTS. During the Interim Period, each Company will
refrain from:
(a) performing any grading or excavation, construction, or removal of
or from its real estate, or making any other material change or improvement upon
or about its real estate, without the consent of Buyer, other than those
required to bring the same into compliance with applicable laws, rules or
regulations, or as specifically provided herein;
(b) committing or allowing any third party to commit any waste or
nuisance upon its real estate; and
(c) violating or allowing any third party to violate any Environmental
Laws with respect to its real estate.
The Companies and Shareholders will not agree to any actions by the
Joint Venture Companies which are described in subparagraph (a) through (c)
above, which if taken by them would cause them to be in violation of said
subparagraphs and the Companies and Shareholders will use their reasonable best
efforts to prevent each Joint Venture Company from taking any actions or failing
to take any actions which would violate said subparagraphs
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as if each Joint Venture Company was bound thereby in the same manner as the
Companies are bound thereby.
4.3 Purposely left Bank.
4.4 NO ENCUMBRANCES ON SHARES. Except as contemplated by this agreement,
Shareholders shall not (a) sell, transfer, pledge, assign or otherwise dispose
of or otherwise encumber any of the Shares; (b) enter into any contract, option
or other arrangement or understanding with respect to the sale, transfer,
pledge, assignment or other disposition or encumbrance of any of the Shares; or
(c) grant any proxies, deposit any Shares into a voting trust or enter into any
voting agreement with respect to any of the Shares.
4.5 RECORDS.
(a) On the Closing Date Shareholders will deliver or cause to be
delivered to Buyer all original agreements, documents, books, records and files
(collectively, "Records"), in the possession of Shareholders or any member of
the Childs Group relating to the business and operations of the Companies and
the Joint Venture Companies to the extent not then in the possession of Buyer,
subject to the following exceptions:
(i) Shareholders may retain all Records prepared in
connection with the sale of the Shares, including bids received from
other parties and analyses relating to the Companies and the Joint
Venture Companies; and
(ii) Shareholders may retain copies of any tax returns,
reports or forms, and Buyer shall be provided with the originals of
such returns, reports or forms to the extent that they relate to the
Companies or the Joint Venture Companies separate returns or separate
tax liability.
(b) After the Closing, upon reasonable written notice, Buyer and
Shareholders agree to furnish or cause to be furnished to each other and their
representatives, employees, counsel and accountants access, during normal
business hours, such information (including Records pertinent to the Companies
and the Joint Venture Companies) and assistance relating to the Companies and
the Joint Venture Companies as is reasonably necessary for financial reporting
and accounting matters, the preparation and filing of any Returns, reports or
forms or the defense of any tax claim or assessment; PROVIDED, HOWEVER, that
such access does not unreasonably disrupt the normal operations of Buyer, the
Companies or the Joint Venture Companies.
4.6 ACCESS TO AND INFORMATION CONCERNING REAL PROPERTY. Shareholders agree
to cause the Companies and the Joint Venture Companies, during the Interim
Period, to allow Buyer and its agents access to the Childs Realty during regular
business hours upon reasonable prior notice, for purposes of inspecting and
testing the same or any part thereof as the other shall reasonably request. The
Shareholders agree to cause the Childs Group agree to
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furnish to Buyer any and all information regarding ownership of Childs Group and
their Businesses that the Buyer shall reasonably request from time to time.
Buyer agrees to indemnify and hold the Childs Group harmless from all claims,
suits, damages, and losses arising from the its inspection or testing of the
said real property, which indemnity shall survive termination of this agreement.
4.7 ENVIRONMENTAL AND ENGINEERING MATTERS. The Rock of Ages Group may,
prior to the Closing Date, perform whatever environmental and engineering tests,
searches or inspections of the Childs Group's Realty which it desires to
perform. In addition to any testing which may be performed:
(a) Upon or prior to the execution of this agreement Buyer shall hire
a certified environmental engineering firm at its own cost and expense
("Environmental Engineer"), to perform a Level I environmental audit of Childs
Group's Realty and at its option a Level II environmental audit of Childs
Group's Realty. Such Environmental Engineer shall address and certify his
environmental report to the Buyer. If the report issued by the Environmental
Engineer recommends or requires further testing and/or the removal or treatment
of any Hazardous Material (as defined in EXHIBIT 3.2(m)), or if any engineer
hired by the Buyer determines an environmental problem exists on Childs Group's
Realty, or recommends further testing and/or the removal or treatment of any
Hazardous Material on any portion of Childs Group's Realty, such testing,
removal, repair or treatment of Hazardous Material or the correction of the
environmental problem shall be at the sole cost and expense of CC, CCT or the
Joint Venture Company involved (the "Environmental Work") (and the Shareholders
shall cause CC, CCT or such Joint Venture Company to pay such costs and
defenses), and shall be completed to the sole satisfaction of the Rock of Ages
Group and its engineers and financing institutions as evidenced by a report from
an engineer acceptable to them which indicates that the Hazardous Materials have
been brought into compliance with Environmental Laws, or the environmental
problem has been corrected. If CC, CCT or the Joint Venture Company involved
fails to perform the Environmental Work, to the satisfaction of the Rock of Ages
Group and its financing institutions, the Buyer shall have the right to
terminate this agreement. Shareholders shall cause any Environmental Work, to be
completed, as expeditiously as possible, but in any event, the Environmental
Work shall be completed within thirty (30) days from receipt of written notice
from the Buyer that it requires the performance of Environmental Work.
Notwithstanding the foregoing, if the Environmental Engineer estimates that the
cost for completing the Environmental Work would be equal to or greater than Two
Hundred Thousand Dollars ($200,000.00), in the aggregate including one-half
(1/2) of the cost of any work for the Joint Venture Companies, Shareholders may
by ten (10) days prior written notice terminate this agreement without incurring
any obligation or liability to Buyer as a result of such termination; provided,
however that Shareholders shall have no such right of termination if a member of
the Rock of Ages Group agrees in writing within ten (10) days of receipt of
Shareholders' said notice to reimburse CC, CCT or the Joint Venture Company
involved for the portion of the Environmental Work exceeding Two Hundred
Thousand Dollars ($200,000.00), and in such event, as set forth
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above, Shareholders shall pay the first Two Hundred Thousand Dollars
($200,000.00) of the cost of such work..
(b) The Rock of Ages Group has previously had Level I environmental
audits conducted on the Rock of Ages Realty.
4.8 COVENANTS RELATING TO TAXES.
(a) LIABILITY FOR TAXES. Shareholders shall be liable for and
indemnify Buyer for all Taxes imposed on the Companies for which the Companies
may otherwise be liable for any taxable year or period that ends on or before
the Closing Date and, with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable year or
period ending on and including the Closing Date. Shareholders shall be entitled
to any refund of Taxes of the Companies received for such periods.
(b) TAX LIABILITY OF BUYER. Buyer shall be liable for and indemnify
Shareholders for the Taxes of the Companies for any taxable year or period that
begins after the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year or period beginning after the Closing Date. Buyer shall be entitled to any
refund of Taxes of the Companies received for such periods.
(c) TAXES FOR SHORT TAXABLE YEAR. For purposes of Section 4.8(a) and
(b), whenever it is necessary to determine the liability for Taxes of the
Companies for a portion of a taxable year or period that begins before and ends
after the Closing Date, the determination of the Taxes of the Companies for the
portion of the year or period ending on, and the portion of the year or period
beginning after, the Closing Date shall be determined by assuming that the
Companies had a taxable year or period which ended at the close of the Closing
Date, except that exemptions, allowances or deductions that are calculated on an
annual basis, such as the deduction for depreciation, shall be apportioned on a
time basis.
(d) TAX REFUNDS. To the extent that they arise as a result of
transactions or activities occurring after the Closing Date, Buyer shall cause
the Companies to retain all federal, state, local and foreign income tax
refunds, including interest, with respect to periods ended as of or prior to the
close of business on the Closing Date.
(e) ASSISTANCE AND COOPERATION. After the Closing Date, Buyer and
Shareholders shall each:
(i) assist the other party in the preparation of any Returns
which such other party is responsible for preparing and filing in
accordance with this Section 4.8;
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(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Returns of the
Companies;
(iii) make available to the other party and to any taxing
authority as reasonably requested all information, records, and
documents relating to Taxes of the Companies;
(iv) provide timely notice to the other party in writing of
any pending or threatened tax audits of or assessment against the
Companies for taxable periods for which the other party may have a
liability under this Section 4.8; and
(v) furnish the other party with copies of all
correspondence received from any taxing authority in connection with
any tax audit or information request with respect to any such taxable
period.
(f) SURVIVAL OF OBLIGATIONS. The obligations of the parties set forth
in this Section 4.8 shall be unconditional and absolute and shall remain in
effect without limitation as to time irrespective of any other provision of this
agreement.
(g) TRANSFER AND GAINS TAXES. Shareholders shall be liable for and pay
all stamp, transfer, documentary, sales, use, registration, gains and other such
taxes and fees (including any penalties and interest) incurred in connection
with this agreement and the transaction contemplated hereby.
(h) ELECTION FOR SHORT TAXABLE YEAR UNDER NORMAL TAX ACCOUNTING RULES.
Shareholders and Buyer agree that each of the Companies which is an S.
Corporation under the Code shall make the election under Section 1362(e)(3) of
the code to have each of the Companies items of income, loss, etc., assigned to
the short taxable year of the Companies caused by such election under normal tax
accounting rules and Shareholders agree that they will, and will cause any other
shareholder who was a shareholder at the time during the Companies short years
ending on the Closing Date, to consent to said election and Buyer agrees to
consent to said election.
4.9 NOTIFICATION OF CERTAIN MATTERS. Shareholders shall give prompt notice
to Buyer of: (a) any notice of, or other communication relating to, a default or
event that, with notice or lapse of time or both, would become a default,
received by Shareholders, the Companies or the Joint Venture Companies
subsequent to the date of this agreement and prior to the Closing Date, under
any contract material to the Companies or the Joint Venture Companies to which
Shareholders, the Companies or any of the Joint Venture Companies is a party or
is subject; and (b) any material adverse change in the condition, financial or
otherwise, assets, properties, liabilities, results of operations or prospects
of the Companies or the Joint Venture Companies or the occurrence of any event
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in any such change. Each of Shareholders and Buyer
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shall give prompt notice to the other party of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transaction contemplated by this agreement.
4.10 CONSULTING AGREEMENTS AND EMPLOYMENT AGREEMENTS. At the Closing,
Robert Otis Childs, Jr. and Bernita Childs agree to enter into Consulting
Agreements in the forms attached hereto as EXHIBIT 2.3 and Robert Otis Childs,
III and Timothy Carroll Childs agree to enter into the Employment Agreement in
the forms attached hereto as EXHIBIT 2.1 and EXHIBIT 2.4, respectively.
4.11 SECURITIES LAW COMPLIANCE.
(a) Buyer shall cause to be prepared and filed such applications,
forms, statements, if any, as are required under Federal securities laws to
cover the issuance of Buyer's Common Stock to Robert Otis Childs, III as
provided for in Article I at the Closing.
(b) Buyer will take any action required to be taken under applicable
state securities laws and Buyer will also take action to secure all necessary
exemptions or clearances under all state securities laws applicable to the
issuance of Buyer's Common Stock to Robert Otis Childs, III pursuant hereto.
(c) Buyer will deliver to Robert Otis Childs, III copies of any
filings made by Buyer pursuant to this Section 4.11.
4.12 THIRD PARTY CONSENTS. All parties to this agreement shall use their
best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and approvals from third parties or
governmental authorities necessary to consummate this agreement and the
transactions contemplated hereby and each party to this agreement will use its
best efforts to cause the Closing to occur.
4.13 CERTAIN LIFE INSURANCE POLICIES. Shareholders shall cause CC prior to,
or at the Closing, to transfer certain life insurance policies, listed on
EXHIBIT 4.13, owned by it on the lives of Robert Otis Childs, III and Timothy
Carroll Childs to each of them.
4.14 COOPERATION. Shareholders shall reasonably cooperate with Buyer with
respect to the release or discharge contemplated by Section 5.1(g) and 5.2(k).
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ARTICLE V
CONDITIONS TO COMPLETION OF CLOSING
-----------------------------------
5.1 CONDITIONS TO SHAREHOLDERS' OBLIGATIONS. The obligations of
Shareholders under this agreement to consummate the transaction provided for
herein are subject to the fulfillment of each of the following conditions prior
to the completion of the Closing, except to the extent Shareholders may, in
their absolute discretion, waive anyone or more thereof, in whole or in part:
(a) The representations and warranties by Buyer to Shareholders and,
if applicable, to Robert Otis Childs, III, respectively, in this agreement shall
be true and correct, in all material respects as of the Closing Date, with the
same force and effect as though such representations and warranties had been
made on the Closing Date, Buyer shall have performed in all material respects
all its obligations, covenants and agreements set forth herein; and Shareholders
shall have received a certificate of an executive officer of Buyer to such
effect; provided, however, that changes in said representations, warranties,
covenants and agreements occurring because of Buyer's conduct of its business in
the ordinary course or occurring because of the Proposed Transactions shall not
be considered a breach of, or default in, any of Buyer's representations,
warranties, covenants and agreements set forth in this agreement for purpose of
this Section 5.1(a) or for any other purpose under this agreement.
(b) There shall have been delivered to Shareholders an opinion of
counsel for Buyer, reasonably satisfactory in form and substance to counsel for
Shareholders, to the effect that Buyer is a corporation existing and in good
standing under the laws of its state of incorporation; that all necessary
corporate proceedings of Buyer have been duly taken to authorize this agreement
and the transactions contemplated hereby; that this agreement constitutes
Buyer's legal, valid, and binding obligation, enforceable against Buyer in
accordance with its terms; that shares of Buyer's Common Stock, if any,
delivered to Robert Otis Childs, III pursuant to this agreement will be duly
authorized, validly issued, fully paid, and nonassessable shares of Buyer's
Common Stock; that this agreement does not, and the carrying out of the
transaction herein provided for will not, to the best of such counsel's
knowledge, violate any charter or other corporate restriction to which Buyer is
subject or any other agreement or instrument to which it is a party or by which
it is bound.
(c) The Employment Agreements, substantially in the forms attached as
EXHIBIT 2.1 and EXHIBIT 2.4 and the Consulting Agreements substantially in the
forms attached as EXHIBIT 2.3 shall be executed by Buyer.
(d) The Stock Subscription Agreement substantially in the form
attached as EXHIBIT 2.2 shall be executed by Buyer.
(e) Buyer shall have delivered to Shareholders a certificate
certifying it has completed all the Rock of Ages Group Due Diligence it desires
to conduct, is satisfied, in its
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sole discretion, with the results thereof and as a consequence thereof it
desires to consummate the transactions contemplated by this agreement.
(f) Buyer shall have delivered to Shareholders its Secretary's
Certificates having attached thereto copies of its Articles of Incorporation and
Bylaws, as amended to date and a list of their officers and directors.
(g) Any guaranties by Shareholders of any indebtedness of CC, CCT or
any of the Joint Venture Companies shall have been released and discharged or
provisions for the future release and discharge thereof shall have been made; if
, in the latter case, agreed to by the parties.
(h) All Schedules and Exhibits to be attached to their agreement were
attached to this agreement upon its execution or have been attached pursuant to
Section 8.12.
5.2 CONDITIONS TO THE ROCK OF AGES GROUP'S OBLIGATIONS. The obligations of
Buyer under this agreement to consummate the transactions provided for herein
are subject to the fulfillment of each of the following conditions prior to the
completion of the Closing, except to the extent that Buyer may, in its absolute
discretion, waive any one or more hereof, in whole or in part:
(a) The representations and warranties by Shareholders shall be true
and correct, in all material respects, as of the completion of the Closing Date,
with the same force and effect as though such representations and warranties had
been made on the Closing Date; Shareholders shall have performed, in all
material respects, all their obligations, covenants and agreements set forth
herein; Shareholders have not breached any of their covenants or agreements set
forth herein, and Buyer shall have received certificates from Shareholders to
such effect.
(b) There shall have been delivered to Buyer an opinion of counsel for
the Shareholders, and the Childs Group, reasonably satisfactory in form and
substance to counsel for Buyer, to the effect that:
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(i) that this agreement has been duly executed and delivered
by the Shareholders and constitutes their legal, valid and binding
obligation enforceable in accordance with its terms; and the Shares
are owned by Shareholders free and clear of all liens, claims,
pledges, encumbrances, charges, options, proxies or restrictions of
any kind or nature and Shareholders have complete and unrestricted
power and the unqualified right to sell, assign, transfer and deliver
the Shares to Buyer; upon consummation of the transactions
contemplated by this agreement, Buyer will acquire good, valid and
marketable title to the Shares, free and clear of all liens, claims
pledges, charges, options, proxies or restrictions of any kind or
nature; this agreement does not, and the carrying out of the
transactions herein provided for will not, to the best of such
counsel's knowledge, violate any agreement or instrument to which any
Shareholders or any member of the Childs' Group, are a party or by
which it or they are bound;
(ii) Each member of the Childs Group has been duly organized
and is in good standing in its state of incorporation, and is in good
standing as a foreign corporation in each other state where it is
qualified to do business, or where the nature of its business requires
such qualification and the capitalization of each member of the Childs
Group is as set forth in Section 3.3(c) and Section 3.3(c) of the
Shareholders Disclosure Group;
(iii) Each member of the Childs Group's capital stock has
been duly authorized, validly issued, and is fully paid and
non-assessable; this agreement and the transactions contemplated
hereby do not conflict with, breach, or constitute a default under,
the organizational documents of any member of the Childs Group or any
corporate restriction, contracts, laws or regulations applicable to
any member of the Childs Group the capital stock of which is being
acquired pursuant to this agreement; and no consents or approvals of
any governmental entity or other third party are required for the
valid execution, delivery or performance of this agreement or the
transactions contemplated by this agreement; and to counsel's best
knowledge, there is no pending or threatened litigation against the
Shareholders or any member of the Childs Group which would have a
material adverse effect on this agreement or the transactions
contemplated by this agreement, or would have a material adverse
effect on the Business operations or financial condition of any member
of the Childs Group.
(c) Robert Otis Childs, III shall have executed his Employment
Agreement substantially in the form attached as EXHIBIT 2.1;
(d) Robert Otis Childs, III shall have executed the Stock Subscription
Agreement substantially in the form attached as EXHIBIT 2.2.
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(e) Robert Otis Childs, Jr. and Bernita Y. Childs shall have executed
their Consulting Agreements substantially in the forms attached as EXHIBIT 2.3
and Timothy Carroll Childs shall have executed his Employment Agreement in
substantially in the form attached as EXHIBIT 2.4.
(f) Prior to the Closing Date, Buyer shall have received the consent
of CIT Group/Business Credit, Inc. ("CIT/BC") to this agreement and the
transactions contemplated herein and shall have received from CIT/BC credit
facilities, satisfactory to Buyer, in its sole discretion, or shall have
received IPO proceeds sufficient to provide the funds required for Buyer to pay
the cash portion of the Purchase Price.
(g) There shall be no uncompleted Environmental work on Childs Group's
Realty and the Shareholders shall have paid to CC, CCT or the applicable Joint
Venture Company or Joint Venture Companies any amounts which they have agreed to
pay in respect of environmental work pursuant to Section 4.7(a).
(h) Shareholders shall have delivered to Buyer a Certificate having
attached thereto copies of CC, CCT and the Joint Venture Companies Articles of
Incorporation and Bylaws, as amended to date and an incumbency certificate for
their officers and directors and the resignations of such of the officers and
directors thereof as Buyer shall request in writing.
(i) Shareholders shall own on the Closing Date fifty percent (50%) of
the issued and outstanding capital stock of each of the Joint Venture Companies
except that Pennsylvania will on the Closing Date own all of the issued and
outstanding capital stock of Carolina.
(j) At the Closing the sum of CC's cash, accounts receivable,
inventory (valued at full cost or market, whichever is lower, as determined by
the KMPG Peat Marwick, LLP audit, updated to the Closing Date the "KMPG Audit")
exceeds the sum of CC's accounts payable, accrued payroll and current tax
liabilities (the "Current Tax Liabilities") and notes payable (excluding from
the amount of the notes payable for this purpose any notes payable to Robert
Otis Childs, Jr., Robert Otis Childs, III, Timothy Carroll Childs or Bernita Y.
Childs), by at least Four Hundred Thousand Dollars ($400,000.00).
(k) Any personal guaranties by the Shareholders of indebtedness of CC,
CCT and the Joint Venture Companies or their obligation to pay any such
indebtedness shall have been released or discharged or provisions for the future
release and discharge thereof shall have been made, if agreed to by the parties
in the latter case, shall have been made on terms satisfactory to Buyer, in its
sole discretion.
(l) All Schedules and Exhibit to be attached to this agreement were
attached to this agreement upon its execution or have been attached pursuant to
Section 8.12.
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5.3 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party under this agreement to consummate the transactions provided for
herein shall be subject to the fulfillment of all of the following conditions
precedent at or prior to the Closing Date:
(a) No injunction or other or decree shall have been issued by any
competent Federal or state court which prevents the consummation of the
transactions provided for in this agreement and no inquiry shall have been
received from, nor shall any investigation or proceeding have been instituted
by, any governmental agency seeking to prohibit said transactions and the
transactions provided for in this agreement or asserting that the same breach or
violate any material statute, rule or regulation.
(b) No statute or regulation has been enacted which would prevent
consummation of the transactions provided for in this agreement.
(c) All governmental consents, approvals and filings required to
consummate the transactions provided for in this agreement have been obtained or
made.
ARTICLE VI
TERMINATION
-----------
6.1 TERMINATION OF AGREEMENT. This agreement and the transactions
contemplated herein may be terminated as follows:
(a) By mutual written consent of Buyer and Shareholders.
(b) By the Shareholders pursuant to written notice delivered after
September 1, 1997 if any of those conditions set forth in Sections 3.1 or 3.3
have not been satisfied by such date (unless the non-satisfaction of such
conditions is due to the breach or default by Shareholders under this
agreement), or, delivered at any time prior to the Closing, if the Buyer has
failed in any material respect to perform its Covenants as set forth in Article
IV or if the Buyer has materially breached any of its representations and
warranties as set forth in Section 3.2.
(c) By Buyer pursuant to written notice delivered after September 1,
1997 if any of those conditions set forth in Sections 3.2 or 3.3 have not been
satisfied by such date (unless the non-satisfaction of such conditions is due to
the breach or default by Buyer under this agreement), or delivered at any time
prior to the Closing if Shareholders have failed in any material respect to
perform any Covenants as set forth in Article IV or if Shareholders have
materially breached any of their representations and warranties as set forth in
Section 3.3.
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(d) By either Buyer or Shareholders, pursuant to written notice
delivered prior to the Closing, if (i) any governmental or regulatory body, the
consent of which is a condition to the obligations of Buyer and Shareholders to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent and all appeals of such determination shall have been taken
and have been unsuccessful, or (ii) any court of competent jurisdiction in the
United States or any state shall have issued an order, judgment or decree (other
than a temporary restraining order) restraining, enjoining or otherwise
prohibiting the transaction provided for in this agreement and such order,
judgment or decree shall have become final and nonappealable.
6.2 CONSEQUENCES OF TERMINATION. In the event of termination of this
agreement, it shall forthwith become void and there shall be no liability on the
part of Buyer or Shareholder (except as set forth below in this Section 6.2 or
Section 8.2 hereof) and each party hereto shall return to the others all
documents and materials obtained from it or them in connection with the
transactions contemplated by this agreement. In the event of termination under
Section 6.1(a), the parties shall be deemed to have released each other from any
liability arising from the termination of this agreement. In the event of
termination under Section 6.1(b), (c) or (d), the parties shall retain all
rights and remedies, if any, pertaining to any claim for breach of this
agreement.
ARTICLE VII
INDEMNIFICATION
---------------
7.1 SHAREHOLDERS GENERAL INDEMNIFICATION COVENANTS. Subject to the
provisions of Sections 7.3 and 7.4, Shareholders shall indemnify, save and keep
Buyer and its parent, subsidiaries (including the members of the Childs Group if
the Closing has occurred), affiliates, successors and permitted assigns (the
"Buyer Indemnities"), harmless against and from all liability, demands, claims,
actions or causes of action, assessments, losses, fines, penalties, costs,
damages and expenses, including reasonable attorneys' fees, disbursements and
expenses (collectively, "Damages"), sustained or incurred by any of the Buyer
Indemnities as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation, or non-fulfillment
of any agreement or covenant on the part of Shareholders, whether contained in
this agreement or any exhibit or schedule hereto or any written statement or
certificate furnished or to be furnished to Buyer pursuant hereto or in any
closing document delivered by Shareholders in connection herewith.
7.2 SHAREHOLDERS TAX INDEMNITY.
(a) Shareholders hereby agree to pay, indemnify, defend and hold the
Buyer Indemnities harmless from and against any and all Taxes of the
Shareholders' or the Companies with respect to any period (or any portion
thereof) up to and including the Closing
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Date, together with all reasonable legal fees, disbursements and expenses
incurred by the Buyer Indemnities in connection therewith.
(b) Shareholders shall prepare and file any Return of CC and CCT which
is required to be filed after the Closing Date and which relates to any period
(or portion thereof) up to and including the Closing Date, and Shareholders
shall, within forty-five (45) days prior to the due date of any such Return,
deliver a draft copy to Buyer. Within thirty (30) days of the receipt of any
such Return, Buyer may reasonably request changes, in which event Buyer and
Shareholders shall attempt to agree on a mutually acceptable resolution of the
issues in dispute. If a resolution is reached, such Return shall be filed in
accordance therewith. If a resolution is not reached, then at the expense of
Buyer and Shareholders (such expense to be shared equally), such Return shall be
submitted to a firm of independent certified public accountants selected by
Buyer and reasonably acceptable to Shareholders, which shall be directed to
resolve the issues in dispute and prepare the Return for filing. As soon as is
practicable after notice from Buyer to Shareholders at any time prior to the
date any payment for Taxes by Buyer attributable to any such Return is due,
provided such Return is prepared for filing in accordance with the foregoing, an
amount equal to the excess, if any, of (i) Taxes that are due with respect to
any taxable period ending on or before the Closing Date, or taxes that would
have been due with respect to a taxable period beginning before and ending after
the Closing Date if such period has ended on the Closing Date over (ii) the
amount of such Taxes of CC and CCT and their subsidiaries with respect to such
taxable period which are reflected as current tax liabilities on the KMPG Audit
shall be paid by Shareholders to Buyer by wire transfer of immediately available
funds within three (3) business days after the determination of said amount is
made.
(c) The indemnity provided for in this Section 7.2 shall be
independent of any other indemnity provision hereof and, anything in this
agreement to the contrary notwithstanding, shall survive until the expiration of
the applicable statutes of limitation for the Taxes referred to herein, and any
Taxes subject to the indemnification for Taxes set forth in this Section 7.2
shall not be subject to the provisions of Sections 7.1 or 7.4 hereof.
7.3 LIMITATIONS ON SHAREHOLDER INDEMNIFICATION. The obligations of
Shareholders pursuant to Sections 7.1 and 7.2 are subject to the following
limitations:
(a) In no event shall the obligation of Shareholders to indemnify the
Buyer Indemnities pursuant to Section 7.1 exceed the Purchase Price in the
aggregate; provided, however, that such limitation shall not apply to any
indemnification obligations of Shareholders under Section 7.2; and
(b) Shareholders shall not have any indemnification obligation with
respect to the first $10,000.00 of total liabilities incurred under Sections 7.1
and 7.2, unless the total aggregate liabilities of Shareholders under Sections
7.1 and 7.2 equal or exceed such amount, in which case the indemnification
obligations of Shareholders will include all liabilities in excess of One Dollar
($1.00) incurred under Sections 7.1 and 7.2 (subject only, in the case of
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liabilities incurred under Section 7.1, to the maximum aggregate amount set
forth in Section 7.3(a) above).
7.4 CONDITIONS OF SHAREHOLDERS INDEMNIFICATION PURSUANT TO SECTION 7.1.
(a) Promptly following the receipt by an Buyer Indemnitee of notice of
a demand, claim, action, assessment or proceeding made or brought by a third
party, including a governmental agency (a "Third Party Claim"), the Buyer
Indemnitee receiving the notice of the Third Party Claim (i) shall notify
Shareholders of its existence, setting forth the facts and circumstances of
which such Buyer Indemnitee has received notice, and (ii) if the Buyer
Indemnitee giving such notice is a person entitled to indemnification under this
Article VII (an "Indemnified Party"), specifying the basis hereunder upon which
the Indemnified Party's claim for indemnification is asserted.
(b) The Indemnified Party shall, upon reasonable notice by
Shareholders, tender the defense of a Third Party Claim to Shareholders. If
Shareholders accepts responsibility for the defense of a Third Party Claim, then
Shareholders shall have the exclusive right to contest, defend and litigate the
Third Party Claim and shall have the exclusive right, in Shareholders'
discretion exercised in good faith and upon the advice of counsel, to settle any
such matter, either before or after the initiation of litigation, at such time
and upon such terms as Shareholders deem fair and reasonable, provided that at
least ten (10) days prior to any such settlement, Shareholders shall give
written notice of Shareholders' intentions to settle to the Indemnified Party.
The Indemnified Party shall have the right to be represented by counsel at its
own expense in any defense conducted by Shareholders.
(c) Notwithstanding the foregoing, in connection with any settlement
negotiated by Shareholders, no Indemnified Party shall be required to (i) enter
into any settlement (A) that does not include the delivery by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim or litigation, (B) if the Indemnified Party shall, in writing to
Shareholders within the ten (10) day period prior to such proposed settlement,
disapprove of such settlement proposal and desire to have Shareholders tender
the defense of such matter back to the Indemnified Party, or (C) that requires
an Indemnified Party to take any affirmative actions as a condition of such
settlement, or (ii) consent to the entry of any judgment that does not include a
full dismissal of the litigation or proceeding against the Indemnified Party
with prejudice; provided, however, that should the Indemnified Party disapprove
of a settlement proposal pursuant to Clause (B) above, the Indemnified Party
shall thereafter have all of the responsibility for defending, contesting and
settling such Third Party Claim but shall not be entitled to indemnification by
Shareholders to the extent that, upon final resolution of such Third Party
Claim, Shareholders' liability to the Indemnified Party but for this proviso
exceeds what Shareholder's liability to the Indemnified Party would have been if
Shareholder were permitted to settle such Third Party Claim in the absence of
the Indemnified Party exercising its right under Clause (B) above.
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(d) If, in accordance with the foregoing provisions of this Section
7.4, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if Shareholders shall fail to accept the defense of a Third
Party Claim which has been tendered in accordance with this Section 7.4, the
Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle is given to Shareholders.
If, pursuant to this Section 7.4, the Indemnified Party so defends or settles a
Third Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by Shareholders
for the reasonable attorneys' fees and other expenses of defending the Third
Party Claim which are incurred from time to time, forthwith following the
presentation to Shareholders of itemized bills for said attorneys' fees and
other expenses. No failure by Shareholders to acknowledge in writing
Shareholders' indemnification obligations under this Article VII shall relieve
Shareholder of such obligations to the extent they exist.
7.5 CERTAIN TAX AND OTHER MATTERS.
(a) If, in connection with the audit of any Return, a proposed
adjustment is asserted in writing with respect to any Taxes of CC and CCT for
which Shareholders is required to indemnify a Buyer Indemnitee pursuant to
Section 9.2(a) hereof, Buyer shall notify Shareholders of such proposed
adjustment within twenty (20) days after the receipt thereof. Upon notice to
Buyer within twenty (20) days after receipt of the notice of such proposed
adjustment from Buyer, Shareholders may assume (at Shareholders' own cost and
expense) control of and contest such proposed adjustment.
(b) Alternatively, if Shareholders request within twenty (20) days
after receipt of notice of such proposed adjustment from an Buyer Indemnitee,
Buyer or the Buyer Indemnitee involved at Buyer's option, as the case may be,
shall contest such proposed adjustment. Shareholder shall be obligated to pay
all reasonable out-of-pocket costs and expenses (including legal fees and
expenses) which Buyer may incur in so contesting such proposed adjustment as
such costs and expenses are incurred, and Buyer shall have the full right to
contest such proposed adjustment and shall be entitled to settle or agree to pay
in full such proposed adjustment (in its sole discretion) and thereafter pursue
its rights under this agreement. Shareholders shall pay to Buyer all indemnity
amounts in respect of any such proposed adjustment within thirty (30) days after
written demand to Shareholders therefor, or, if Shareholders have assumed
control of the contest of such proposed adjustment as provided above (or have
requested Buyer to contest such proposed adjustment within the time provided
above), within thirty (30) days after such proposed adjustment is settled or a
Final Determination has been made with respect to such proposed adjustment.
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(c) For purposes of this Section 7.5, a "Final Determination" shall
mean (i) the entry of a decision of a court of competent jurisdiction at such
time as an appeal may no longer be taken from such decision or (ii) the
execution of a closing agreement or its equivalent between the particular
taxpayer and the Internal Revenue Service, as provided in Section 7121 and
Section 7122, respectively, of the Internal Revenue Code of 1986, as amended, or
a corresponding agreement between the particular taxpayer and the particular
state or local taxing authority. The obligation of Shareholders to make any
indemnity payment pursuant to Section 7.2(a) shall be premised on the receipt by
Shareholders from Buyer of a written notice setting forth the relevant portion
of any Final Determination, and in cases where the amount of the indemnity
payment exceeds $100,000.00, a certified statement by Buyer's nationally
recognized accounting firm setting forth the amount of the indemnity payment
(and in all other cases, a similar statement certified by the chief financial
officer of Buyer) and describing in reasonable detail the calculation thereof.
7.6 INDEMNITY FUND. Buyer will withhold Two Hundred Fifty Thousand Dollars
($250,000.00) of the Purchase Price and hold it as a fund (the "Indemnity Fund")
for the payment of any Taxes required to be paid by Shareholders under Section
7.2 or any Damages required to be paid by Shareholders under Section 7.1. Robert
Otis Childs, Jr. will contribute Eighty-Three Thousand Three Hundred
Thirty-Three Dollars ($83,333.00) of his share of the Purchase Price to the
Indemnity Fund, Timothy Carroll Childs will contribute Eighty-Three Thousand
Three Hundred Thirty-Three Dollars ($83,333.00) of his share of the Purchase
Price to the Indemnity Fund and Robert Otis Childs, III will contribute
Eighty-Three Thousand Three Hundred Thirty-Three Dollars ($83,333.00) of Buyer's
Common Stock, along with Assignments Separate From Certificate assigning said
stock to Buyer, if he receives said stock as part of the Purchase Price pursuant
to Section 1.6 hereof, and if he does not receive said stock as part of the
Purchase Price or if he is prevented by law, the rules and regulations of the
Securities and Exchange Commission or agreements with Buyer's underwriters or
investment bankers from contributing said stock he will contribute Eighty-Three
Thousand Three Hundred Thirty-Three Dollars ($83,333.00) of his share of the
cash Purchase Price to the Indemnity Fund. Each of the amounts so contributed by
each of the Sellers is herein sometimes referred to as the "Seller's
Contribution to the Indemnity Fund".
If any claim for Taxes or Damages (a "Claim" or "Claims") is received
by a Buyer Indemnitee within one (1) year of the Closing Date, Buyer will be
entitled to deduct the amount thereof from the Indemnity Fund and to hold said
amount in reserve until liability for the Claim is resolved pursuant to the
provisions of this Article VII.
When the Buyer Indemnitee liability for a Claim (the "Claim
Liability") has been determined pursuant to the provisions of this Article VII,
Buyer shall deduct the amount so determined from the amounts reserved for it and
if necessary any additional amounts from the Indemnity Fund necessary to pay the
Claim Liability. Buyer shall send Sellers written notice at least ten (10) days
prior to paying the Claim Liability.
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On the date which is one (1) year after the Closing Date, Buyer will
forward its check to each of the Sellers for the amount of each's Seller's
Contribution to the Indemnity Fund not already deducted from the Indemnity Fund
for Claims paid from the Fund or held in reserve in the Indemnity Fund against
Claims asserted against the Buyer Indemnities. Thereafter, at the end of each
calendar quarter occurring after the first payment, Buyer will forward to each
Seller any amounts released from the reserve because Claims were determined not
to be payable. Buyer will pay interest at the rate of five (5%) percent simple
interest on the Indemnity Fund, less amounts therein reserved for claims,
payable quarterly at Shareholders' request to Robert Otis Childs, Jr.
Each Seller's Contribution to the Indemnity Fund shall be prorata
liable for all Claims Buyer may pay from the Indemnity Fund.
7.7 CERTAIN COMPANIES' INFORMATION. Buyer and Shareholders agree to furnish
or cause to be furnished to each other (at reasonable times and at no charge)
upon request as promptly as practicable such information (including access to
books and records) pertinent to the Companies and assistance relating to the
Companies as is reasonably necessary for the preparation, review and audit of
financial statements, the preparation, review, audit and filing of any Return,
the preparation for any audit or the prosecution or defense of any claim, suit
or proceeding relating to any proposed adjustment or which may result in
Shareholders being liable under the indemnification provisions of this Article
VII, provided, that access shall be limited to items pertaining solely to the
Companies. Shareholders shall grant to Buyer access to all Returns filed with
respect to the Companies and their subsidiaries, current or past.
7.8 RELEASE OF BUYER BY SHAREHOLDERS. Shareholders hereby release and
discharge Buyer and each of its officers and directors from, and agree and
covenant that in no event will Shareholders commence any litigation or other
legal or administrative proceeding against, Buyer, its subsidiaries, parents and
affiliates or any of their officers or directors, whether in law or equity,
relating to any and all claims and demands, known or unknown, suspected and
unsuspected, disclosed and undisclosed, for damages, actual or consequential,
past, present and future, arising out of or in any way connected with
Shareholders' ownership or alleged ownership of the Companies capital stock
prior to the Closing Date, other than claims or demands arising out of the
transactions contemplated by this agreement.
7.9 BUYER GENERAL INDEMNIFICATION COVENANTS. Subject to the provisions of
Sections 7.9 and 7.10, if the Closing occurs, Buyer shall indemnify, save and
keep Robert Otis Childs, III, if he agrees to acquire any of Buyer's Common
Stock pursuant to Section 1.6 hereof and his heirs, personal representatives and
successors (the "Shareholders Indemnities"), harmless against and from all
Damages sustained or incurred by any of the Shareholders Indemnities as a result
of, arising out of or by virtue of any misrepresentation, breach of any warranty
or representation, or non-fulfillment of any agreement or covenant of the part
of Buyer, contained in this agreement or any exhibit or schedule hereto or any
written statement or certified furnished or to be furnished to Shareholders
hereto or in any closing document delivered by Buyer in connection herewith;
provided that Buyer's indemnification covenants
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<PAGE> 41
and obligations in this agreement shall terminate upon the effectiveness of
Buyer's registration statement under the Securities Act of 1933, as amended,
with respect to the IPO.
7.10 LIMITATION ON BUYER INDEMNIFICATION. The obligations of Buyer pursuant
to Section 7.9 is subject to the following limitations:
(a) In no event shall the obligation of Buyer to indemnify the
Shareholder Indemnities pursuant to Section 7.9 exceed the value on the Closing
Date of any Common Stock acquired by Robert Otis Childs, III pursuant to Section
1.6 hereof determined as provided in said Section.
(b) Buyer shall not have any indemnification obligation with respect
to the first $10,000.00 of total liabilities incurred under Section 7.9, unless
the total aggregate liabilities of Buyer under Section 7.9 equal or exceed such
amount, in which case the indemnification obligations of Buyer will include all
liabilities in excess of One Dollar ($1.00) incurred under Section 7.9 (subject
only, to the maximum aggregate amount set forth in Section 7.10(a) above).
7.11 CONDITIONS OF INDEMNIFICATION PURSUANT TO SECTION 7.9.
(a) Promptly following the receipt by a Shareholder Indemnitee of
notice of a demand, claim, action, assessment or proceeding made or brought by a
third party, including a governmental agency (a "Third Party Claim"), the
Shareholder Indemnitee receiving the notice of the Third Party Claim (i) shall
notify Buyer of its existence, setting forth the facts and circumstances of
which such Shareholder Indemnitee has received notice, and (ii) if the
Shareholder Indemnitee giving such notice is a person entitled to
indemnification under this Section VII (an "Indemnified Party"), specifying the
basis hereunder upon which the Indemnified Party's claim for indemnification is
asserted.
(b) The Indemnified Party shall, upon reasonable notice by Buyer,
tender the defense of a Third Party Claim to Buyer. If Buyer accepts
responsibility for the defense of a Third Party Claim, then Buyer shall have the
exclusive right to contest, defend and litigate the Third Party Claim and shall
have the exclusive right, in its discretion exercised in good faith and upon the
advice of counsel, to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair and
reasonable, provided that at least ten (10) days prior to any such settlement,
it shall give written notice of its intention to settle to the Indemnified
Party. The Indemnified Party shall have the right to be represented by counsel
at its own expense in any defense conducted by Buyer.
(c) Notwithstanding the foregoing, in connection with any settlement
negotiated by Buyer, no Indemnified Party shall be required to (i) enter into
any settlement (A) that does not include the delivery by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim or litigation, (B) if the Indemnified Party shall, in writing to
Buyer within the ten (10) day period prior to such proposed settlement,
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<PAGE> 42
disapprove of such settlement proposal and desire to have Buyer tender the
defense of such matter back to the Indemnified Party, or (C) that requires an
Indemnified Party to take any affirmative actions as a condition of such
settlement, or (ii) consent to the entry of any judgment that does not include a
full dismissal of the litigation or proceeding against the Indemnified Party
with prejudice; provided, however, that should the Indemnified Party disapprove
of a settlement proposal pursuant to Clause (B) above, the Indemnified Party
shall thereafter have all of the responsibility for defending, contesting and
settling such Third Party Claim but shall not be entitled to indemnification by
Buyer to the extent that, upon final resolution of such Third Party Claim,
Buyer's liability to the Indemnified Party but for this proviso exceeds what
Buyer's liability to the Indemnified Party would have been if Buyer were
permitted to settle such Third Party Claim in the absence of the Indemnified
Party exercising its right under Clause (B) above.
(d) If, in accordance with the foregoing provisions of this Section
7.11, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if Buyer shall fail to accept the defense of a Third Party
Claim which has been tendered in accordance with this Section 7.11, the
Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle is given to Buyer. If,
pursuant to this Section 7.11, the Indemnified Party so defends or settles a
Third Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by Buyer for the
reasonable attorneys' fees and other expenses of defending the Third Party Claim
which are incurred from time to time, forthwith following the presentation to
Buyer of itemized bills for said attorneys' fees and other expenses. No failure
by Buyer to acknowledge in writing its indemnification obligations under this
Article VII shall relieve it of such obligations to the extent they exist.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
All representations, warranties, covenants and agreements made by any party in
this agreement or pursuant hereto shall survive until the expiration of the
applicable statutes of limitations with respect to the matters covered thereby;
provided that notwithstanding anything to the contrary set forth in this
agreement the representations, warranties, covenants and agreements of Buyer
shall terminate and be of no further force or effect upon the effectiveness of
Buyer's registration statement under the Securities Act of 1933, as amended,
with respect to the IPO.
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<PAGE> 43
8.2 CONFIDENTIALITY. Subject to the last sentence of this Section and
regardless of whether the Closing shall take place, or this agreement is
terminated, Buyer and Shareholders all agree to keep the negotiation, execution
and Closing of this agreement and not to disclose the same or any documents
prepared or delivered in connection therewith to any person without the prior
written consent of Buyer and Shareholders; except that each such party may
advise their accountants, attorneys, appraisers, surveyors, engineers and other
advisors, agents, employees, shareholders, investment advisors, underwriters,
bankers, lenders and banks (collectively the "Agents") of the same as necessary
in order to carry out and consummate the transactions contemplated herein;
provided that they inform them of this confidentiality agreement and require
them to keep the subject matter of it confidential and, provided further,
however, no party hereto shall be liable for any breach or violation of this
Section 8.2 confidentiality agreement because of disclosure of this agreement to
any governmental agency as required for such party to fulfill its obligations
under this agreement and to consummate the transactions contemplated by this
agreement or as otherwise required by law.
After the Closing Date and subsequent to the disclosure to the
employees of the Companies and the Rock of Ages Group and their subsidiaries and
affiliates of the transactions referred to in this agreement, Buyer may, at its
election, publicly disclose the execution and delivery of this agreement and the
other agreements referenced herein and in the Exhibits hereto and the details of
the transactions consummated hereunder.
8.3 BROKERS OR FINDERS. Each party represents to the other that no broker
or agent has been involved on its behalf in the transactions contemplated
herein, and agrees that if any claim for a commission or fee is asserted, it
will be paid by the party which the broker or agent claims is represented by
such broker or agent.
8.4 PAYMENT OF EXPENSES. Whether or not the purchase and sale of Shares
provided for herein shall be consummated, each party hereto shall pay his or its
own expenses incident to preparing for, entering into and carrying out this
agreement and the transactions contemplated hereby.
8.5 ARTICLE AND SECTION HEADINGS. Article and Section headings are employed
in this agreement for reference purposes only and shall not affect the
interpretation or meaning of this agreement.
8.6 ASSIGNMENT, SUCCESSORS AND ASSIGNS. This agreement and the rights
hereunder shall not be assignable or transferable by Buyer or Sellers (including
by operation of law in connection with a merger or sale of substantially all of
the assets) without the prior written consent of the other party hereto;
provided that Buyer may assign its rights to purchase the Shareholders hereunder
to a wholly owned direct or indirect subsidiary of Buyer without the prior
written consent of Sellers, provided that no such assignment shall limit or
affect Buyer's obligations hereunder and all references to Buyer hereunder shall
be deemed to also include such subsidiary to which Buyer has assigned its right
to purchase the Shares hereunder, and
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<PAGE> 44
provided further herein that Buyer may assign this agreement by operation of law
or otherwise in connection with the proposed transaction.
8.7 NOTICES. Any notice or other communication required or permitted under
this agreement shall be in writing and shall be deemed to have been duly given
(i) upon hand delivery, or (ii) on the third day following delivery to the U.S.
Postal Service as certified or registered mail, return receipt requested and
postage prepaid, or (iii) on the first day following delivery to a nationally
recognized United States overnight courier services, fee prepaid, return receipt
or other confirmation of delivery requested or (iv) when telecopied or sent by
facsimile transmission if an additional notice is also given under (i), (ii) or
(iii) above within three days thereafter. Any such notice or communication shall
be directed to a party at its address set forth below or at such other address
as may be designated by a part in a notice given to all other parties hereto in
accordance with the provisions of this Section.
If to Shareholders: 1303 Lincolnton Highway
Elberton, GA 30635
Phone: 706-283-2737
with, in the case of notice R. Chris Phelps, Esq.
to Shareholders, a copy to Phelps & Campbell
(which shall not constitute P. O. Drawer 1056
notice): Elberton, GA 30635
Phone: 706-283-5000
Fax: 706-283-5002
If to any member of
the Rock of Ages Group: Kurt M. Swenson, Chairman and
Chief Executive Officer
Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Phone: 603-225-8397
Fax: 603-225-4801
with a copy to: John R. Monson, Esq.
(which shall not Wiggin & Nourie, P.A.
constitute notice) P.O. Box 808
Manchester, NH 03105
Phone: 603-669-2211
Fax: 603-623-8442
8.8 COMPLETE AGREEMENT, WAIVERS. Neither this agreement nor any provision
hereof may be changed, waived, modified, discharged, amended or terminated
orally but only by an instrument in writing signed by all parties hereto. No
action taken by any party after
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<PAGE> 45
the date hereof, including without limitation any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance by any other party with any representations, warranties,
covenants or agreements contained in this agreement. The waiver by any party
hereto of a breach of any provision of this agreement shall not operate or be
construed as a waiver of any other or any subsequent breach. The failure of any
party at any time or times to require performance of any provision hereof shall
in no manner affect its right at a later time to enforce the same. This
agreement, together with the Exhibits and Schedules attached hereto or
incorporated herein pursuant to Section 8.12 hereof constitutes the only
agreement among the parties hereto concerning the subject matter hereof and
supersedes all prior agreements whether written or oral, relating thereto.
8.9 GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New Hampshire and any actions brought
pertaining to the same shall lie only in the Merrimack County New Hampshire
Superior Court, in the United States District Court for the District of New
Hampshire, the Washington County Superior Court, Georgia, or the U.S. District
Court for the District of Georgia, in said States all of which are the sole and
exclusive forums for any actions or claims by the parties to this agreement and
each party hereto consents to the jurisdiction of, and venue in, said courts in
any action brought by another party hereto and agrees that no claims or actions
relating to any matter hereunder will be brought by them in any other courts of
said States, any other country.
8.10 TAX CONSEQUENCES. Each party represents and warrants that it has made
an independent evaluation of the tax consequences resulting to such party as a
result of the terms and effect of this agreement. No party shall have any
recourse against any other party to this agreement nor shall this agreement be
affected in any way by reason of the fact that the consummation of this
agreement and the transactions contemplated thereby do not have the tax
consequences anticipated by such party; provided that the foregoing shall not
limit a party's liability for breach of any representation, warranty, covenant
or agreement set forth herein.
8.11 COUNTERPARTS. This agreement may be executed in counterparts and by
different parties on different counterparts with the same effect as if the
signatures were on the same instrument. This agreement shall be effective and
binding upon all parties hereto as of the time when all parties have executed a
counterpart of this agreement.
8.12 EXHIBITS. Each Exhibit or Schedule delivered pursuant to the terms of
this agreement shall be in writing and shall constitute a part of this
agreement. The parties may agree with respect to any Schedule or Exhibit
required to be attached to this agreement, that such Schedule or Exhibit, if
mutually satisfactory, may be attached to this agreement after the date of
execution hereof and prior to the Closing and, after mutual approval thereof,
such subsequently attached Schedule or Exhibit shall be treated as if it were
attached to this agreement as of the date of execution of this agreement. All
Exhibits and Schedules attached hereto are specifically incorporated herein by
reference and made a part hereof. The words
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<PAGE> 46
"agreement," "herein" and "hereof" as used herein shall in all respects include
the entirety of this agreement together with all Exhibits and Schedules attached
hereto and all documents required or permitted to be delivered hereunder.
8.13 FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto, the other party shall execute and deliver, or cause to be executed
and delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
agreement.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this agreement all as
of the 27th day of June, 1997.
WITNESS: ROCK OF AGES CORPORATION
/s/ By: /s/ Kurt M. Swenson
- ---------------------------------- ------------------------------
Kurt M. Swenson,
Chairman of the Board
and Chief Executive Officer
/s/ /s/ Robert Otis Childs, Jr.
- ---------------------------------- ----------------------------------
Robert Otis Childs, Jr.
/s/ /s/ Robert Otis Childs, Jr.
- ---------------------------------- ----------------------------------
Robert Otis Childs, III
/s/ /s/ Timothy Carroll Childs
- ---------------------------------- ----------------------------------
Timothy Carroll Childs
/s/ /s/ Bernita Y. Childs
- ---------------------------------- ----------------------------------
Bernita Y. Childs
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<PAGE> 48
LIST OF EXHIBITS TO STOCK PURCHASE AGREEMENT
--------------------------------------------
Exhibit 1.3(b) Escrow Agreement
Exhibit 2.1 Employment Agreement for Robert Otis Childs, III
Exhibit 2.2 Consulting Agreements
Exhibit 2.4 Employment Agreement for Timothy Carroll Childs
Exhibit 3.2(e) Swenson Group Financial Statements
Exhibit 3.2(m) Environmental Laws and Hazardous Materials
(Environmental Definitions)
Exhibit 3.3(d) Childs Financial Statements
Exhibit 3.3(f) Childs Group Realty
Exhibit 3.3(h) Collective Bargaining Agreements, Labor Agreements,
etc.
Exhibit 3.3(k) Target Licenses, Permits and Approvals
Exhibit 3.3(m) Target Pension, Profit Sharing, Stock Bonus and Other
Deferred Compensation Arrangements
Exhibit 3.3(o) Target Intellectual Property and Proprietary Interest;
Insurance; Material Contracts
Exhibit 4.13 Life Insurance Policies
Rock of Ages Corporation agrees to furnish supplementally to the Commission a
copy of any omitted schedule upon request.
<PAGE> 1
Exhibit 2.3
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT made as of this ____ day of July, 1997, by and
among ROCK OF AGES CORPORATION, with a principal office located in Concord, New
Hampshire (hereinafter referred to as the "Buyer"), JOHN E. KEITH, (hereinafter
referred to as "JK") an individual residing in Hodgenville, Kentucky and ROY H.
KEITH, JR., (hereinafter referred to as "RK") an individual residing in
Elizabethtown, Kentucky, GLASGOW MONUMENT CO., INC., a Kentucky corporation
("GMC"), KEITH LETTERING AND SETTING CORPORATION, a Kentucky corporation
("KLS"), KEITH MONUMENT COMPANY, a Kentucky corporation ("KMC"), NATIONAL
MEMORIAL CORPORATION, a Kentucky corporation ("NMC"), RIEHM-GERLACK MONUMENT
CO., a Kentucky corporation ("RGM") and THE SNYDER CORPORATION, a Kentucky
corporation ("SC") (hereinafter each of said corporations is sometimes referred
to as a "Company" or a "Seller" and all of said corporations are sometimes
collectively referred to as the "Companies" and as the "Sellers" and JK and RK
are sometimes collectively referred to as the "Principal Shareholders").
RECITALS:
The Principal Shareholders own and/or control substantially all of the
issued and outstanding shares of capital stock of the Companies except for KMC
which is a wholly owned subsidiary of Keith National Corporation, a Kentucky
corporation. The Companies are sometimes collectively referred to as the "KMC
Group". The Buyer desires to purchase and assume, and the Sellers desire to sell
and assign, substantially all of the assets and substantially all of the
liabilities of the Sellers upon the terms and subject to the conditions of this
agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS AND
ASSUMPTION OF LIABILITIES
1.1 PURCHASE OF ASSETS. Subject to the terms and conditions of this
agreement, the Sellers agree on the Closing Date (as hereinafter defined), to
sell, assign, transfer, convey, and deliver to the Buyer, and the Buyer agrees
on the Closing Date to purchase from the Sellers, all of the assets and
properties of the Sellers (except for the Excluded Assets (as hereinafter
defined)) wherever the same may be located, including without limitation the
following (collectively referred to as the "Assets"):
<PAGE> 2
(a) All of Sellers inventories, including, without
limitation, all raw materials, work in process, supplies and finished
inventory in existence, as of the Closing Date;
(b) All of Sellers machinery, tooling, trade fixtures and
leasehold improvements, motor vehicles, equipment, furniture,
furnishings, fixtures, terminals, and accessories of all kinds, as
such items exist as of the Closing Date; together with all drawings,
specifications and instructions relating thereto;
(c) All of Sellers U.S. and foreign trademarks, trademark
applications, servicemarks, copyrights, copyright applications, trade
names, patents and patent applications, inventions, trade secrets and
technical know-how and proprietary information (whether or not
registered with any state or federal governmental agency);
(d) All of Sellers customer lists, labels, advertising and
promotional materials, software owned by the Sellers, sales and other
business records and reports, files, telephone numbers, and
proprietary information;
(e) All of Sellers permits, licenses, certificates,
approvals and notifications, governmental or otherwise;
(f) Each Seller's rights and obligations under all purchase
orders, made or accepted by the Sellers with their customers and
others for goods and services sold in the ordinary course of business
consistent with past practices prior to the Closing (as defined below)
which each Seller has not fulfilled by Closing, together with any
accounts receivable and all prepaids for such orders;.
(g) All of the Seller's contract rights and benefits under
any personal property and real property leases subject to the terms
and conditions thereof;
(h) All of Sellers cash, accounts receivable, prepaids,
insurances, instruments, general intangibles, goodwill, Businesses and
similar property;
(i) All other personal property, tangible and intangible,
and all KMC Group's Realty (as hereinafter defined) owned by Sellers;
(j) All books and records of the Sellers related to Sellers'
Businesses (as hereinafter defined); and
(k) The Sellers' corporate names, except NMC may retain its
name.
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<PAGE> 3
1.2 EXCLUDED ASSETS. Notwithstanding anything herein to the contrary, Buyer
does not purchase, and Sellers do not sell, any of the assets listed on EXHIBIT
1.2 attached hereto (the "Excluded Assets"):
1.3 LIABILITIES AND OBLIGATIONS ASSUMED. Buyer does hereby agree to assume
at Closing and in writing, Sellers' obligations and liabilities set forth in the
KMC Financial Statements and the KMC 1997 Financial Statements and Sellers'
obligations and liabilities incurred in the ordinary course of business from the
dates of the KMC 1997 Financial Statements up to the Closing Date (collectively
referred to as the "Assumed Liabilities"), except for those listed in Section
1.4 below.
1.4 LIABILITIES AND OBLIGATIONS NOT ASSUMED. Except for the liabilities of
Sellers expressly assumed by Buyer in Section 1.3, Buyer shall not assume any
liabilities, obligations or undertakings of Sellers of any kind or nature
whatsoever, whether fixed or contingent, known or unknown, determined or
determinable, including, without limitation: (a) those liabilities listed on
EXHIBIT 1.2 hereof; (b) all of Sellers interest bearing indebtedness, and
obligations, including the amount due David DeMarcus and the Covenant Not to
Compete amount due David DeMarcus both listed on EXHIBIT 1.2, all of which will
be paid at the Closing pursuant to EXHIBIT 1.2 (the amounts thereof being herein
sometimes referred to the "Loan Amount"); and (c) trade payables other than
Existing Trade Payable (as defined below) (all of the liabilities and
obligations of Sellers described in this Section being herein sometimes
collectively referred to as the "Excluded Liabilities").
1.5 BULK SALES. Buyer and Sellers each hereby waive compliance by the other
with any applicable provisions of the bulk sales laws of the State of Kentucky
because Buyer is assuming the obligations to Sellers' trade creditors existing
as of the date of the KMC 1997 Financial Statements and incurred thereafter in
the ordinary course of business (the "Existing Trade Payables"). Any trade
payables other than the Existing Trade Payables are not part of the Assumed
Liabilities, are not assumed by Buyer hereunder and shall remain the liabilities
of Sellers and Sellers and Principal Shareholders agree to pay the same.
1.6 CLOSING. The closing of the purchase and sale hereunder (the "Closing")
shall take place at Skadden, Arps, Slate, Meagher & Flom, LLP, One Beacon
Street, Boston, MA 02108-3194 at 10:00 A.M., Eastern Standard Time, on or before
November 1, 1997, in accordance with the provisions of Article IV hereof after
all of the conditions set forth in Article IV hereof shall be fulfilled or
waived in accordance with this agreement and applicable law or at such other
time, date and/or place as Sellers and Buyer may agree. The date and time at
which the Closing actually occurs is referred to as the "Closing Date". The
Closing Date can be extended automatically by Buyer for an additional thirty
(30) days to November 30, 1997, if an S-1 Registration for Buyer's IPO (as
hereinafter defined) has been filed with the Securities and Exchange Commission
on or before November 1, 1997 and on or before November 1, 1997 Buyer makes an
additional TWENTY-FIVE THOUSAND AND no/100 DOLLARS ($25,000.00) addition to the
Deposit with the Escrow Agent.
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<PAGE> 4
1.7 DETERMINATION OF AND ALLOCATION OF THE PURCHASE PRICE.
(a) The purchase price for the Assets will be Sixteen Million Three
Hundred Seventy-Five Thousand Dollars ($16,375,000.00) (the "Purchase Price").
The Purchase Price will be payable at the Closing. Buyer will subtract from the
Purchase Price the Loan Amount and will pay the creditors of the Sellers owed
the Loan Amount at the Closing. The difference between the Purchase Price and
the Loan Amount is herein referred to as the "Balance of the Purchase Price."
The Loan Amount and the Balance of the Purchase Price will be tentatively
allocated to the Sellers and to the Assets and the Assumed Liabilities being
purchased and assumed by Buyer from each Seller as set forth on EXHIBIT 1.7(a)
and the Common Stock (as hereinafter defined) of Buyer being paid to certain
Sellers as part of the Purchase Price shall be allocated to said Sellers as set
forth in Section 1.8 below. The Loan Amount and the Balance of the Purchase
Price, except for the Common Stock, will be reallocated by Buyer and Sellers at
the Closing by an amendment to EXHIBIT 1.7(a) which will amend the allocations
on EXHIBIT 1.7(a) when the final amount of the Loan Amount is calculated on or
before the Closing Date.
(b) One Hundred Thousand Dollars ($100,000.00) shall be deposited upon
execution of this agreement by Buyer as an earnest money deposit (the "Deposit")
in escrow with Whitlow & Scott (the "Escrow Agent"). The Deposit shall be held
by the Escrow Agent in accordance with the terms of the escrow agreement (the
"Escrow Agreement"), a copy of which is attached hereto as EXHIBIT 1.7(b), and
paid by the Escrow Agent to Sellers as part of the Purchase Price at the
Closing; provided that the Deposit shall (i) be immediately returned to the
Buyer if the transaction contemplated by this agreement does not close because
any of the Sellers or Principal Shareholders are in default of or have breached
any of their representations, warranties, covenants or agreements set forth
herein or any of the conditions to Closing for the benefit of Buyer are not met
or waived in writing on the Closing Date; or (ii) paid to Sellers in accordance
with the terms and conditions of the Escrow Agreement upon the failure by Buyer
to close on the Closing Date (unless such failure is due to the nonfulfillment
of any of Buyer's conditions to Closing set forth in Section 5.2 of this
agreement), provided that Sellers and Principal Shareholders on the Closing Date
are not in default of, nor have they breached any of, their representations,
warranties, covenants or agreements set forth herein and all the conditions to
Closing for the benefit of Buyer have been met or waived in writing on the
Closing Date.
(c) The parties agree to report the transactions contemplated by this
agreement and to allocate the Purchase Price, for tax and accounting purposes in
accordance with the allocations set forth on EXHIBIT 1.7(a) pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended, ("Code") and the
permanent and temporary Treasury Regulations thereunder.
1.8 COMMON STOCK PORTION OF THE PURCHASE PRICE. The following portion of
the Purchase Price will be paid with shares of Buyer's Common Stock: The number
of shares of Buyer's Common Stock having an aggregate value of $1,500,000.00
(the "NMC Common
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<PAGE> 5
Stock Consideration Amount," determined as provided in Section 1.10) shall be
paid to NMC in part payment for a portion of the Assets being sold by it to
Buyer. As noted above, except for the NMC Common Stock Consideration Amount and
the allocation made to real estate and improvements thereto and thereon, to
furniture, fixture and equipment and to motor vehicles, all the allocations set
forth on EXHIBIT 1.7(a) are tentative and will be finalized on the Closing Date
as set forth above in Section 1.7(a).
1.9 PAYMENT OF PURCHASE PRICE. Upon the terms and subject to the conditions
of this agreement, at the Closing:
(a) Buyer shall deliver to each of the Sellers on the Closing Date by
wire transfer in immediately available funds to a bank account designed in
writing by each of the Sellers no later than three (3) business days prior to
the Closing Date the amount of the Purchase Price payable in cash as set forth
on EXHIBIT 1.7(a), to each Seller, less the amount of each Seller's Contribution
to the Indemnity Fund (as hereinafter defined in Section 7.6 hereof) and shall
pay in the same fashion the Loan Amount.
(b) Buyer shall deliver to NMC the Common Stock equal to the Common
Stock Share Amount (as defined in Section 1.10 below), registered in its name.
(c) Each of the Sellers shall deliver to Buyer (i) a bill of sale and
assignment with full warranties of title, warranty deeds and all other necessary
instruments necessary to transfer title to its portion of the Assets and Assumed
Liabilities, free and clear of all liens, claims pledges, encumbrances, charges,
options proxies or restrictions of any kind or nature, except for Permitted
Encumbrances (ii) its agreements, if any, listed in Article II, and (iii) funds
for the payment of all sales, transfer, and similar taxes, if any, in respect to
the sale, transfer and assignment of the Assets and Assumed Liabilities pursuant
to this agreement, including without limitation, any transfer or gains taxes, to
the extent Buyer has any liability for the collection thereof, to which the
transactions contemplated hereby may be subject under the laws of the State of
Kentucky; and each of the Principal Shareholders shall deliver to Buyer his
agreements listed in Article II.
1.10 COMMON STOCK OF BUYER. NMC agrees to acquire from Buyer and accept, in
full payment of the NMC Common Stock Consideration Amount a number of shares of
common stock of the Buyer ("Common Stock") having an aggregate value equal to
the NMC Common Stock Consideration Amount with each share of the Common Stock to
be valued for this purpose at the price per share of the Common Stock to the
public in the Buyer's contemplated initial public offering (the "IPO") or the
fair market value per share as determined on the Closing Date in good faith by
the Buyer's Board of Directors if the IPO has not occurred on or before the
Closing Date and the parties waive the IPO conditions set forth in Article V and
elect to close (the "Common Stock Price"). The number of such shares to be
delivered to NMC by Buyer and accepted by NMC shall be the quotient (the "Common
Stock Share Amount") determined by dividing the NMC Common Stock Consideration
Amount by the Common Stock Price. If the IPO occurs within one (1) year
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after the Closing, then the Common Stock Price will be recalculated using the
IPO price per share of the Common Stock to the public, the Common Stock Share
Amount will be recalculated and the Buyer will deliver any additional shares of
Common Stock required by said recalculated Common Stock Share Amount to NMC and
NMC will return to the Buyer any shares it has received which exceed the
recalculated Common Stock Share Amount rounded down to the nearest whole share
of the Common Stock.
ARTICLE II
FURTHER AGREEMENTS
------------------
2.1 EMPLOYMENT AGREEMENT FOR JK. At the Closing, Buyer and JK shall execute
the Employment Agreement (the "JK Employment Agreement") substantially in the
form thereof attached as EXHIBIT 2.1 hereto.
2.2 EMPLOYMENT AGREEMENT FOR RK. At the Closing, Buyer and RK shall execute
the Employment Agreement (the "RK Employment Agreement") substantially in the
form thereof attached as EXHIBIT 2.2 hereto.
2.3 STOCK SUBSCRIPTION AGREEMENT FOR NMC. Concurrently with the execution
and delivery of this agreement, NMC and Buyer shall execute the Stock
Subscription Agreement (the "NMC Stock Subscription Agreement") substantially in
the form thereof attached hereto as EXHIBIT 2.3.
2.4 INTENTIONALLY LEFT BLANK.
2.5 ACQUISITION NONCOMPETE, NONSOLICITATION AND NONDISCLOSURE AGREEMENT FOR
JK. At the Closing, Buyer and JK shall execute the Acquisition Noncompete,
Nonsolicitation and Nondisclosure Agreement (the "JK Noncompete Agreement")
substantially in the form attached hereto as EXHIBIT 2.5.
2.6 ACQUISITION NONCOMPETE, NONSOLICITATION AND NONDISCLOSURE AGREEMENT FOR
RK. At the Closing, Buyer and RK shall execute the Acquisition Noncompete,
Nonsolicitation and Nondisclosure Agreement (the "RK Noncompete Agreement")
substantially in the form attached hereto as EXHIBIT 2.6.
2.7 LEASE AGREEMENT. At the Closing, Buyer and Keith & Keith shall execute
the Lease Agreement (the "Lease Agreement") substantially in the form attached
hereto as EXHIBIT 2.7.
2.8 COVENANT NOT TO COMPETE FROM SELLERS. At the Closing, Sellers shall
execute the Noncompete, Nonsolicitation and Nondisclosure Agreement (the
"Covenant Not To Compete") substantially in the form attached hereto as EXHIBIT
2.8, prohibiting each Seller,
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and any corporation or entity, directly or indirectly, owned, controlled or
affiliated with each Seller ("Affiliates") from competing with Buyer, or taking
any of the other actions described therein, for a period of five (5) years from
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 GENERAL STATEMENT. The parties make the representations and warranties
which are set forth in this Article III. The survival of all such
representations and warranties shall be in accordance with Section 8.1 hereof.
All representations and warranties of the parties are made subject to the
exceptions, if any, which are noted in the respective schedules delivered by the
parties to each other and accepted by the receiving party concurrently herewith
and identified as, in the case of Section 3.2, the "Buyer's Disclosure
Schedule," and in the case of Section 3.3, the "Sellers' Disclosure Schedule."
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. Except as set forth below
where certain representations and warranties are noted as specifically made to
all Sellers, Buyer makes the following representations and warranties as of the
date hereof and only to NMC with the intention that NMC and all the Sellers, as
applicable, may rely upon the same, and acknowledges that the same are true and
correct in all material respects on the date hereof and shall be true and
correct in all material respects at the Closing Date, subject to changes therein
occurring because of Buyer's conduct of its business in the ordinary course or
occurring because of the Transactions as defined in EXHIBIT 3.2 attached hereto:
(a) ORGANIZATION, POWER, ETC. Buyer represents and warrants to all
Sellers that Buyer is a corporation, existing and in good standing under the
laws of its state of incorporation. The Buyer has all requisite corporate power
and authority to own and lease its respective properties and to carry on the
business in which it is presently engaged (herein sometimes referred to as the
"Business").
(b) BUYER CAPITAL STOCK. On the date hereof the authorized capital
stock of Buyer consists of 20,000,000 shares of Common Stock, 7,526,882 shares
of which are issued and outstanding and of 1,000,000 shares of Serial Preferred
Stock of which zero (0) shares are issued and outstanding. All stock of Buyer to
be issued to NMC shall be duly authorized, validly issued, fully paid and
non-assessable.
(c) CORPORATE AUTHORITY. Buyer represents and warrants to all Sellers
that the execution, delivery and performance of this agreement by it and
consummation by it of the transactions contemplated herein have been duly
authorized by all necessary corporate action and this agreement constitutes the
legal, valid and binding obligation of Buyer in accordance with its terms.
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(d) BINDING NATURE AND EFFECT OF AGREEMENT. Buyer represents and
warrants to Sellers that the execution, delivery and performance of this
agreement by it and consummation by it of the transactions contemplated herein
do not, to the best of its knowledge, require the consent, waiver, approval,
license or authorization of any person or public authority which will not be
obtained prior to or at the Closing Date; to the best of its knowledge, after
due inquiry, this agreement does not violate, with or without the giving of
notice and/or the passage of time, any provision of law applicable to it and
does not conflict with or result in a breach or termination of any provision of,
or constitute a default in or under, or result in the creation of any lien,
charge or encumbrance upon any of its property or assets pursuant to any
corporate charter provision, bylaw, mortgage, deed of trust, indenture or other
agreement or instrument, or any order, judgment, and, to the best of its
knowledge, after due inquiry, any decree, statute, regulation or any other
restriction of any kind or character to which the it is a party or by which it
or any of its assets and properties are bound.
(e) FINANCIAL STATEMENTS. Buyer has furnished to NMC the draft audit
of Rock of Ages Corporation and Subsidiaries consolidated financial statements
as of December 31, 1996 and 1995, together with a Schedule of Material
Inter-Company Transactions (the foregoing financial data shall be collectively
referred to as the "Financial Statements" and are attached hereto as EXHIBIT
3.2(e). The Financial Statements were furnished to NMC solely for the purposes
set forth therein.
(f) TAX MATTERS. Buyer has duly filed with the appropriate federal,
state and local governmental agencies, and all foreign countries and political
subdivisions thereof, all Returns (as defined in Section 3.3(e)(i) hereof)
required to be filed and has paid in full all Taxes (as defined in Section
3.3(e)(xii) hereof), assessments or deficiencies shown to be due on such Returns
or claimed to be due by any taxing authority and all such Returns as filed or as
amended or to be amended prior to the Closing Date accurately and completely
report the Taxes due to any such taxing authority. Buyer has not executed or
filed with the Internal Revenue Service or any other taxing authority (domestic
or foreign) any agreement extending the period for assessment or collection of
any Taxes. Buyer is not a party to any pending action or proceeding nor, to the
best of its knowledge, is any action or proceeding threatened by any
governmental authority for assessment or collection of Taxes, and no claim for
assessment or collection of Taxes has been asserted against it. The provisions
for Taxes shown in the Financial Statements (if any) are and will be adequate to
cover the respective liabilities of Buyer as of the date thereof for all Taxes
of Buyer.
(g) TITLE TO ASSETS, ABSENCE OF LIENS AND ENCUMBRANCES. Buyer has good
and marketable title to all of its assets, subject to liens, claims and
encumbrances as set forth in the Financial Statements, those incurred since the
date thereof in the ordinary course of business and to those incurred in the
Transactions.
(h) LITIGATION. Except as set forth on EXHIBIT 3.2(h), Buyer has not
been notified of, and is not a party to, any material actions, suits,
proceedings or investigations
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(including any environmental, building or safety investigation) pertaining to
its assets or Business; nor does Buyer have any knowledge of, nor reasonable
grounds to have knowledge of, any claim or state of facts which may lead to, or
constitute a threat of, any material investigation, claim, proceeding, or
litigation, against Buyer or its assets or Business. There are no orders,
judgments or decrees of any court or governmental agency relating to Buyer which
would prevent, impede or make illegal the consummation of the transactions
contemplated herein or which would have a material adverse effect upon Buyer.
(i) LABOR CONTROVERSIES. To the best of Buyer's knowledge, there are
no material controversies between it and any of its employees, no material
unresolved labor practice proceedings or disputes and no material labor
arbitration proceedings pending or threatened, and there are no organizational
efforts presently being made or, to the best of Buyer's knowledge, after due
inquiry, threatened involving any of its non-union employees. Buyer has complied
in all material respects with all federal, state and local laws and orders
relating to the employment of labor, and all laws governing wages, hours,
collective bargaining, the payment of social security, withholding and similar
taxes, equal employment opportunity, employment discrimination and immigration
and naturalization; and Buyer is not liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing. There is no
claim of employment discrimination or sexual harassment pending or, to the best
of Buyer's knowledge, after due inquiry, threatened against it, or any strike,
dispute, slowdown or stoppage pending or, to the best of Buyer's knowledge,
threatened against or involving it.
(j) PATENTS, TRADEMARKS, ETC. No one has made or, to the best of
Buyer's knowledge, after due inquiry, threatened to make any claims that it has
wrongfully used or appropriated, or infringed upon any patent, patent license,
trade name, trademark, servicemark, brandmark, brand name, copyright, know-how,
trade secret or other proprietary or trade rights of any third party. No
director, officer, shareholder or employee of Buyer owns or has owned, directly
or indirectly, in whole or in part, any patents, trademarks, trade names,
servicemarks, brandmarks, brand names, copyrights, registrations or applications
thereof or interests therein which Buyer has used or is using or the use of
which is necessary for its Business.
(k) BOOKS AND RECORDS. The books, records and working papers of Buyer,
to the extent such books and records relate to its Business, are in all material
respects complete and correct, have been maintained in accordance with sound
business practices, and accurately reflect the basis for the financial condition
and results of operations of Buyer as set forth in the Financial Statements.
(l) PERMITS, AUTHORIZATIONS, ETC. Buyer has all material approvals,
authorizations, consents, licenses, orders and other permits of all governmental
agencies, whether federal, state or local, reasonably required to permit the
operation of its Business as heretofore and as presently conducted, and all of
the same will survive the consummation of the transactions contemplated by this
agreement. Buyer has not received any written notice
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of any license or permit which will have to be acquired in the future in order
for its Business to be operated by as heretofore and presently conducted.
(m) COMPLIANCE WITH APPLICABLE LAW. Buyer has not received any written
notice that it is in material violation of any foreign or domestic (federal,
state or local) law, ordinance, regulation, order or requirement including
without limitation Environmental Laws (as defined in EXHIBIT 3.2(m)) relating to
its Business. Buyer has not received any written notice that it or its assets
used in the operation of its Business is in material violation of any state and
local building, zoning, subdivision, land use, Environmental Laws and other
laws, ordinances and regulations. There are no federal, state, municipal, public
zoning or other restrictions that will prevent the utilization of any property
owned or leased by Buyer in connection with its Business for the purposes
presently used, and there are no condemnation proceedings pending or, to the
best of its knowledge, threatened against any such property.
(n) EMPLOYEE PLANS. Buyer will make made available upon written
request for examination by NMC true, correct and complete copies of:
(i) the most recent Internal Revenue Service determination
letter relating to each of Buyer's pension, profit-sharing, stock
bonus or other deferred compensation arrangements, if any, for which a
letter was obtained except for any multi-employer plans sponsored by
Buyer, (each a "Plan" and collectively the "Plans");
(ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedules of each Plan sponsored by Buyer with respect to
which the same are required, as filed pursuant to applicable law; and
(iii) all plan documents, as amended to date, summary plan
descriptions and summaries of material modifications with respect to
each Plan sponsored by Buyer, as well as the most recent financial
statements of each of such plans.
With respect to each of such Plans as to which an Annual Report (Form 5500
series) is required to be filed, no liabilities as of the date of such Annual
Report exist unless specifically referred to in the most recent such Annual
Report, and no material change has occurred with respect to the matters covered
by the last Annual Report since the date thereof. Buyer does not know, nor have
any reasonable grounds to know, of any "prohibited transaction," as such term is
defined in Section 406 of the Employee Retirement Income Security Act of 1974,
as amended, ("ERISA") and Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), which has been engaged in by Buyer or by any Plan
sponsored by Buyer, any trust created thereunder or any trustee, administrator
or other fiduciary thereof, or which would subject such Plan or any such entity,
or any party dealing with such Plan or any such trust, to the sanctions imposed
by ERISA or the tax on prohibited transactions imposed by Section 4975 of the
Code. There are no actions, suits or claims
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pending or, to the best of Buyer's knowledge, after due inquiry, threatened
against any of the Plans or any administrator or fiduciary thereof. Neither any
of the Plans nor any said trust have incurred any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA or Section 412(a)
of the Code (whether or not waived), since the Closing Date of ERISA. The terms
and operation of each of the Plans have complied to the extent required with the
provisions of Section 401(a) of the Code and with ERISA, and all reports and
notices required by ERISA or the Code have been duly filed or given. Buyer shall
make available for examination by JK or RK a list of all of Buyer's Plans
subject to Title IV of ERISA and all trusts created thereunder which have been
terminated, and all "reportable events," as that term is defined in Section 4043
of ERISA, if any. Except as may be specified in Buyer's Disclosure Schedule
hereto, none of Buyer's Plans and no such trust has been terminated, nor has any
such "reportable event" occurred with respect to any such Plans since the
effective date of ERISA. The present value, on a plan termination basis, of all
benefits accrued under each Plan sponsored or contributed to by Buyer and
subject to Title IV of ERISA did not, as of the most recent valuation date,
exceed the fair market value of the assets of such plan as of such date.
(o) INVENTORY. All of the inventory of Buyer consists of materials of
a quality and quantity usable and salable in accordance with Buyer's normal
pricing and sales practices.
(p) LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. Buyer will deliver
on the written request of NMC a true and complete list, which list shall be
updated and amended as of the Closing Date if requested, in writing, setting
forth the following:
(i) all material intellectual property and all other
material proprietary information owned by Buyer, and copies of all
other material agreements to which Buyer is a party which relate to
any material proprietary rights affecting its assets;
(ii) all policies of insurance insuring Buyer's assets; and
(iii) all material contracts, agreements, leases,
understandings and commitments to which Buyer is a party, or to which
any of its assets are subject and which involve a payment or an amount
in excess of $100,000.
True and complete copies of all documents referred to in such list will be
provided to NMC and their counsel upon their written request as part of their
due diligence. All such material contracts, agreements, rights, leases,
obligations and commitments are valid and enforceable in accordance with their
respective terms, except as such enforceability may be affected by bankruptcy or
similar laws affecting the rights of creditors generally and by general
principles of equity, for the periods stated therein.
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(q) INDUSTRY AND GOVERNMENTAL EVENTS. Buyer is not aware of any future
events, loss of customers or suppliers that may materially affect Buyer and/or
its Business and financial affairs either prior to or subsequent to the Closing
Date. Buyer has received no written notice of any change or any pending or
contemplated condemnation or change of zoning, subdivision, land use,
environmental or other statutes, or regulations or court or administrative
rulings or other governmental action materially affecting Buyer.
(r) NO DEFAULTS. There currently are no defaults by Buyer or acts or
events which, with the passage of time or giving of notice, or both, could
become defaults by it under any indebtedness, indenture, mortgage, deed of
trust, security deed, security agreement or other instrument.
(s) ACCURACY AND OMISSIONS. None of the information and documents
furnished or to be furnished or made available for inspection for NMC by Buyer
pursuant to the provisions of this agreement is or will be false or misleading,
or contains or will contain any material misstatement of fact or omits or will
omit to state any material fact required to be stated to make the statements
therein not misleading.
3.3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Sellers and Principal
Shareholders, jointly and severally, make the following representations and
warranties to Buyer, in each case with the intention that it may rely upon the
same and acknowledge that the same are true and correct and shall be true and
correct at the Closing Date:
(a) ORGANIZATION, POWER, ETC. Each member of the KMC Group is a
corporation existing and in good standing under the laws of the state of
Kentucky. Each member of the KMC Group has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
(hereinafter the business of each member of the KMC Group is sometimes referred
to as its "Business" and all their businesses are sometimes collectively
referred to as the "Businesses"). The copies of the Articles of Incorporation
and By-Laws, as amended to date, of each member of the KMC Group, which have
been delivered by Sellers to Buyer, are complete and correct. None of the
members of the KMC Group, except KNC which has KMC as a wholly owned subsidiary,
have any subsidiaries. To the best of Sellers and Principal Sellers' knowledge,
after due inquiry, each member of the KMC Group is registered to do business in
each state where the nature of its business activities or the location of its
assets or employees makes such registration necessary.
(b) BINDING NATURE, EFFECT OF AGREEMENT AND AUTHORITY. Except as set
forth on Sellers Disclosure Schedule, Sellers and Principal Shareholders
represent and warrant that the execution, delivery and performance of this
agreement by Sellers and Principal Shareholders and consummation by each of them
of the transactions contemplated herein do not and will not (i) require the
consent, waiver, approval, license or authorization of any person or public
authority which will not be obtained prior to or at the Closing Date, (ii) to
the best of their knowledge, after due inquiry, violate, with or without the
giving of
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notice and/or the passage of time, any provision of law applicable to them, or
(iii) conflict with or result in a breach or termination of any provision of, or
constitute a default or violation under, or result in the creation of any lien,
charge or encumbrance upon any of the property or assets of any member of the
KMC Group pursuant to, any corporate charter or articles of incorporation
provision, bylaw, mortgage, deed of trust, indenture or other agreement or
instrument, or any order or judgment, or, to the best of their knowledge, after
due inquiry, any decree, statute, regulation or any other restriction of any
kind or character, to which any member of the KMC Group are or were a party or
by which any member of the KMC Group or any of their assets and properties are
bound. The execution, delivery and performance of this agreement by them and
consummation by them of the transactions contemplated herein have been duly
authorized by all necessary actions and this agreement constitutes their legal,
valid and binding obligation enforceable against them in accordance with its
terms.
(c) INSURANCE. Each Seller has maintained and will continue to
maintain until the Closing Date the property, casualty, liability, extended
coverage and other insurance described in EXHIBIT 3.3(c) attached hereto,
including insurance on each Seller's portion of the Assets, including, without
limitation, tangible personal property and on KMC Group Realty (as hereinafter
defined), whether owned or leased, against loss or damage by fire or other
casualty, in amounts equal to or in excess of One Hundred Percent (100%) of the
replacement value thereof, subject to current deductibles; all such insurance is
in full force and effect on the date of this agreement, is carried in reputable
companies authorized to do business in Kentucky and is in amounts and with
coverages normally and customarily carried by similar business doing business in
the areas where each Seller does business and all such insurance can be assigned
to Buyer at the Closing without any cost or expense to Buyer.
(d) FINANCIAL STATEMENTS. Sellers and Principal Shareholders have
furnished to Buyer true and complete balance sheets of each member of the KMC
Group for its prior three (3) fiscal years and the related statements of
operations, stockholders equity and cash flows, including the notes thereto,
each dated as shown on EXHIBIT 3.3(d) attached hereto (the foregoing financial
data shall be collectively referred to as the "KMC Financial Statements" and are
attached hereto as EXHIBIT 3.3(d)). The balance sheets dated as of each member
of the KMC Group's most recent fiscal year end (the "Balance Sheet Date") make
full and adequate provision for all direct and indirect material obligations and
liabilities (fixed or contingent) as of such Balance Sheet Date and the members
of the KMC Group have no direct or indirect material obligations or liabilities
(fixed or contingent) not reflected or reserved against on such balance sheets.
The KMC Financial Statements, taken as a whole, fairly and accurately present
the financial position and results of operations of each of the members of the
KMC Group, in all material respects, as of the dates and for the periods
indicated and have been prepared in conformity with generally accepted
accounting principals applied on a consistent basis. Sellers and Principal
Shareholders have also furnished to Buyer each KMC Group member's balance sheet
as of June 30, 1997 and the related statements of operations, stockholders
equity and cash flows, including the notes thereto, for the period then ended
(the "KMC 1997 Financial Statements"). The KMC 1997 Financial
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Statements are materially complete and correct, taken as a whole, fairly present
the consolidated financial position and results of operations of each member of
the KMC Group in all material respects, as of the date and for the period
indicated and have been prepared in conformity with generally accepted
accounting principals applied on a consistent basis. Except as disclosed in the
Shareholders Disclosure Schedule, elsewhere herein or in the KMC 1997 Financial
Statements, there have been no material changes (other than in the ordinary
course of business) in each member of the KMC Group's obligations and
liabilities since the date of each member's most recent fiscal year end.
(e) TAX MATTERS. With respect to Taxes (as defined in Clause (xi) and
(xii) hereof):
(i) Each member of the KMC Group has filed, within the time
and in the manner prescribed by law, all returns, declarations,
reports, estimates, information returns and statements ("Returns")
required to be filed under federal, state, local or any foreign laws
by each such member, and all such Returns are true, correct and
complete in all material respects.
(ii) Except as set forth in the Sellers' Disclosure
Schedule, each member of the KMC Group has within the time and in the
manner prescribed by law, paid (and until the Closing Date will,
within the time and in the manner prescribed by law, pay) all Taxes
that are due and payable.
(iii) Each member of the KMC Group has established (and
until the Closing Date will establish) on their respective books and
records and on KMC 1997 Financial Statements reserves (to be
specifically designated as an increase to current liabilities) that
are adequate for the payment of all Taxes not yet due and payable.
(iv) There are no liens for Taxes upon the assets of any
member of the KMC Group's except liens for Taxes not yet due.
(v) Except as set forth in the Sellers' Disclosure Schedule
(which shall set forth the type of return, date filed, and date of
expiration of the statute of limitations), (i) the statute of
limitations for the assessment of federal income taxes has expired for
all federal income tax returns of each member of the KMC Group or such
returns have been examined by the Internal Revenue Service for all
periods through December 31, 1994; (ii) the statute of limitations for
the assessment of state, local and foreign income taxes has expired
for all applicable Returns of each member of the KMC Group or such
Returns have been examined by the appropriate tax authorities for all
periods through December 31, 1994; and (iii) no deficiency for any
Taxes has been proposed, asserted or assessed against any member of
the KMC Group which has not been resolved and paid in full.
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(vi) There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect
to any Taxes or Returns that have been given by any member of the KMC
Group.
(vii) Except as set forth in the Sellers' Disclosure
Schedule (which shall set forth the nature of the proceeding, i the
type of return, the deficiencies proposed or assessed and the amount
thereof, and the taxable year in question), no federal, state, local
or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Returns.
(viii) No member of the KMC Group is a party to any
tax-sharing or allocation agreement, nor does any member of the KMC
Group owe any amount under any such agreement.
(ix) No member of the KMC Group will be liable for any Taxes
under Section 4972 of the Code for contributions made by any member to
any Plans (as defined in Section 3.2(m)).
(x) Each member of the KMC Group has complied (and until the
Closing Date will comply) in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to
Sections 1441 or 1442 of the Code or similar provisions under any
foreign laws) and has, within the time and in the manner prescribed by
law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and
paid over under all applicable laws.
(xi) No member of the KMC Group has ever been (nor has any
liability for unpaid Taxes because any of them once was) a member of
an "affiliated group" within the meaning of Section 1502 of the Code
during any part of any consolidated return year except for the current
liability for taxes for the 1997 fiscal year of KMC and KNC.
(xii) For purposes of this agreement, "Taxes" shall mean all
taxes, charges, fees, levies or other assessments of whatever kind or
nature, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated,
severance, stamp, occupancy or property taxes, customs duties, fees,
assessments or charges of any kind whatsoever (together within any
interest and any penalties, additions to tax or additional amounts)
imposed by any taxing authority (domestic or foreign) upon or payable
by the party in question or any subsidiary thereof.
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(f) TITLE TO ASSETS, ABSENCE OF LIENS AND ENCUMBRANCES. Each member of
the KMC Group has good, marketable and insurable title to all of its respective
portion of the Assets, and except as set forth in any of the financial
statements set forth in Section 3.3(d) above or on the Sellers' Group Disclosure
Schedule, such title is free and clear of all liens, claims and encumbrances and
rights of other parties relating to its assets or its Business. The matters set
forth on EXHIBIT 3.3(f) attached hereto which affect each Seller's title to its
respective portion of the Assets and agreed to be accepted by Buyer are herein
sometimes referred to as the "Permitted Encumbrances." EXHIBIT 3.3(f) sets forth
an accurate and complete description of all of each member of the KMC Group's
real estate and interests therein, including leasehold interests, ("KMC Group's
Realty"). Each member of the KMC Group owns or leases all assets and property
required to operate its Business in the ordinary course and to the extent any
thereof are leased, EXHIBIT 3.3(f) sets forth the terms of such lease and the
other parties thereto, none of such leases will be breached or violated by the
transactions contemplated by this agreement and all of such leases can be
assigned to Buyer at the Closing. Except as set forth on EXHIBIT 3.3(f), no
director, officer, shareholder, or employee of any member of the KMC Group, or
any relative of any of them, owns or has owned, directly or indirectly, in whole
or in part, or leases or has leased, to any member of the KMC Group any asset
which any member of the KMC Group uses or has used or the use of which is
necessary for its Business. The Assets are good condition and repair and will be
in good condition and repair on the Closing Date.
(g) LITIGATION. Except as set forth in the Sellers' Disclosure
Schedule, none of the members of the KMC Group nor the Principal Shareholders
have been notified of, and none of the KMC Group or the Principal Shareholders
are a party to, any actions, suits, proceedings or investigations (including any
environmental, building or safety investigation) pertaining to them or their
assets or Businesses, nor do Sellers or Principal Shareholders have any
knowledge of, nor reasonable grounds to have knowledge of, any claim or state of
facts which may lead to, or constitute a threat of, any investigation, claim,
proceeding, or litigation, relating to Principal Shareholders or any member of
the KMC Group or their assets or Business. There are no orders, judgments or
decrees of any court or governmental agency relating to Principal Shareholders
or any member of the KMC Group, which would prevent, impede or make illegal the
consummation of the transactions contemplated herein or which would have a
material adverse effect on Principal Shareholders or any member of the KMC
Group.
(h) LABOR CONTROVERSIES. Except as set forth in EXHIBIT 3.3(h), no
member of the KMC Group is a part to any collective bargaining agreements, labor
agreement, affirmative action program or other agreement or program affecting
any such member's employees or its business. There are no controversies between
any member of the KMC Group and any of said member's employees, no unresolved
labor practice proceedings or disputes and no labor arbitration proceedings
pending or threatened relating to any such member with respect to its Business,
and there are no organizational efforts presently being made or to the best of
each member's actual knowledge, after due inquiry, threatened involving any of
member's employees involved in the Businesses. Each Seller and to the
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best of each Seller's actual knowledge, after due inquiry, all of its employees,
have complied with all federal, state and local laws and orders relating to the
employment of labor, including, without limitation ERISA and all laws governing
wages, hours, collective bargaining, the payment of social security, withholding
and similar taxes, equal employment opportunity, employment discrimination,
disability, family leave and immigration and naturalization, including, without
limitation, Executive Order 11246, governing affirmative action, the
Rehabilitation Act of 1973, the Vietnam-Era Veterans' Readjustment Assistance
Act of 1974, the Drug-Free Workplace Act, the Americans With Disabilities Act of
1990, the Age Discrimination in Employment Act, the Family and Medical Leave
Act, Title VII of the Civil Rights Act of 1964, as amended, the Fair Labor
Standards Act, the Occupational Safety and Health Act, the Immigration Reform
and Control Act, the Worker Adjustment and Retaining Notification Act, the
Social Security Act, the Department of Transportation Drug-Testing Rules, the
Employee Polygraph Protection Act of 1988, the Equal Pay Act, the Kentucky Human
Rights Law, the AIDS Testing Confidentiality Act, the Rights of Persons with
Disabilities Act, the Nondiscrimination Against Genetic Disorders Act, the
Employee's Protection from Discrimination for Engagement in Legal Activities
Law, the Equal Rights Law, the Adoptive Parents' Child Care Leave Law, and the
Employment Agency Discrimination Law, and is not subject to any governmental or
private claims, proceedings, investigations, lawsuits or other actions alleging
violation of or failure to comply with any of the foregoing nor is any Seller
liable for any arrears of wages, or any taxes or penalties for failure to comply
with any of the foregoing or any judgements, orders, damage awards or other
sanctions. Each member of the KMC Group has enjoyed a satisfactory
employer-employee relationship with its respective employees, past and present.
There is no claim under any law regulating employees or their employment pending
or to the best of each Seller's actual knowledge, after due inquiry, threatened
against any Seller, nor any strike, dispute, slowdown or stoppage pending or
threatened against or involving any Seller.
(i) PATENTS, TRADEMARKS, ETC. No one has made or, to the best of the
Sellers and Principal Shareholders' knowledge, after due inquiry, threatened to
make any claims that any member of the KMC Group has wrongfully used or
appropriated or infringed upon, any patent, patent license, trade name,
trademark, servicemark, brandmark, brand name, copyright, know-how, trade secret
or other proprietary or trade rights of any third party. No director, officer,
shareholder or employee of any member of the KMC Group owns or has owned,
directly or indirectly, in whole or in part, any patents, trademarks, trade
names, servicemarks, brandmarks, brand names, copyrights, registrations or
applications thereof or interests therein which any member of the KMC Group has
used or are using or the use of which is necessary for their Businesses.
(j) BOOKS AND RECORDS. The financial books, records and working papers
of each member of the KMC Group are in all material respects complete and
correct, have been maintained in accordance with sound business practices, and
accurately reflect the basis for the financial condition and results of their
operations as set forth in their financial statements set forth in Section
3.3(d) above. Each member of the KMC Group maintains financial books, records
and working papers which are in all material respects complete and correct,
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have been maintained in accordance with sound business practices and accurately
reflect the basis for the financial condition and results of their operations as
set forth in their financial statements set forth in Section 3.3(d) above.
(k) PERMITS, AUTHORIZATIONS, ETC. Each member of the KMC Group has all
approvals, authorizations, consents, licenses, orders and other permits of all
governmental agencies, whether federal, state or local, required to permit the
operation of its Business as heretofore and as presently conducted, and all of
the same will survive their assignment to Buyer and the consummation of the
transactions contemplated by this agreement. No member of the KMC Group received
any notice of any license or permit which will have to be acquired in the future
in order for its Business to be operated as heretofore and as presently
conducted. Set forth in EXHIBIT 3.3(k) is a list of all licenses, permits and
approvals necessary for each member of the KMC Group to conduct its Business as
presently being conducted, including all licenses and permits as are required by
any federal, state and local law, rule and regulation.
(l) COMPLIANCE WITH APPLICABLE LAW. No member of the KMC Group has
received any notice that it or any other member of the KMC Group are, and none
of the members of the KMC Group have received any notice that it or any other
member of the KMC Group is in violation of any foreign or domestic (federal,
state or local) law, ordinance, regulation, order or requirement including
Environmental Laws, relating to their Businesses. No member of the KMC Group has
received any notice that, KMC Group's Realty or its assets are in violation of
any state and local building, zoning, subdivision, land use, Environmental Laws
and other laws, ordinances and regulations. No member of the KMC Group has ever
received any notice of any federal, state, municipal, public zoning or other
restrictions that will prevent the utilization of any property owned or leased
by it for the purposes presently used, and there are no condemnation proceedings
pending or, to the best of its knowledge, threatened against any such property.
No member of the KMC Group is in violation of any foreign or domestic (federal,
state or local) law, ordinance, regulation, order or requirement including
Environmental Laws.
(m) EMPLOYEE PLANS. Sellers and Principal Shareholders have heretofore
delivered to the Buyer true, correct and complete copies of:
(i) the most recent Internal Revenue Service determination
letter relating to each member of the KMC Group's pension,
profit-sharing, stock bonus or other deferred compensation
arrangements, if any, listed in EXHIBIT 3.3(m) hereto for which a
determination letter was obtained or for which no such letter was
obtained except for any multi-employer plans sponsored by any of them
(each a "Plan" and collectively the "Plans");
(ii) the most recent Annual Report (Form 5500 series) and
accompanying schedules of each Plan currently sponsored by any of
them,
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with respect to which the same are required, as filed pursuant to
applicable law; and
(iii) all plan documents, as amended to date, summary plan
descriptions and summaries of material modifications and all plan
termination documentation with respect to each Plan and employee
welfare plan presently or in the past sponsored by any member of the
KMC Group, as well as the most recent financial statements of each of
such plans, except for the multi-employer plans referred to below.
With respect to each of such Plans as to which an Annual Report (Form 5500
series) is required to be filed, no liabilities as of the date of such Annual
Report exist unless specifically referred to in the most recent such Annual
Report, and no material change has occurred with respect to the matters covered
by the last Annual Report since the date thereof. Sellers and Principal
Shareholders do not know, nor have any reasonable grounds to know, of any
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, which has ever been engaged in by any shareholder, or
any member of the KMC Group, or by any Plan sponsored by any member of the KMC
Group, any trust created thereunder or any trustee, administrator or other
fiduciary thereof, or which would subject such Plan or any such entity, or any
party dealing with such Plan or any such trust, to the sanctions imposed by
ERISA or the tax on prohibited transactions imposed by Section 4975 of the Code.
There are no actions, suits or claims pending or, to the best of Sellers and
Principal Shareholders' knowledge after due inquiry, threatened, against any of
the Plans or any administrator or fiduciary thereof. Neither any of the Plans
nor any of said trusts have incurred any "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA or Section 412(a) of the Code
(whether or not waived), since the date of ERISA. The terms and operation of
each of the Plans have complied to the extent required with the provisions of
Section 401(a) of the Code and with ERISA, and all reports and notices required
by ERISA or the Code have been duly filed or given. Sellers and Principal
Shareholders shall deliver to the Buyer a list of all of the members of the KMC
Group's Plans subject to Title IV of ERISA and all trusts created thereunder
which have been terminated, and all "reportable events," as that term is defined
in Section 4043 of ERISA. Except as may be specified in EXHIBIT 3.3(m) hereto,
none of such Plans and no such trust has been terminated, nor has any such
"reportable event" occurred with respect to any such Plans since the effective
date of ERISA. The present value, on a plan termination basis, of all benefits
accrued under each Plan sponsored or contributed to by any member of the KMC
Group and subject to Title IV of ERISA did not, as of the most recent valuation
date, exceed the fair market value of the assets of such Plan as of such date.
No members of the KMC Group have ever been sponsors of, and/or a contributing
employer to, a multi-employer pension plan subject to the provisions of Section
4201, ET SEQ., of ERISA; or if they have, they have never incurred any
withdrawal liability thereunder, nor will they incur any such liability as a
result of the consummation of any of the transactions contemplated by this
agreement; or if they will, at or prior to the Closing Date, they will pay
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or otherwise satisfy such liability in full and/or establish an escrow fund or
secure a bond in an appropriate amount with respect to the same with an escrow
agent and/or a bonding company reasonably satisfactory to the Buyer and in a
manner agreeable to applicable law. No member of the KMC Group has ever been a
sponsor of, or a contributing employer to, a single employer pension plan
subject to the provisions of Section 4041, ET SEQ., of ERISA; nor has it ever
incurred any liability thereunder or under Section 4062, ET SEQ., of ERISA, nor
will it incur any such liability as a result of the consummation of any of the
transactions contemplated by this agreement; or if any of them will, at or prior
to the Closing Date, they will pay or otherwise satisfy such liability in full
and/or establish an escrow fund or secure a bond with respect to the same as
provided in the preceding sentence.
(n) INVENTORY. All of the inventory of each member of the KMC Group
consists of materials of a quality and quantity usable and salable in accordance
with each member's normal pricing and sales practices.
(o) LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. Prior to the
execution of this agreement or concurrently herewith, Sellers and Principal
Shareholders have delivered or will deliver to the Buyer a true and complete
list (designated for purposes of this agreement as EXHIBIT 3.3(o)), which list
shall be updated and amended as of the Closing Date, setting forth the
following:
(i) all intellectual property and all other proprietary
information owned by each member of the KMC Group, and copies of all
other material agreements to which each member of the KMC Group are a
party which relate to any proprietary rights affecting their assets;
and
(ii) all contracts, agreements, mortgages, promissory notes,
loan facilities, leases, understandings and commitments to which each
member of the KMC Group is a party, or to which any of its assets are
subject, except those involving not more than $5,000 on an annual
basis.
True and complete copies of all documents referred to in such list have been or
will be provided to Buyer and its counsel upon their request as part of Buyer's
due diligence. All such documents, rights, leases, obligations and commitments
are valid and enforceable in accordance with their respective terms, except as
such enforceability may be affected by bankruptcy, or similar laws affecting the
rights of creditors generally and by general principles of equity, for the
periods stated therein and there is not, under any of them any existing default
or event of default or any event which with notice and/or lapse of time would
constitute a default nor will the consummation of the transactions contemplated
by this agreement cause a default or constitute an event of default under any of
them.
(p) INDUSTRY AND GOVERNMENTAL EVENTS. Neither Sellers nor Principal
Shareholders, nor any member of the KMC Group, are aware of any future events,
loss of customers or suppliers, that may materially affect any member of the KMC
Group and/or
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their Businesses and financial affairs either prior to or subsequent to the
Closing Date. No member of the KMC Group has received any notice of any pending
or contemplated condemnation or any change of zoning, subdivision land use,
environmental or other statutes, or regulations or court or administrative
rulings or other governmental action affecting KMC Group's Realty.
(q) NO DEFAULTS. There currently are no defaults by any member of the
KMC Group or acts or events which, with the passage of time or giving of notice,
or both, could become defaults by any of them under any indebtedness, indenture,
mortgage, deed of trust, security deed, security agreement or other instrument
or agreements, except as set forth in EXHIBIT 3.3(q).
(r) ACCURACY AND OMISSIONS. None of the information and documents
furnished or to be furnished or made available for inspection by Principal
Shareholders, or any member of the KMC Group pursuant to the provisions of this
agreement is or will be false or misleading, or contains or will contain any
material misstatement of fact or omits or will omit to state any material fact
required to be stated to make the statements therein not misleading.
ARTICLE IV
PRE-ACQUISITION AND POST-ACQUISITION COVENANTS
----------------------------------------------
4.1 CONDUCT OF KMC GROUP'S BUSINESSES PENDING CLOSING. For the period
commencing from and after the date hereof until the Closing Date or the earlier
termination of this agreement (hereinafter referred to as the "Interim Period"),
Principal Shareholders and Sellers covenant and agree as follows:
(a) FULL ACCESS AND DUE DILIGENCE. Buyer and its respective agents and
representatives (including legal counsel and accountants) shall have full access
during normal business hours, to inspect all properties, books, records,
contracts and documents of the KMC Group used in or associated with their
Businesses and to all of their executive employees (including the opportunity to
meet with and discuss their Businesses with such employees) and to otherwise
conduct such due diligence (the "Buyer's Due Diligence") regarding its
examination of them, their Businesses and financial affairs as Buyer may deem
reasonably necessary and appropriate; provided, however, that the Buyer and its
representatives shall not unreasonably interfere with their operations; and each
of the KMC Group shall furnish or cause to be furnished to the Buyer and its
authorized representatives all information with respect to their Businesses as
Buyer or its representatives may reasonably request. Furthermore, Buyer, its
agents and representatives, shall have the opportunity to inspect and test any
or all of each of the KMC Group's equipment and properties as it determines in
its sole discretion, at any reasonable time, and from time to
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time, up to the Closing Date provided that the Buyer makes reasonable efforts
not to disrupt their Businesses and operations when conducting such tests.
(b) BUSINESS IN THE ORDINARY COURSE. Except as specifically permitted
or required herein, during the Interim Period, the KMC Group's Businesses shall,
and the Principal Shareholders shall cause the KMC Group's Businesses to, be
conducted in the ordinary course consistent with past practices. Except as
specifically permitted or required herein, the members of the KMC Group shall
not, enter into any contract or commitment or engage in any transaction that
could reasonably be anticipated to (separately or in the aggregate) materially
adversely affect their financial condition or their Businesses. If any member of
the KMC Group desires to engage in any transaction not in the ordinary course of
business and such transaction involves consideration equal to or greater than
Ten Thousand Dollars ($10,000.00), it shall first obtain the prior written
consent of Buyer before entering into such transaction (which consent shall not
be unreasonably withheld); provided that in no event shall any member of the KMC
Group incur any obligation to lawyers, accountants, financial advisors,
environmental or other engineers, brokers or finders in connection with the
transactions contemplated by this agreement.
(c) PRESERVATION OF ORGANIZATION. During the Interim Period, each
member of the KMC Group shall (i) not make or voluntarily suffer any change in
their Articles of Incorporation or By-Laws; (ii) make a reasonable and diligent
effort to in the ordinary course of business and to the extent consistent with
reasonable business judgment, to preserve its Business intact; (iii) keep
available, to the extent feasible, its present employees and representatives;
(iv) preserve their present relationships with its suppliers, customers,
governmental agencies, and others having business relations with it; (v) not
increase the compensation of any of its employees or representatives or the rate
of any commission that may be paid to any such employee or representatives, nor
make any promise or undertake to increase such compensation or rate of
commission without the prior written consent of Buyer; (vi) not issue any
capital stock or warrants, options or rights to purchase or acquire such stock
nor incur any new indebtedness; and (vii) not pay any dividends nor make any
distributions on their capital stock; provided that at or before the Closing
those members of the KMC Group which are S-corporations may distribute to their
shareholders cash in the amount of each of their current year 1997 earnings and
profits accrued up to the Closing Date.
(d) NO DEFAULT. During the Interim Period, no member of the KMC Group
shall breach any contract, commitment or obligation to which it is a party.
(e) COMPLIANCE WITH LAWS. Each member of the KMC Group shall comply
with all applicable laws, rules, regulations and ordinances, as are required for
the conduct of its Business.
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(f) NO ENCUMBRANCES. No member of the KMC Group shall create,
voluntarily suffer, or permit to become effective any encumbrance of any kind
upon its portion of the Assets, except as specifically authorized or
contemplated by this agreement.
(g) NO DISPOSITION OF ASSETS. No member of the KMC Group shall
transfer, sell, abandon, destroy, or otherwise dispose of, or enter into any
contract or agreement to sell or otherwise transfer, any of their property or
any portion of the Assets other than in the ordinary course of business
consistent with past practices.
(h) INSURANCE. Each member of the KMC Group shall keep all of its
portion of the Assets and properties insured as described in Section 3.3(c)
against any loss, either by fire, other casualty or theft.
(i) TERMINATION OF EMPLOYEE PENSION BENEFIT PLANS. Prior to Closing
each member of the KMC Group shall commence all requisite action to (a)
terminate any employee pension benefit plans (within the meaning of ERISA)
sponsored by it; and (b) upon the written request of Buyer, withdraw from, or
cease all contributions to, any multiple-employer or multiemployer employee
pension benefit plans (within the meaning of ERISA) in which it may participate
or to which it may contribute for the benefit of some or all of its employees;
all such action to be taken in accordance with the provisions of the respective
plans and of applicable law (including, without limitation, the Code and ERISA)
and in a timely manner.
(j) NO TERMINATION OF KEY EMPLOYEES. No member of the KMC Group shall,
without the prior written consent of Buyer, terminate the employment of any of
their officers or any of their other key employees.
(k) AUDIT. Principal Shareholders will cause each member of the KMC
Group to, and each member of the KMC Group will assist and cooperate with
Buyer's auditors, KPMG Peat Marwick, LLP, to allow them to expeditiously
complete the KPMG audit of each member of the KMC Group (the "KPMG Audit") as
Buyer deems appropriate on or before July 31, 1997.
4.2 REAL PROPERTY COVENANTS. During the Interim Period, each member of the
KMC Group will refrain from:
(a) performing any grading or excavation, construction, or removal of
or from KMC Group's Realty, or making any other material change or improvement
upon or about the KMC Group's Realty, without the consent of Buyer, other than
those required to bring the same into compliance with applicable laws, rules or
regulations, or as specifically provided herein;
(b) committing or allowing any third party to commit any waste or
nuisance upon the KMC Group's Realty; and
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(c) violating or allowing any third party to violate any Environmental
Laws with respect to the KMC Group's Realty.
(d) violating or defaulting under any lease to which it is a party or
amending or changing any such lease or accepting any prepayments of rent under
any such lease.
4.3 COVENANT NOT TO COMPETE. At the Closing each Seller shall execute its
Covenant Not to Compete in the form attached hereto as EXHIBIT 2.8.
4.4 RECORDS.
(a) On the Closing Date, each member of the KMC Group will deliver or
cause to be delivered to Buyer all original agreements, documents, books,
records and files (collectively, "Records"), in its possession relating to its
Business and operations to the extent not then in the possession of Buyer.
(b) After the Closing, upon reasonable written notice, Buyer and
Sellers agree to furnish or cause to be furnished to each other and their
representatives, employees, counsel and accountants access, during normal
business hours, such information and assistance relating to the members of the
KMC Group as is reasonably necessary for financial reporting and accounting
matters, the preparation and filing of any Returns, reports or forms or the
defense of any tax claim or assessment; PROVIDED, HOWEVER, that such access does
not unreasonably disrupt the normal operations of Buyer or the members of the
KMC Group.
4.5 ACCESS TO AND INFORMATION CONCERNING REAL PROPERTY. Each member of
the KMC Group, during the Interim Period will allow Buyer and its agents access
to its portion of the KMC Realty and Assets during regular business hours upon
reasonable prior notice, for purposes of inspecting and testing the same or any
part thereof as the Buyer shall reasonably request. Each member of the KMC Group
will furnish to Buyer any and all information regarding it and its Business that
the Buyer shall reasonably request from time to time. Buyer agrees to indemnify
and hold the KMC Group members harmless from all claims, suits, damages, and
losses arising from the its inspection or testing of the said real property,
which indemnity shall survive termination of this agreement.
4.6 ENVIRONMENTAL AND ENGINEERING MATTERS. Buyer may, prior to the
Closing Date, perform whatever environmental and engineering tests, searches or
inspections of the KMC Group's Realty owned by each member thereof which it
desires to perform. In addition to any testing which may be performed upon or
prior to the execution of this agreement, Buyer may hire a certified
environmental engineering firm at its own cost and expense ("Environmental
Engineer"), to perform a Level I environmental audit of KMC Group's Realty and
at its option a Level II environmental audit of KMC Group's Realty. Such
Environmental Engineer shall address and certify his environmental report to the
Buyer. If the report issued by the Environmental Engineer recommends or requires
further testing
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and/or the removal or treatment of any Hazardous Material (as defined in EXHIBIT
3.2(m)), or if any engineer hired by the Buyer determines an environmental
problem exists on KMC Group's Realty, or recommends further testing and/or the
removal or treatment of any Hazardous Material on any portion of KMC Group's
Realty, such testing, removal, repair or treatment of Hazardous Material or the
correction of the environmental problem shall be at the sole cost and expense of
the affected Seller (the "Environmental Work") and the Environmental Work shall
be completed to the sole satisfaction of the Buyer and its engineers and
financing institutions as evidenced by a report from an engineer acceptable to
them which indicates that the Hazardous Materials and the KMC Group Realty has
been brought into compliance with Environmental Laws, or the environmental
problem has been corrected. If the Sellers fail to cause the members of the KMC
Group involved to perform the Environmental Work, to the satisfaction of the
Buyer and its financing institutions, the Buyer shall at its election have the
right to terminate this agreement or to perform the Environmental Work itself
and pay for the same as provided for in the next sentence. Each Seller agrees to
cause any Environmental Work on its KMC Group Realty, to be completed, as
expeditiously as possible, but in any event, the Environmental Work shall be
completed within thirty (30) days from receipt of written notice from the Buyer
that it requires the performance of Environmental Work and shall be promptly
paid for by the affected Seller and to the extent not paid for at the Closing
may be deducted by the Buyer from the Purchase Price before allocation thereof
to Sellers under Section 1.4 and paid to the providers of the Environmental
Work.
4.7 COVENANTS RELATING TO TAXES.
(a) LIABILITY FOR TAXES. Principal Shareholders and Sellers shall be
liable for and indemnify Buyer for all Taxes imposed on the members of the KMC
Group for which the said members may otherwise be liable for any taxable year or
period that ends on, before or after the Closing Date.
(b) TRANSFER AND GAINS TAXES. Principal Shareholder shall be liable
for and pay all transfer, registration, gains and other such taxes and fees
(including any penalties and interest) incurred in connection with this
agreement and the transaction contemplated hereby; provided, however, Buyer will
pay sales taxes incurred in connection with this agreement.
4.8 NOTIFICATION OF CERTAIN MATTERS. Sellers shall give prompt notice to
Buyer of: (a) any notice of, or other communication relating to, a default or
event that, with notice or lapse of time or both, would become a default,
received by any member of the KMC Group, subsequent to the date of this
agreement and prior to the Closing Date, under any contract material to any
member of the KMC Group to which any member of the KMC Group is a party or is
subject; and (b) any material adverse change in the condition, financial or
otherwise, assets, properties, liabilities, results of operations or prospects
of any member of the KMC Group or the occurrence of any event which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in any such change. Each Seller and Buyer shall give prompt notice to
the other party of any notice or other communication
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from any third party alleging that the consent of such third party is or may be
required in connection with the transaction contemplated by this agreement.
4.9 EMPLOYMENT AGREEMENTS AND NONCOMPETE AGREEMENTS. At the Closing, JK and
RK agree to enter into: (a) the Employment Agreements in substantially the forms
attached hereto as EXHIBIT 2.1 and EXHIBIT 2.2, respectively, and (b)
Acquisition Noncompete, Nonsolicitation and Nondisclosure Agreements and
Noncompete Agreements in the forms attached hereto as EXHIBIT 2.5 and EXHIBIT
2.6, respectively.
4.10 LEASE AGREEMENT. At the Closing, Principal Shareholders shall cause
Keith & Keith to execute the Lease Agreement substantially in the form attached
hereto as EXHIBIT 2.7.
4.11 SECURITIES LAW COMPLIANCE.
(a) Buyer shall cause to be prepared and filed such applications,
forms, statements, if any, as are required under Federal securities laws to
cover the issuance of Buyer's Common Stock to NMC as provided for in Article I
at the Closing.
(b) Buyer will take any action required to be taken under applicable
state securities laws and Buyer will also take action to secure all necessary
exemptions or clearances under all state securities laws applicable to the
issuance of Buyer's Common Stock to NMC pursuant hereto.
4.12 THIRD PARTY CONSENTS. All parties to this agreement shall use their
best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, assignments, waivers and approvals from third parties
or governmental authorities necessary to consummate this agreement and the
transactions contemplated hereby and each party to this agreement will use its
best efforts to cause the Closing to occur.
4.13 SELLERS' EMPLOYEES. All employees of the Sellers (both union and
non-union) shall be employees of the Sellers up to and through (whether it is a
business day, weekend day or holiday) the Closing Date, and the Sellers shall be
responsible for and shall pay all payroll, salaries, bonuses, accrued vacation
pay, workman's compensation benefits and other obligations due and payable to
said employees through that date and Buyer agrees post-Closing to pay to all
Sellers employees whether or not Buyer employs them all such obligations due
after the Closing Date and to assist the Sellers in the preparation of the
Sellers' final payrolls. Prior to or at the Closing, the Sellers will provide
the Buyer with a list of all of their employees, and their current compensation,
as of the last full payroll period prior to the Closing Date. Buyer will prior
to the Closing Date meet with Sellers' employees and make offers of employment
to such of them as Principal Shareholders recommend should be employed by Buyer
after the Closing Date and each Seller will assist Buyer with these discussions.
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ARTICLE V
CONDITIONS TO COMPLETION OF CLOSING AND CLOSING
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5.1 CONDITIONS TO SELLERS' OBLIGATIONS. The obligations of Sellers under
this agreement to consummate the transaction provided for herein are subject to
the fulfillment of each of the following conditions prior to the completion of
the Closing, except to the extent Sellers may, in their absolute discretion,
waive anyone or more thereof, in whole or in part:
(a) The representations and warranties by Buyer to Sellers in this
agreement shall be true and correct, in all material respects as of the Closing
Date, with the same force and effect as though such representations and
warranties had been made on the Closing Date, Buyer shall have performed in all
material respects all its obligations, covenants and agreements set forth
herein; and Sellers shall have received a certificate of an executive officer of
Buyer to such effect (the "Buyer's Officer's Certificate"); provided, however,
that changes in said representations, warranties, covenants and agreements
occurring because of Buyer's conduct of its business in the ordinary course or
occurring because of the Transactions shall not be considered a breach of, or
default in, any of Buyer's representations, warranties, covenants and agreements
set forth in this agreement for purpose of this Section 5.1(a) or for any other
purpose under this agreement.
(b) There shall have been delivered to Sellers an opinion of counsel
for Buyer ("Buyer's Opinion of Counsel"), reasonably satisfactory in form and
substance to counsel for Shareholders, to the effect that Buyer is a corporation
existing and in good standing under the laws of its state of incorporation; that
all necessary corporate proceedings of Buyer have been duly taken to authorize
this agreement and the transactions contemplated hereby; that this agreement
constitutes Buyer's legal, valid, and binding obligation, enforceable against
Buyer in accordance with its terms; that this agreement does not, and the
carrying out of the transaction herein provided for will not, to the best of
such counsel's knowledge, violate any charter or other corporate restriction to
which Buyer is subject or any other agreement or instrument to which it is a
party or by which it is bound; and an opinion to NMC that the shares of Buyer's
Common Stock delivered to NMC pursuant to this agreement will be duly
authorized, validly issued, fully paid, and nonassessable shares of Buyer's
Common Stock.
(c) The Employment Agreements, substantially in the forms attached as
EXHIBIT 2.1 and EXHIBIT 2.2 shall be executed by Buyer.
(d) Buyer shall have delivered to Sellers a certificate certifying it
has completed all the Buyer Due Diligence it desires to conduct, is satisfied,
in its sole discretion, with the results thereof and as a consequence thereof it
desires to consummate the transactions contemplated by this agreement.
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(e) Buyer shall have delivered to NMC its Secretary's Certificate
having attached thereto copies of its Articles of Incorporation and Bylaws, as
amended to date, and a list of its officers and directors.
(f) Prior to or simultaneously with the Closing, Buyer shall have
received proceeds from its IPO sufficient to provide Buyer with the funds
required to pay the cash portion of the Purchase Price to the Sellers.
(g) All Schedules and Exhibits to be attached to their agreement were
attached to this agreement upon its execution or have been attached pursuant to
Section 8.12.
5.2 CONDITIONS TO THE BUYER'S OBLIGATIONS. The obligations of Buyer under
this agreement to consummate the transactions provided for herein are subject to
the fulfillment of each of the following conditions prior to the completion of
the Closing, except to the extent that Buyer may, in its absolute discretion,
waive any one or more hereof, in whole or in part:
(a) The representations and warranties by Sellers and Principal
Shareholders shall be true and correct, in all material respects, as of the
completion of the Closing Date, with the same force and effect as though such
representations and warranties had been made on the Closing Date; Sellers and
Principal Shareholders shall have performed, in all material respects, all their
obligations, covenants and agreements set forth herein; Sellers and Principal
Shareholders have not breached any of their covenants or agreements set forth
herein, and Buyer shall have received a certificates from Sellers and Principal
Shareholders to such effect an officer of each Seller to that effect (each the
"Sellers' Officer's Certificate") and from each Principal Shareholders to that
effect (each a "Principal Shareholder's Certificate").
(b) There shall have been delivered to Buyer an opinion of counsel for
Sellers and the Principal Shareholders, reasonably satisfactory in form and
substance to counsel for Buyer, to the effect that:
(i) This agreement has been duly executed and delivered by the
Sellers and Principal Shareholders and constitutes their legal, valid
and binding obligation enforceable in accordance with its terms; and
the Assets are owned by Sellers free and clear of all liens, claims,
pledges, encumbrances, charges, options, or restrictions of any kind
or nature, except for Permitted Encumbrances, Sellers have complete
and unrestricted power and the unqualified right to sell, assign,
transfer and deliver the Assets to Buyer; upon consummation of the
transactions contemplated by this agreement, Buyer will acquire good,
valid and marketable title to the Assets, free and clear of all liens,
claims pledges, charges, options, or restrictions of any kind or
nature; except for Permitted Encumbrances, this agreement does not,
and the carrying out of the transactions herein provided for will not,
to the best of such
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counsel's knowledge, violate any agreement or instrument to which any
Seller or Principal Shareholder, are a party or by which any of them
are bound, nor violate any statute, law, rule or regulation to which
any Seller or Principal Shareholder is subject;
(ii) Each member of the KMC Group has been duly organized and is
in good standing in the State of Kentucky, and is in good standing as
a foreign corporation in each other state, if any, where it is
qualified to do business, or where the nature of its business requires
such qualification;
(iii) This agreement and the transactions contemplated hereby do
not conflict with, breach, or constitute a default under, the
organizational documents, i.e., the certificate of incorporation, the
articles of incorporation, the bylaws or other documents, of any
member of the KMC Group or any corporate restriction, contracts,
agreements, laws or regulations applicable to any member of the KMC
Group; and no consents or approvals of any governmental entity or
other third party are required for the valid execution, delivery or
performance of this agreement or the transactions contemplated by this
agreement; and to counsel's best knowledge, there is no pending or
threatened litigation against the Sellers or Principal Shareholders
which would have a material adverse effect on this agreement or the
transactions contemplated by this agreement, or would have a material
adverse effect on the Assets, Assumed Liabilities or Business of any
member of the KMC Group.
(c) JK shall have executed his Employment Agreement substantially in
the form attached as EXHIBIT 2.1;
(d) RK shall have executed his Employment Agreement substantially in
the form attached as EXHIBIT 2.2.
(e) JK shall have executed the JK Noncompete Agreement substantially
in the form attached as EXHIBIT 2.5.
(f) RK shall have executed the RK Noncompete Agreement substantially
in the form attached as EXHIBIT 2.6.
(g) Prior to or simultaneously with the Closing, Buyer shall have
received proceeds from its IPO sufficient to provide Buyer with the funds
required to pay the cash portion of the Purchase Price to the Sellers.
(h) There shall be no uncompleted Environmental work on KMC Group's
Realty and the Sellers and Principal Shareholders shall have paid any amounts
which they
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have agreed to pay in respect of Environmental Work pursuant to Section 4.6(a)
or Buyer shall have elected to pay the same and deduct such amounts from the
Purchase Price.
(i) Each Seller shall have delivered to Buyer a Certificate of its
Secretary having attached thereto true, correct and complete copies of its
Articles of Incorporation and Bylaws, as amended to date, an incumbency
certificate for its officers and directors, and copies of the minutes of the
meetings of its shareholders and directors authorizing and approving this
agreement and the transactions contemplated by this agreement certified by its
Secretary as true, correct, complete and in effect on the Closing Date.
(j) Sellers shall have executed the Covenant Not to Compete
substantially in the form attached as EXHIBIT 2.8.
(k) Keith & Keith shall have executed and delivered the Lease
Agreement.
(l) All Schedules and Exhibit to be attached to this agreement were
attached to this agreement upon its execution or have been attached pursuant to
Section 8.12.
5.3 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party under this agreement to consummate the transactions provided for
herein shall be subject to the fulfillment of all of the following conditions
precedent at or prior to the Closing Date:
(a) No injunction or order or decree shall have been issued by any
competent Federal or state court which prevents the consummation of the
transactions provided for in this agreement and no inquiry shall have been
received from, nor shall any investigation or proceeding have been instituted
by, any governmental agency seeking to prohibit said transactions and the
transactions provided for in this agreement or asserting that the same breach or
violate any material statute, rule or regulation.
(b) No statute or regulation has been enacted which would prevent
consummation of the transactions provided for in this agreement.
(c) All governmental consents, approvals and filings required to
consummate the transactions provided for in this agreement have been obtained or
made.
5.4 THE CLOSING.
(a) DOCUMENTS AND INSTRUMENTS TO BE DELIVERED BY SELLERS. Each Seller
or the Sellers and the Principal Shareholders agree to deliver the following
documents and instruments, duly executed, to the Buyer at the Closing:
(i) An Officer's Certificate for each Seller and a Principal
Shareholder's Certificate for each Principal Shareholder;
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(ii) A Secretary's Certificate for each Seller;
(iii) A Certificate of Existence for each Seller from the
Secretary of State of Kentucky dated within twenty (20) day prior to
the Closing Date;
(iv) The opinion of counsel for Sellers and Principal
Shareholders;
(v) The agreements listed in Article II hereof which are required
to be executed by Sellers or Principal Shareholders;
(vi) A bill of sale, assignment and assumption with full
warranties of title for the assignment and transfer of the Assets and
Assumed Liabilities of each Seller;
(vii) Certificates of title and assignments thereof for each
Seller's motor vehicles which are required under state law to have
certificates of title and which are being purchased hereunder;
(viii) Warranty Deeds subject to no liens, charges or
encumbrances other than Permitted Encumbrances from each Seller to
Buyer for any of KMC Group's Realty owned by it;
(ix) An assignment from each Seller of any and all warranties,
maintenance agreements and insurance policies covering the Assets;
(x) Assignment of each Seller's real estate and personal property
leases and the consents to assignment of the lessors under any
personal property leases and real property leases of each Seller's
rights, title and interest in all leases of personal property and KMC
Group Realty leased by it;
(xi) Such other documents as Buyer or its counsel may reasonably
request for the purpose of assigning, transferring, granting,
conveying, and confirming to Buyer or reducing to its possession all
of the Assets and required for Sellers and Principal Shareholders to
consummate the transactions contemplated by this agreement;
(b) DOCUMENTS AND INSTRUMENTS TO BE DELIVERED BY BUYER. The Buyer
agrees to deliver the following documents and instruments, duly executed, to the
Sellers at the Closing:
(i) Its Officer's Certificate;
(ii) Its Secretary's Certificate;
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(iii) A Certificate of Good Standing from the Secretary of State
of Buyer's state of incorporation dated within twenty (20) days prior
to the Closing;
(iv) The opinion of counsel for Buyer;
(v) The agreements listed in Article II hereof which are required
to be executed by Buyer;
(vi) The Common Stock required pursuant to Section 1.8 hereof;
(vii) The cash portion of the Purchase Price due at Closing as
required by Section 1.9 hereof;
(viii) Such other documents as the Sellers or their counsel may
reasonably request required for Buyer to consummate the transactions
contemplated by this agreement.
ARTICLE VI
TERMINATION
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6.1 TERMINATION OF AGREEMENT. This agreement and the transactions
contemplated herein may be terminated as follows:
(a) By mutual written consent of Buyer and Sellers
(b) By Sellers pursuant to written notice delivered at any time prior
to the Closing, if the Buyer has failed in any material respect to perform its
Covenants as set forth in Article IV or if the Buyer has materially breached any
of its representations and warranties as set forth in Section 3.2.
(c) By Buyer pursuant to written notice delivered at any time prior to
the Closing if any Sellers or any Principal Shareholder has failed in any
material respect to perform its Covenants as set forth in Article IV or if the
Principal Shareholders or the Sellers have materially breached any of their
representations and warranties as set forth in Section 3.3.
(d) By either Buyer or Sellers, pursuant to written notice delivered
prior to the Closing, if (i) any governmental or regulatory body, the consent of
which is a condition to the obligations of Buyer and Sellers to consummate the
transactions contemplated hereby, shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful, or (ii) any court of competent jurisdiction in the
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United States or any state shall have issued an order, judgment or decree (other
than a temporary restraining order) restraining, enjoining or otherwise
prohibiting the transaction provided for in this agreement and such order,
judgment or decree shall have become final and nonappealable.
6.2 CONSEQUENCES OF TERMINATION. In the event of termination of this
agreement, it shall forthwith become void and there shall be no liability on the
part of Buyer or Sellers (except as set forth below in this Section 6.2 or
Section 8.2 hereof) and each party hereto shall return to the others all
documents and materials obtained from it or them in connection with the
transactions contemplated by this agreement. In the event of termination under
Section 6.1(a), the parties shall be deemed to have released each other from any
liability arising from the termination of this agreement. In the event of
termination under Section 6.1(b), (c) or (d), the parties shall retain all
rights and remedies, if any, pertaining to any claim for breach of this
agreement.
ARTICLE VII
INDEMNIFICATION AND RISK OF LOSS
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7.1 SELLERS AND PRINCIPAL SHAREHOLDERS GENERAL INDEMNIFICATION COVENANTS.
Subject to the provisions of Sections 7.3 and 7.4, Sellers and Principal
Shareholders shall, jointly and severally, indemnify, save and keep Buyer and
its parent, subsidiaries, affiliates, successors and permitted assigns (the
"Buyer Indemnitees"), harmless against and from all liability, demands, claims,
actions or causes of action, assessments, losses, fines, penalties, costs,
damages and expenses, including reasonable attorneys' fees, disbursements and
expenses (collectively, "Damages"), sustained or incurred by any of the Buyer
Indemnitees as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation, or non-fulfillment
or breach of any agreement or covenant made on the part of Sellers or Principal
Shareholders, whether contained in this agreement or any exhibit or schedule
hereto or any written statement or certificate furnished or to be furnished to
Buyer pursuant hereto or in any closing document delivered by Sellers or
Principal Shareholders in connection herewith.
7.2 TAX INDEMNITY.
(a) Sellers and Principal Shareholders hereby, jointly and severally,
agree to pay, indemnify, defend and hold the Buyer Indemnities harmless from and
against any and all Taxes of the Sellers or the Principal Shareholders or the
other shareholders of each member of the KMC Group with respect to any period
(or any portion thereof) up to and including the Closing Date, and for any Taxes
owed by them because of the consummation of the transactions contemplated by
this agreement, together with all reasonable legal fees, disbursements and
expenses incurred by the Buyer Indemnities in connection therewith.
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(b) The indemnity provided for in this Section 7.2 shall be
independent of any other indemnity provision hereof and, anything in this
agreement to the contrary notwithstanding, shall survive until the expiration of
the applicable statutes of limitation for the Taxes referred to herein, and any
Taxes subject to the indemnification for Taxes set forth in this Section 7.2
shall not be subject to the provisions of Sections 7.1 or 7.4 hereof.
7.3 LIMITATIONS ON INDEMNIFICATION. The obligations of Sellers and
Principal Shareholders pursuant to Sections 7.1 and 7.2 are subject to the
following limitations:
(a) In no event shall the joint and several obligation of Sellers and
Principal Shareholders to indemnify the Buyer Indemnitees pursuant to Section
7.1 exceed the Purchase Price in the aggregate; provided, however, that such
limitation shall not apply to any indemnification obligations of Sellers and
Principal Shareholders under Section 7.2; and
(b) Sellers and Principal Shareholders shall not have any
indemnification obligation with respect to the first $10,000.00 of total
liabilities incurred under Sections 7.1 and 7.2, unless the total aggregate
liabilities of Sellers and Principal Shareholders under Sections 7.1 and 7.2
equal or exceed such amount, in which case the indemnification obligations of
Sellers and Principal Shareholders will include all liabilities in excess of One
Dollar ($1.00) incurred under Sections 7.1 and 7.2 (subject only, in the case of
liabilities incurred under Section 7.1, to the maximum aggregate amount set
forth in Section 7.3(a) above).
7.4 CONDITIONS OF INDEMNIFICATION PURSUANT TO SECTION 7.1.
(a) Promptly following the receipt by an Buyer Indemnitee of notice of
a demand, claim, action, assessment or proceeding made or brought by a third
party, including a governmental agency (a "Third Party Claim"), the Buyer
Indemnitee receiving the notice of the Third Party Claim (i) shall notify
Principal Shareholders of its existence, setting forth the facts and
circumstances of which such Buyer Indemnitee has received notice, and (ii) if
the Buyer Indemnitee giving such notice is a person entitled to indemnification
under this Article VII (an "Indemnified Party"), specifying the basis hereunder
upon which the Indemnified Party's claim for indemnification is asserted.
(b) The Indemnified Party shall, upon reasonable notice by
Shareholders, tender the defense of a Third Party Claim to Principal
Shareholders. If Principal Shareholders accept responsibility for the defense of
a Third Party Claim, then Principal Shareholders shall have the exclusive right
to contest, defend and litigate the Third Party Claim and shall have the
exclusive right, in Principal Shareholders' discretion exercised in good faith
and upon the advice of counsel, to settle any such matter, either before or
after the initiation of litigation, at such time and upon such terms as
Principal Shareholders deem fair and reasonable, provided that at least ten (10)
days prior to any such settlement, Principal Shareholders shall give written
notice of Principal Shareholders' intentions to settle
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to the Indemnified Party. The Indemnified Party shall have the right to be
represented by counsel at its own expense in any defense conducted by Principal
Shareholders.
(c) Notwithstanding the foregoing, in connection with any settlement
negotiated by Principal Shareholders, no Indemnified Party shall be required to
(i) enter into any settlement (A) that does not include the delivery by the
claimant or plaintiff to the Indemnified Party of a release from all liability
in respect of such claim or litigation, (B) if the Indemnified Party shall, in
writing to Principal Shareholders within the ten (10) day period prior to such
proposed settlement, disapprove of such settlement proposal and desire to have
Principal Shareholders tender the defense of such matter back to the Indemnified
Party, or (C) that requires an Indemnified Party to take any affirmative actions
as a condition of such settlement, or (ii) consent to the entry of any judgment
that does not include a full dismissal of the litigation or proceeding against
the Indemnified Party with prejudice; provided, however, that should the
Indemnified Party disapprove of a settlement proposal pursuant to Clause (B)
above, the Indemnified Party shall thereafter have all of the responsibility for
defending, contesting and settling such Third Party Claim but shall not be
entitled to indemnification by Principal Shareholders to the extent that, upon
final resolution of such Third Party Claim, Principal Shareholders' liability to
the Indemnified Party but for this proviso exceeds what Principal Shareholders'
liability to the Indemnified Party would have been if Principal Shareholders
were permitted to settle such Third Party Claim in the absence of the
Indemnified Party exercising its right under Clause (B) above.
(d) If, in accordance with the foregoing provisions of this Section
7.4, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if Principal Shareholders shall fail to accept the defense of a
Third Party Claim which has been tendered in accordance with this Section 7.4,
the Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle is given to Principal
Shareholders. If, pursuant to this Section 7.4, the Indemnified Party so defends
or settles a Third Party Claim for which it is entitled to indemnification
hereunder, as hereinabove provided, the Indemnified Party shall be reimbursed by
Principal Shareholders for the reasonable attorneys' fees and other expenses of
defending the Third Party Claim which are incurred from time to time, forthwith
following the presentation to Principal Shareholders of itemized bills for said
attorneys' fees and other expenses. No failure by Principal Shareholders to
acknowledge in writing Principal Shareholders' indemnification obligations under
this Article VII shall relieve Principal Shareholders of such obligations to the
extent they exist.
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7.5 CERTAIN TAX AND OTHER MATTERS.
(a) If, in connection with the audit of any Return, a proposed
adjustment is asserted in writing with respect to any Taxes for any of the
Sellers for which Sellers and Principal Shareholders are required to indemnify a
Buyer Indemnitee pursuant to Section 7.2(a) hereof, Buyer shall notify Principal
Shareholders of such proposed adjustment within twenty (20) days after the
receipt thereof. Upon notice to Buyer within twenty (20) days after receipt of
the notice of such proposed adjustment from Buyer, Principal Shareholders may
assume (at Principal Shareholders' own cost and expense) control of and contest
such proposed adjustment.
(b) Alternatively, if Principal Shareholders request within twenty
(20) days after receipt of notice of such proposed adjustment from an Buyer
Indemnitee, Buyer or the Buyer Indemnitee involved at Buyer's option, as the
case may be, shall contest such proposed adjustment. Principal Shareholders
shall be obligated to pay all reasonable out-of-pocket costs and expenses
(including legal fees and expenses) which Buyer may incur in so contesting such
proposed adjustment as such costs and expenses are incurred, and Buyer shall
have the full right to contest such proposed adjustment and shall be entitled to
settle or agree to pay in full such proposed adjustment (in its sole discretion)
and thereafter pursue its rights under this agreement. Principal Shareholders
shall pay to Buyer all indemnity amounts in respect of any such proposed
adjustment within thirty (30) days after written demand to Principal
Shareholders therefor, or, if Principal Shareholders have assumed control of the
contest of such proposed adjustment as provided above (or have requested Buyer
to contest such proposed adjustment within the time provided above), within
thirty (30) days after such proposed adjustment is settled or a Final
Determination has been made with respect to such proposed adjustment.
(c) For purposes of this Section 7.5, a "Final Determination" shall
mean (i) the entry of a decision of a court of competent jurisdiction at such
time as an appeal may no longer be taken from such decision or (ii) the
execution of a closing agreement or its equivalent between the particular
taxpayer and the Internal Revenue Service, as provided in Section 7121 and
Section 7122, respectively, of the Code, or a corresponding agreement between
the particular taxpayer and the particular state or local taxing authority. The
obligation of Principal Shareholders to make any indemnity payment pursuant to
Section 7.2(a) shall be premised on the receipt by Principal Shareholders from
Buyer of a written notice setting forth the relevant portion of any Final
Determination, and in cases where the amount of the indemnity payment exceeds
$100,000.00, a certified statement by Buyer's nationally recognized accounting
firm setting forth the amount of the indemnity payment (and in all other cases,
a similar statement certified by the chief financial officer of Buyer) and
describing in reasonable detail the calculation thereof.
7.6 INDEMNITY FUND. Buyer will withhold One Hundred Thousand Dollars
($100,000.00) of the Purchase Price and hold it as a fund (the "Indemnity Fund")
for the payment of any Taxes required to be paid under Section 7.2 or any
Damages required to be
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paid under Section 7.1. Keith Monument Company will contribute One Hundred
Thousand Dollars ($100,000.00) to the Indemnity Fund. The amount so contributed
is herein sometimes referred to as the "Seller's Contribution to the Indemnity
Fund".
If any claim for Taxes or Damages (a "Claim" or "Claims") is received
by a Buyer Indemnitee within one (1) year of the Closing Date, Buyer will be
entitled to deduct the amount thereof from the Indemnity Fund and to hold said
amount in reserve until liability for the Claim is resolved pursuant to the
provisions of this Article VII.
When the Buyer Indemnitee liability for a Claim (the "Claim
Liability") has been determined pursuant to the provisions of this Article VII,
Buyer shall deduct the amount so determined from the amounts reserved for it and
if necessary any additional amounts from the Indemnity Fund necessary to pay the
Claim Liability. Buyer shall send Principal Shareholders written notice at least
ten (10) days prior to paying the Claim Liability.
On the date which is one (1) year after the Closing Date, Buyer will
forward its check to KMC for the amount of Seller's Contribution to the
Indemnity Fund not already deducted from the Indemnity Fund for Claims paid from
the Fund or held in reserve in the Indemnity Fund against Claims asserted
against the Buyer Indemnitees. Thereafter, at the end of each calendar quarter
occurring after the first payment, Buyer will forward to KMC any amounts
released from the reserve because Claims were determined not to be payable.
Seller's Contribution to the Indemnity Fund shall be liable for all
Claims Buyer may pay from the Indemnity Fund.
7.7 CERTAIN INFORMATION. Buyer and Sellers and Principal Shareholders agree
to furnish or cause to be furnished to each other (at reasonable times and at no
charge) upon request as promptly as practicable such information (including
access to books and records) pertinent to the KMC Group and assistance relating
to the KMC Group as is reasonably necessary for the preparation, review and
audit of financial statements, the preparation, review, audit and filing of any
Return, the preparation for any audit or the prosecution or defense of any
claim, suit or proceeding relating to any proposed adjustment or which may
result in any Seller or Principal Shareholders being liable under the
indemnification provisions of this Article VII, provided, that access shall be
limited to items pertaining solely to the KMC Group. Principal Shareholders
shall grant to Buyer access to all Returns filed with respect to the KMC Group
and their subsidiaries, current or past.
7.8 BUYER GENERAL INDEMNIFICATION COVENANTS. Subject to the provisions of
Sections 7.8 and 7.9, if the Closing occurs, Buyer shall indemnify, save and
keep Sellers, their successors and assigns (the "Seller Indemnitees"), harmless
against and from all Damages sustained or incurred by any of the Sellers
Indemnitees as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation, or non-fulfillment
or breach of any agreement or covenant of the part of Buyer, contained in this
agreement or any exhibit or schedule hereto or any written statement or
certificate furnished
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or to be furnished to Sellers hereto or in any closing document delivered by
Buyer in connection herewith; provided that Buyer's indemnification covenants
and obligations in this agreement shall terminate upon the effectiveness of
Buyer's registration statement under the Securities Act of 1933, as amended,
with respect to the IPO.
7.9 LIMITATION ON BUYER INDEMNIFICATION. The obligations of Buyer pursuant
to Section 7.8 is subject to the following limitations:
(a) In no event shall the obligation of Buyer to indemnify the Seller
Indemnitees pursuant to Section 7.8 exceed Two Hundred Thousand Dollars
($200,000.00).
(b) Buyer shall not have any indemnification obligation with respect
to the first $10,000.00 of total liabilities incurred under Section 7.8, unless
the total aggregate liabilities of Buyer under Section 7.8 equal or exceed such
amount, in which case the indemnification obligations of Buyer will include all
liabilities in excess of One Dollar ($1.00) incurred under Section 7.8 (subject
only, to the maximum aggregate amount set forth in Section 7.10(a) above).
7.10 CONDITIONS OF INDEMNIFICATION PURSUANT TO SECTION 7.8.
(a) Promptly following the receipt by a Seller Indemnitee of notice of
a demand, claim, action, assessment or proceeding made or brought by a third
party, including a governmental agency (a "Third Party Claim"), the Seller
Indemnitee receiving the notice of the Third Party Claim (i) shall notify Buyer
of its existence, setting forth the facts and circumstances of which such Seller
Indemnitee has received notice, and (ii) if the Seller Indemnitee giving such
notice is a person entitled to indemnification under this Section VII (an
"Indemnified Party"), specifying the basis hereunder upon which the Indemnified
Party's claim for indemnification is asserted.
(b) The Indemnified Party shall, upon reasonable notice by Buyer,
tender the defense of a Third Party Claim to Buyer. If Buyer accepts
responsibility for the defense of a Third Party Claim, then Buyer shall have the
exclusive right to contest, defend and litigate the Third Party Claim and shall
have the exclusive right, in its discretion exercised in good faith and upon the
advice of counsel, to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair and
reasonable, provided that at least ten (10) days prior to any such settlement,
it shall give written notice of its intention to settle to the Indemnified
Party. The Indemnified Party shall have the right to be represented by counsel
at its own expense in any defense conducted by Buyer.
(c) Notwithstanding the foregoing, in connection with any settlement
negotiated by Buyer, no Indemnified Party shall be required to (i) enter into
any settlement (A) that does not include the delivery by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim or litigation, (B) if the Indemnified Party shall, in writing to
Buyer within the ten (10) day period prior to such proposed settlement,
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<PAGE> 39
disapprove of such settlement proposal and desire to have Buyer tender the
defense of such matter back to the Indemnified Party, or (C) that requires an
Indemnified Party to take any affirmative actions as a condition of such
settlement, or (ii) consent to the entry of any judgment that does not include a
full dismissal of the litigation or proceeding against the Indemnified Party
with prejudice; provided, however, that should the Indemnified Party disapprove
of a settlement proposal pursuant to Clause (B) above, the Indemnified Party
shall thereafter have all of the responsibility for defending, contesting and
settling such Third Party Claim but shall not be entitled to indemnification by
Buyer to the extent that, upon final resolution of such Third Party Claim,
Buyer's liability to the Indemnified Party but for this proviso exceeds what
Buyer's liability to the Indemnified Party would have been if Buyer were
permitted to settle such Third Party Claim in the absence of the Indemnified
Party exercising its right under Clause (B) above.
(d) If, in accordance with the foregoing provisions of this Section
7.10, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if Buyer shall fail to accept the defense of a Third Party
Claim which has been tendered in accordance with this Section 7.10, the
Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle is given to Buyer. If,
pursuant to this Section 7.10, the Indemnified Party so defends or settles a
Third Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by Buyer for the
reasonable attorneys' fees and other expenses of defending the Third Party Claim
which are incurred from time to time, forthwith following the presentation to
Buyer of itemized bills for said attorneys' fees and other expenses. No failure
by Buyer to acknowledge in writing its indemnification obligations under this
Article VII shall relieve it of such obligations to the extent they exist.
7.11 RISK OF LOSS. The risk of loss, damage or impairment, confiscation or
condemnation of any of the Assets from any cause whatsoever shall be borne by
the Sellers at all times prior to the Closing. Sellers shall notify Buyer with
ten (10) days of any such loss exceeding One Thousand Dollars ($1,000.00). In
the event the cumulative amount of any uninsured, uncompensated or unreimbursed
loss, damage or impairment, confiscation or condemnation exceeds Fifty Thousand
Dollars ($50,000.00) (the "Material Amount"), the Buyer may elect to terminate
this agreement, receive a refund of the Deposit and to treat this agreement as
terminated under Section 6.1(a) hereof; or elect to close and deduct the amount
of the uninsured loss from the cash portion of the Purchase Price due to the
Seller(s) which incurred the uninsured, compensated or unreimbursed loss.
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<PAGE> 40
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. All
representations, warranties, covenants and agreements made by any party in this
agreement or pursuant hereto shall survive until the expiration of the
applicable statutes of limitations with respect to the matters covered thereby;
provided that notwithstanding anything to the contrary set forth in this
agreement the representations, warranties, covenants and agreements of Buyer
shall terminate and be of no further force or effect upon the effectiveness of
Buyer's registration statement under the Securities Act of 1933, as amended,
with respect to the IPO.
8.2 CONFIDENTIALITY. Subject to the last sentence of this Section and
regardless of whether the Closing shall take place, or this agreement is
terminated, Buyer, Sellers and Principal Shareholders all agree to keep the
negotiation, execution and Closing of this agreement confidential and not to
disclose the same or any documents prepared or delivered in connection therewith
to any person without the prior written consent of Buyer and Principal
Shareholders; except that each such party may advise their accountants,
attorneys, appraisers, surveyors, engineers and other advisors, agents,
employees, shareholders, investment advisors, underwriters, bankers, lenders and
banks (collectively the "Agents") of the same as necessary in order to carry out
and consummate the transactions contemplated herein; provided that they inform
them of this confidentiality agreement and require them to keep the subject
matter of it confidential and, provided further, however, no party hereto shall
be liable for any breach or violation of this Section 8.2 confidentiality
agreement because of disclosure of this agreement to any governmental agency as
required for such party to fulfill its obligations under this agreement and to
consummate the transactions contemplated by this agreement, as otherwise
required by law, as necessary or appropriate in connection with Buyer's IPO, and
as agreed to by the Buyer and the Principal Shareholders.
After the Closing Date and subsequent to the disclosure to the
employees of the KMC Group and the Buyer and their subsidiaries and affiliates
of the transactions referred to in this agreement, Buyer may, at its election,
publicly disclose the execution and delivery of this agreement and the other
agreements referenced herein and in the Exhibits hereto and the details of the
transactions consummated hereunder.
8.3 BROKERS OR FINDERS. Each party represents to the other that no broker
or agent has been involved on its behalf in the transactions contemplated
herein, and agrees that if any claim for a commission or fee is asserted, it
will be paid by the party which the broker or agent claims is represented by
such broker or agent.
8.4 PAYMENT OF EXPENSES. Whether or not the purchase and sale provided for
herein shall be consummated, each party hereto shall pay his or its own expenses
incident to preparing for, entering into and carrying out this agreement and the
transactions
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<PAGE> 41
contemplated hereby and Principal Shareholders shall pay all expenses of
transferring the Assets from Sellers to Buyer, except Buyer will pay any sales
taxes incident to said transfers.
8.5 ARTICLE AND SECTION HEADINGS. Article and Section headings are employed
in this agreement for reference purposes only and shall not affect the
interpretation or meaning of this agreement.
8.6 ASSIGNMENT, SUCCESSORS AND ASSIGNS. This agreement and the rights
hereunder shall not be assignable or transferable by Buyer or Sellers (including
by operation of law in connection with a merger or sale of substantially all of
the assets) without the prior written consent of the other party hereto;
provided that Buyer may assign this agreement and its rights to purchase the
Assets hereunder to a wholly owned direct or indirect subsidiary (corporation,
limited liability company or other entity) of Buyer without the prior written
consent of Sellers, provided that no such assignment shall limit or affect
Buyer's obligations hereunder and all references to Buyer hereunder shall be
deemed to also include such subsidiary to which Buyer has assigned its right to
purchase the Shares hereunder and provided, further however, that Buyer may
assign this agreement by operation of law or otherwise as a part of the
Transactions.
8.7 NOTICES. Any notice or other communication required or permitted under
this agreement shall be in writing and shall be deemed to have been duly given
(i) upon hand delivery, or (ii) on the third day following delivery to the U.S.
Postal Service as certified or registered mail, return receipt requested and
postage prepaid, or (iii) on the first day following delivery to a nationally
recognized United States overnight courier services, fee prepaid, return receipt
or other confirmation of delivery requested or (iv) when telecopied or sent by
facsimile transmission if an additional notice is also given under (i), (ii) or
(iii) above within three days thereafter. Any such notice or communication shall
be directed to a party at its address set forth below or at such other address
as may be designated by a part in a notice given to all other parties hereto in
accordance with the provisions of this Section.
If to Sellers or to John E. Keith
Principal Shareholders: 169 Forest Hill Road
Hodgenville, KY 42728
Phone: (502) 358-4035
Roy H. Keith, Jr.
782 Bates Road
Elizabethtown, KY 42701
Phone: (502) 737-6007
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<PAGE> 42
with, in the case of notice James T. Whitlow, Esq.
to Sellers or Principal Whitlow & Scott
Shareholders, a copy to (which 45 Lincoln Square
shall not constitute notice): P. O. Box 179
Hodgenville, KY 42748
Phone: 502-358-4344
Fax: 502-358-4536
If to Buyer: Kurt M. Swenson, Chairman,
President
and Chief Executive Officer
Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Phone: 603-225-8397
Fax: 603-225-4801
with a copy to: John R. Monson, Esq.
(which shall not Wiggin & Nourie, P.A.
constitute notice) P.O. Box 808
Manchester, NH 03105
Phone: 603-669-2211
Fax: 603-623-8442
8.8 COMPLETE AGREEMENT, WAIVERS. Neither this agreement nor any provision
hereof may be changed, waived, modified, discharged, amended or terminated
orally but only by an instrument in writing signed by all parties hereto. No
action taken by any party after the date hereof, including without limitation
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance by any other party with any
representations, warranties, covenants or agreements contained in this
agreement. The waiver by any party hereto of a breach of any provision of this
agreement shall not operate or be construed as a waiver of any other or any
subsequent breach. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect its right at a
later time to enforce the same. This agreement, together with the Exhibits and
Schedules attached hereto or incorporated herein pursuant to Section 8.12 hereof
constitutes the only agreement among the parties hereto concerning the subject
matter hereof and supersedes all prior agreements whether written or oral,
relating thereto.
8.9 GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New Hampshire and any actions brought
pertaining to the same shall lie only in the Merrimack County New Hampshire
Superior Court, in the United States District Court for the District of New
Hampshire, the Hardin County Circuit Court, Kentucky, or the U.S. District Court
for the Western District of Kentucky, in said States all of which are the sole
and exclusive forums for any actions or claims by the parties
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<PAGE> 43
to this agreement and each party hereto consents to the jurisdiction of, and
venue in, said courts in any action brought by another party hereto and agrees
that no claims or actions relating to any matter hereunder will be brought by
them in any other courts of said States, any other country.
8.10 TAX CONSEQUENCES. Each party represents and warrants that it has made
an independent evaluation of the tax consequences resulting to such party as a
result of the terms and effect of this agreement. No party shall have any
recourse against any other party to this agreement nor shall this agreement be
affected in any way by reason of the fact that the consummation of this
agreement and the transactions contemplated thereby do not have the tax
consequences anticipated by such party; provided that the foregoing shall not
limit a party's liability for breach of any representation, warranty, covenant
or agreement set forth herein.
8.11 COUNTERPARTS. This agreement may be executed in counterparts and by
different parties on different counterparts with the same effect as if the
signatures were on the same instrument. This agreement shall be effective and
binding upon all parties hereto as of the time when all parties have executed a
counterpart of this agreement.
8.12 EXHIBITS. Each Exhibit or Schedule delivered pursuant to the terms of
this agreement shall be in writing and shall constitute a part of this
agreement. The parties may agree with respect to any Schedule or Exhibit
required to be attached to this agreement, that such Schedule or Exhibit, if
mutually satisfactory, may be attached to this agreement after the date of
execution hereof and prior to the Closing and, after mutual approval thereof,
such subsequently attached Schedule or Exhibit shall be treated as if it were
attached to this agreement as of the date of execution of this agreement. All
Exhibits and Schedules attached hereto are specifically incorporated herein by
reference and made a part hereof. The words "agreement," "herein" and "hereof"
as used herein shall in all respects include the entirety of this agreement
together with all Exhibits and Schedules attached hereto and all documents
required or permitted to be delivered hereunder.
8.13 FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto, the other party shall execute and deliver, or cause to be executed
and delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
agreement.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this agreement all as
of the date first set forth above.
WITNESS: ROCK OF AGES CORPORATION
/s/ By: /S/ KURT M. SWENSON
- -------------------------------- -------------------------------
Kurt M. Swenson,
Chairman of the Board, President
and Chief Executive Officer
/s/ /S/ JOHN E. KEITH
- -------------------------------- -----------------------------------
John E. Keith, Principal Shareholder
/s/ /S/ ROY H. KEITH, JR.
- -------------------------------- -----------------------------------
Roy H. Keith, Jr., Principal
Shareholder
GLASGOW MONUMENT CO., INC.
/s/ By: /S/ ROY H. KEITH, JR.
- -------------------------------- -------------------------------
Roy H. Keith, Jr., President
KEITH LETTERING AND SETTING
CORPORATION
/s/ By: /S/ JOHN E. KEITH
- -------------------------------- -------------------------------
John E. Keith, President
KEITH MONUMENT COMPANY
/s/ By: /S/ ROY H. KEITH, JR.
- -------------------------------- -------------------------------
Roy H. Keith, Jr., President
NATIONAL MEMORIAL CORPORATION
/s/ By: /S/ ROY H. KEITH, JR.
- -------------------------------- -------------------------------
Roy H. Keith, Jr., President
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<PAGE> 45
RIEHM-GERLACK MONUMENT CO.
/s/ By: /S/ ROY H. KEITH, JR.
- -------------------------------- -------------------------------
Roy H. Keith, Jr., President
THE SNYDER CORPORATION
/s/ By: /S/ JOHN E. KEITH
- -------------------------------- -----------------------------------
John E. Keith, President
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<PAGE> 46
EXHIBIT 1.2
TO THE
ASSET PURCHASE AGREEMENT
The following are the Excluded Assets and Excluded Liabilities referred to
in Sections 1.2 and 1.4:
1. Two notes receivable from Green Meadows Cemetery, one to Keith Monument
Company and one to National Memorial Corporation with a combined remaining
unpaid balance of approximately $600,000.
2. A certain tract of land and any related liabilities owned by Keith
Monument Company held as a potential cemetery in Elizabethtown, Kentucky near
I-65 and not used in the KMC Group's memorial business.
3. Escrow Account of approximately $75,000 for Harry Jackson, held by
Whitlow & Scott.
4. The land and buildings at 810-812 East Broadway in Louisville, Kentucky
owned by National Monument Corporation and any related liabilities.
5. The stock of Clairmont Cemetery owned by National Memorial Corporation
and any related liabilities.
6. The cemetery property in Georgetown, Kentucky owned by National Memorial
Corporation and any related liabilities.
7. The Loan Amount of the KMC Group of $1,797,600 plus interest owed to
David DeMarcus and the Covenant Not to Compete in the amount of $500,000 due
David DeMarcus will not be assumed and will be paid at the Closing by Buyer as a
deduction to the Purchase Price as set forth in Section 1.3(a) and the $500,000
Covenant Not to Compete will be held in escrow pursuant to an escrow agreement
to be entered into among Sellers, Buyer and Whitlow & Scott.
8. Life insurance policy and approximately $42,000 cash surrender value
thereof on life of Roy H. Keith, Sr.
9. Keith Monument Company interest and receivable on a $500,000 life
insurance policy on the life of Susan S. Keith, having a value of approximately
$83,000.
10. Memberships in Valhalla Country Course and Oxmoor Country Club.
<PAGE> 47
EXHIBIT 3.2
OF THE
ASSET PURCHASE AGREEMENT
Buyer has and will be pursuing the IPO, its own corporate restructuring and
other mergers and acquisitions (some of which have been consummated as of the
date hereof, some of which are pending and some of which are proposed), will be
restructuring and refinancing its credit facilities with its lenders, as
necessary to consummate said transactions, may pursue other debt and equity
financing it deems appropriate, and will otherwise be engaging in other
transactions necessary and appropriate to consummate said transactions,
including internal reorganizations, asset dispositions, dividends, mergers, and
recapitalizations (all of the foregoing transactions being herein sometimes
referred to in this agreement as the "Transactions").
<PAGE> 48
LIST OF EXHIBITS TO ASSET PURCHASE AGREEMENT
--------------------------------------------
Exhibit 1.3(b) Escrow Agreement
Exhibit 1.7(A) Tentative Allocations of Purchase Price
Exhibit 1.7(b) Escrow Agreement
Exhibit 2.1 Employment Agreement for JK
Exhibit 2.2 Employment Agreement for RK
Exhibit 2.3 Stock Subscription Agreement for NMC
Exhibit 2.5 Acquisition Noncompete, Nonsolicitation and Nondisclosure
Agreement for JK
Exhibit 2.6 Acquisition Noncompete, Nonsolicitation and Nondisclosure
Agreement for RK
Exhibit 2.7 Lease Agreement
Exhibit 2.8 Covenant not to Compete from Sellers
Exhibit 3.2(e) Swenson Group Financial Statements
Exhibit 3.2(h) Litigation
Exhibit 3.2(m) Environmental Laws and Hazardous Materials (Environmental
Definitions)
Exhibit 3.3(c) Sellers' Insurance
Exhibit 3.3(d) Sellers' Financial Statements
Exhibit 3.3(f) Sellers' Group Realty
Exhibit 3.3(h) Collective Bargaining Agreements, Labor Agreements, etc.
Exhibit 3.3(k) Seller Licenses, Permits and Approvals
Exhibit 3.3(m) Seller Pension, Profit Sharing, Stock Bonus and Other
Deferred Compensation Arrangements
Exhibit 3.3(o) Seller Intellectual Property and Proprietary Interest;
Insurance; Material Contracts
Schedule to Asset Buyer's Disclosure Schedule Under Section 3.1 and 3.2
Purchase Agreement
Schedule to Asset Sellers' Disclosure Schedule Under Section 3.1 and 3.3
Purchase Agreement
Rock of Ages Corporation agrees to furnish supplementally to the Commission a
copy of any omitted schedule upon request.
<PAGE> 1
Exhibit 2.4
AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of
August 13, 1997 by and among Rock of Ages Corporation, a Delaware corporation
("Rock of Ages"), Swenson Granite Company, Inc., a New Hampshire corporation and
owner of 93% of the outstanding capital stock of Rock of Ages ("Swenson
Granite"), and Kurt M. Swenson and Kevin C. Swenson, each of whom own 30.3% of
the outstanding capital stock of Swenson Granite (collectively, the "Swenson
Shareholders").
WHEREAS, the parties hereto desire to set forth the terms and
conditions whereby Swenson Granite will merge (the "Merger") with and into Rock
of Ages, with Rock of Ages as the surviving corporation (the "Surviving
Corporation"), as part of a reorganization of Rock of Ages and Swenson Granite
(the "Reorganization") in order to facilitate, and which will occur immediately
prior to consummation of, an initial public offering by Rock of Ages of its
Class A Common Stock, par value $.01 per share (the "IPO"); and
WHEREAS, as part of the Reorganization and immediately prior
to the Effective Time (as defined herein) of the Merger, Swenson Granite will
effect, through a series of transactions, a pro rata distribution to its
shareholders of equity interests representing ownership of substantially all of
the assets and business of Swenson Granite, other than Swenson Granite's stock
interest in Rock of Ages (the "Distribution"); and
WHEREAS, the Board of Directors of each of Swenson Granite and
Rock of Ages, and Swenson Granite, as a shareholder of Rock of Ages, has
determined that the Merger is advisable and in the best interests of their
respective corporations and shareholders; and
WHEREAS, the Swenson Shareholders hold shares of capital stock
of Swenson Granite representing a majority of the voting power of all
outstanding voting securities of Swenson Granite, and, accordingly, can approve
this Agreement in their capacity as shareholders of Swenson Granite without the
vote of any other Swenson Granite shareholder and can cause Swenson Granite to
<PAGE> 2
approve and adopt this Agreement in its capacity as a stockholder of Rock of
Ages without the vote of any other Rock of Ages stockholder;
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
below, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time, Swenson Granite shall merge with and into
Rock of Ages in accordance with the General Corporation Law of the State of
Delaware (the "DGCL") and the New Hampshire Business Corporation Act (the "NH
Law"), the separate corporate existence of Swenson Granite shall cease and Rock
of Ages shall continue as the Surviving Corporation.
Section 1.2 Consummation of the Merger. In order to effectuate
the Merger, immediately upon satisfaction of all of the conditions set forth
in Article VII hereof, Swenson Granite and Rock of Ages shall cause (i) a
certificate of merger (the "Certificate of Merger") to be filed with the
Secretary of State of the State of Delaware and (ii) articles of merger
("Articles of Merger") to be filed with the Secretary of State of the State of
New Hampshire, each in such form as required by, and executed in accordance
with, the DGCL and NH Law, respectively. The Merger shall be effective as of
the later of the time of the filing of the Certificate of Merger or Articles of
Merger (the "Effective Time").
Section 1.3 Effects of Merger. The Merger shall have the
effects provided for in Section 259 of the DGCL and Section 11.06 of the NH Law.
Section 1.4 Governing Documents. The Certificate of
Incorporation of Rock of Ages, as in effect immediately prior the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
without change or amendment, and the By-Laws of Rock of Ages, as in effect
immediately prior the Effective Time,
2
<PAGE> 3
shall be the By-Laws of the Surviving Corporation without change or amendment.
Section 1.5 Officers and Directors. The persons who are
officers and directors of Rock of Ages immediately prior to the Effective Time
shall, after the Effective Time, be the officers and directors of the Surviving
Corporation, without change until their successors have been duly elected and
qualified in accordance with the Certificate of Incorporation and By-Laws of the
Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Swenson Granite Shares. Subject to
Sections 2.4 and 2.6, at the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, each issued and outstanding share
of common stock, par value $10.00 per share ("Swenson Granite Common Stock"), of
Swenson Granite shall be changed and converted into 1,618.123 fully paid and
nonassessable shares of Class B Common Stock, par value $.01 per share, of Rock
of Ages ("Class B Common Stock"); provided, however, that in lieu of fractional
shares of Class B Common Stock that would otherwise be issued, each such holder
that would have been entitled to receive a fractional share of Class B Common
Stock shall receive such whole number of shares of Class B Common Stock as is
equal to the precise number of shares of Class B Common Stock to which such
shareholder would be entitled, with a fractional interest of .5 or above rounded
up to the nearest whole number and a fractional interest of less than .5 rounded
down to the nearest whole number.
Section 2.2 Cancellation of Treasury Stock and Swenson
Granite-Owned Stock. At the Effective Time, by virtue of the Merger and without
any action on the part of Swenson Granite, all shares of Swenson Granite Common
Stock that are owned by Swenson Granite as treasury stock and all shares of
Class B Common Stock owned by Swenson Granite shall be cancelled and retired and
shall cease to exist, and no stock of Rock of Ages or other consideration shall
be delivered in exchange therefor.
3
<PAGE> 4
Section 2.3 Missouri Red-Owned Stock. All shares of Class B
Common Stock owned by Missouri Red Quarries, Inc. shall be unaffected by the
Merger and shall remain issued and outstanding.
Section 2.4 Stock Certificates. At and after the Effective
Time, all of the outstanding certificates which immediately prior to the
Effective Time represented shares of Swenson Granite Common Stock ("Swenson
Granite Certificates"), other than Swenson Granite Certificates representing
Dissenting Shares (as defined herein), shall be deemed for all purposes to
evidence ownership of and to represent the shares of Class B Common Stock into
which the shares of Swenson Granite Common Stock formerly represented by such
Swenson Granite Certificates have been converted as herein provided. At and
after the Effective Time, upon surrender to Rock of Ages of a Swenson Granite
Certificate (other than Swenson Granite Certificates representing Dissenting
Shares), together with a letter to Rock of Ages executed by the record holder
setting forth representations of such holder substantially in the form set forth
in Sections 5.2 - 5.6 hereof, the Surviving Corporation shall issue to the
record holder of such Swenson Granite Certificate so surrendered, a certificate
or certificates representing the shares of Class B Common Stock into which such
holder's Swenson Granite Common Stock formerly represented by such Swenson
Granite Certificate have been converted pursuant to Section 2.1 hereof.
Section 2.5 Closing of Stock Transfer Books. The stock
transfer books of Swenson Granite shall be closed as of the Effective Time, and
thereafter there shall be no further registration of transfers on the stock
transfer books of Swenson Granite or the Surviving Corporation of the shares of
Swenson Granite Common Stock which were outstanding immediately prior to such
time. If, after the Effective Time, Swenson Granite Certificates are presented
to the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in Section 2.4.
Section 2.6 Dissenting Shares. Notwithstanding any other
provision of this Agreement to the contrary, shares of Swenson Granite Common
Stock that are outstanding immediately prior to the Effective Time and which are
held by shareholders of Swenson Granite who
4
<PAGE> 5
shall have not voted in favor of approval and adoption of this Agreement and the
Merger or consented thereto in writing and who shall have properly demanded in
writing appraisal for such shares in accordance with Section 13.21 of the NH Law
and who shall not have withdrawn such demand or otherwise have forfeited
appraisal rights (collectively, the "Dissenting Shares") shall not be converted
into or represent the right to receive shares of Class B Common Stock as
provided herein. Such shareholders of Swenson Granite shall be entitled to
receive payment of the appraised value of such shares of Swenson Granite Common
Stock held by them in accordance with the provisions of Section 13.25 of NH Law,
except that all Dissenting Shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Swenson Granite Common Stock under Section 13.21 of
NH Law shall thereupon be deemed to have been converted, as of the Effective
Time, into the right to receive, without interest, the shares of Class B Common
Stock as provided herein upon surrender by such shareholder, in the manner
provided in Section 2.4, of a Swenson Granite Certificate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
ROCK OF AGES
Rock of Ages represents and warrants as follows:
Section 3.1 Organization. Rock of Ages is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 3.2 Authority. (a) Rock of Ages has all requisite
corporate power and authority to enter into this Agreement and any additional
documents or instruments to be delivered hereunder on or prior to the Effective
Time (the "Additional Documents"), to perform its obligations hereunder and
thereunder and to consummate the Merger.
(b) The execution, delivery and performance by Rock
of Ages of this Agreement and the Additional Documents to which Rock of Ages
is a party and the
5
<PAGE> 6
consummation by Rock of Ages of the Merger have been duly authorized by all
requisite corporate action on the part of Rock of Ages, including without
limitation, obtaining the requisite approval and adoption of this Agreement and
the Merger by the shareholders of Rock of Ages.
(c) This Agreement has been and, upon
execution thereof by Rock of Ages, the Additional Documents to which Rock of
Ages is a party will be, duly and validly executed and delivered by Rock of Ages
and constitutes or, in the case of the Additional Documents, will constitute,
valid and binding obligations of Rock of Ages, enforceable against Rock of Ages
in accordance with their respective terms.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SWENSON GRANITE
Swenson Granite represents and warrants as follows:
Section 4.1 Organization. Swenson Granite is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Hampshire.
Section 4.2 Authority. (a) Swenson Granite has all requisite
corporate power and authority to enter into this Agreement and any Additional
Documents, to perform its obligations hereunder and thereunder and to consummate
the Merger.
(b) The execution, delivery and perfor-
mance by Swenson Granite of this Agreement and the Additional Documents to which
Swenson Granite is a party and the consummation by Swenson Granite of the Merger
have been duly authorized by all requisite corporate action on the part of
Swenson Granite, except for the requisite approval and adoption of this
Agreement and the Merger by the shareholders of Swenson Granite.
(c) This Agreement has been and, upon execution
thereof by Swenson Granite, the Additional Documents to which Swenson Granite is
a party will be,
6
<PAGE> 7
duly and validly executed and delivered by Swenson Granite and constitutes or,
in the case of the Additional Documents, will constitute, valid and binding
obligations of Swenson Granite, enforceable against Swenson Granite in
accordance with their respective terms.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE
SWENSON SHAREHOLDERS
Each Swenson Shareholder represents and warrants, solely with
respect to such Swenson Shareholder, as follows:
Section 5.1 Authority. (a) Such Swenson Shareholder has the
full legal right and power to enter into this Agreement and any Additional
Documents and to perform his obligations hereunder and thereunder.
(b)This Agreement has been and, upon execution
thereof by such Swenson Shareholder, the Additional Documents to which such
Swenson Shareholder is a party will be, duly and validly executed and delivered
by such Swenson Shareholder and constitutes or, in the case of the Additional
Documents, will constitute, valid and binding obligations of such Swenson
Shareholder, enforceable against such Swenson Shareholder in accordance with
their respective terms.
Section 5.2 Accredited Investor; Purchase for Investment. Such
Swenson Shareholder (i) is an "accredited investor" within the meaning of Rule
501(a) of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii) if such Swenson Shareholder is not such an accredited
investor, such Swenson Shareholder has designated a "purchaser representative"
within the meaning of Rule 501(h) of Regulation D under the Securities Act (the
"Purchaser Representative"). The shares of Class B Common Stock to be issued to
such Swenson Shareholder pursuant to the Merger (the "Shares") will be acquired
by such Swenson Shareholder for investment only and not with a view to any
public distribution thereof in violation of any of the requirements of the
Securities Act or the rules and regulations thereunder.
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<PAGE> 8
Section 5.3 Shares Not Registered; Legend. Such Swenson
Shareholder understands that the Shares have not been registered under the
Securities Act in reliance upon exemptions contained in the Securities Act and
applicable regulations promulgated thereunder or interpretations thereof, and
cannot be offered for sale, sold or otherwise transferred unless such sale or
transfer is so registered or qualifies for exemption from registration under the
Securities Act; and that the certificates representing the Shares shall bear a
legend to such effect.
Section 5.4 Rule 144. Such Swenson Shareholder understands
that the Shares will be considered "restricted securities" within the meaning of
Rule 144 under the Securities Act; that Rule 144 may not be available to exempt
from the registration requirements of the Securities Act sales of such
"restricted securities"; that if Rule 144 is available, sales may be made in
reliance upon Rule 144 only in accordance with the terms and conditions of Rule
144, which among other things generally requires that the securities be held for
at least one year and that sales be made in limited amounts (which amounts are
subject to certain exceptions depending upon whether the seller is an
"affiliate" within the meaning of Rule 144 and how long the securities have been
held); and that, if an exemption for such sales is not available, registration
of the Shares may be required, but that Rock of Ages is under no obligation to
register the Shares or to facilitate compliance or to comply with any exemption.
Section 5.5 Sophistication. Such Swenson Shareholder has such
knowledge and experience in financial and business matters that such Swenson
Shareholder is capable of evaluating the merits and risks of such Swenson
Shareholder's investment in the Shares or such Swenson Shareholder has been
advised by a Purchaser Representative possessing such knowledge and experience;
and such Swenson Shareholder understands and is able to bear any economic risks
associated with such investment (including the necessity of holding the Shares
for an indefinite period of time, inasmuch as the Shares have not been, and may
not in the foreseeable future be, registered under the Securities Act, and
including the risk of the loss of such Swenson Shareholder's entire investment
in the Shares).
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<PAGE> 9
Section 5.6 Review. Such Swenson Shareholder and, if
applicable, his Purchaser Representative have been given the opportunity to ask
questions of, and receive answers from, the principal officers of Rock of Ages
concerning the business and financial affairs of Rock of Ages, and the terms and
conditions of such Swenson Shareholder's acquisition of Shares; and such Swenson
Shareholder and, if applicable, his Purchaser Representative have had further
opportunity to obtain any additional information necessary to verify the
accuracy of the foregoing information. Such Swenson Shareholder and, if
applicable, his Purchaser Representative have relied on their own examination of
Rock of Ages and the terms of the Class B Common Stock, including the merits and
risks involved in making an investment in the Shares and such Swenson
Shareholder acknowledges that no representations have been made to such Swenson
Shareholder concerning the Shares. Such Swenson Shareholder acknowledges that he
and, if applicable, his Purchaser Representative have had the opportunity to
review such terms and agreements and the transactions contemplated hereby with
such Swenson Shareholder's own legal counsel and tax and investment advisors.
Such Swenson Shareholder is relying solely on such counsel and advisors
(including, if applicable, such Swenson Shareholder's Purchaser Representative)
for legal, tax and investment advice with respect to such terms, agreements and
transactions.
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.1 Shareholders' Meetings. Swenson Granite shall, and
the Swenson Shareholders shall cause Swenson Granite to, call a meeting of its
shareholders to be held as promptly as practicable for the purpose of voting
upon the approval and adoption of this Agreement. Swenson Granite will, through
its Board of Directors, recommend to its shareholders approval and adoption of
this Agreement and the Merger.
Section 6.2 Best Efforts. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under
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<PAGE> 10
applicable laws and regulations to consummate the Merger in accordance with the
terms and conditions of this Agreement.
Section 6.3 Agreement to Vote Shares. Each of the Swenson
Shareholders irrevocably agrees to vote such Swenson Shareholder's shares of
Swenson Granite Common Stock in favor of adoption and approval of the Merger
Agreement and the Merger at any meeting of the stockholders of Swenson Granite
at which such matter is considered and at every adjournment thereof. Each
Swenson Shareholder agrees to deliver to Rock of Ages (or a designee of Rock of
Ages) upon request prior to any vote contemplated by the foregoing a proxy
substantially in the form attached hereto as Exhibit A (a "Proxy"), which Proxy
shall be irrevocable to the extent permitted under New Hampshire law, and Rock
of Ages (or its designee, if applicable) irrevocably agrees to vote the shares
of Swenson Granite Common Stock subject to each such Proxy in favor of adoption
and approval of the Merger Agreement and the Merger.
ARTICLE VII
CONDITIONS
The respective obligations of Swenson Granite and Rock of Ages
to consummate the Merger are subject to the satisfaction of the following
conditions:
Section 7.1 Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the affirmative vote of the
holders of Swenson Granite Common Stock entitled to cast a majority of the total
number of votes entitled to be cast.
Section 7.2 Consummation of Distribution. The Distribution
shall have been consummated.
Section 7.3 Initial Public Offering. All conditions to the
closing of the IPO set forth in the Underwriting Agreement to be entered into
among Rock of Ages, Raymond James & Associates, Inc. and certain selling
stockholders of Rock of Ages (the "Underwriting Agreement"), shall have been
satisfied or waived by the respective parties thereto, and the closing of the
IPO shall be about to occur.
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<PAGE> 11
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendments; Waiver. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto, which
amendment has been approved by a majority of the directors of each of Swenson
Granite and Rock of Ages (excluding for this purpose the Swenson Shareholders
who are such directors). Any provision hereof may be waived only by an
instrument in writing signed by the party or parties entitled to the benefit of
such provision and, in the case of such a waiver by Swenson Granite or Rock of
Ages, respectively, only if such instrument has been approved by a majority of
the directors of Swenson Granite or Rock of Ages, respectively (excluding for
this purpose the Swenson Shareholders who are such directors).
Section 8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be delivered personally or by next-day
courier or telecopied with confirmation of receipt to the parties at the
respective addresses specified below (or at such other address for a party as
shall be specified by like notice). Any such notice or other communication shall
be effective upon receipt, if personally delivered or telecopied, or one day
after delivery to a courier for next-day delivery.
(a) if to Rock of Ages, to:
772 Graniteville Road
Graniteville, Vermont 05654
Attention: Kurt M. Swenson
Telecopy: (802) 476-3110
(b) if to Swenson Granite, to:
369 North State Street
Concord, New Hampshire 03301
Attention: President
Telecopy: (603) 225-4801
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<PAGE> 12
(c) if to either of the Swenson Share-
holders, to:
c/o Kurt M. Swenson
336 Putney Hill Road
Hopkinton, New Hampshire 03229
Section 8.3 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. 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.
Section 8.4 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality and
enforceability of the remaining provisions herein shall not in any way be
affected or impaired thereby and such invalidity, illegality or unenforceability
shall only apply as to such party in the specific jurisdiction where such
judgment shall be made.
Section 8.5 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 8.6 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware (without
giving effect to the principles of conflicts of law thereof), except to the
extent NH Law applies to the Merger.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
ROCK OF AGES CORPORATION
By /s/ George Anderson
------------------------------
Name: George Anderson
Title: Chief Financial Officer
SWENSON GRANITE COMPANY, INC.
By /s/ Kurt M. Swenson
------------------------------
Name: Kurt M. Swenson
Title: President
SWENSON SHAREHOLDERS:
/s/ Kurt M. Swenson
------------------------------
Kurt M. Swenson
/s/ Kevin C. Swenson
------------------------------
Kevin C. Swenson
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<PAGE> 14
EXHIBIT A
FORM OF PROXY
The undersigned, for consideration received, hereby appoints
[Rock of Ages Corporation, a Delaware corporation ("Rock of Ages")][designee of
Rock of Ages], his proxy to vote all shares of Common Stock, par value $10.00
per share, of Swenson Granite Company, Inc., a New Hampshire corporation (the
"Company"), owned by the undersigned and which the undersigned is entitled vote
at any meeting of stockholders of the Company, and at any adjournment thereof,
to be held for the purpose of considering and voting upon a proposal to approve
and adopt the Agreement and Plan of Merger and Reorganization, dated as of
August , 1997 (the "Merger Agreement"), by and among Rock of Ages, the Company
and Kurt M. Swenson and Kevin C. Swenson, providing for the merger (the
"Merger") of the Company with and into Rock of Ages, FOR such proposal. This
proxy is coupled with an interest and revokes all prior proxies granted by the
undersigned, is irrevocable.
Dated ____________________, 1997
----------------------------------
(Signature of Swenson Shareholder)
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ROCK OF AGES CORPORATION
ROCK OF AGES CORPORATION, a Delaware corporation (the "Corporation"),
does hereby certify that the Corporation was organized in the State of Delaware
on July 31, 1997 under the name Rock of Ages Corporation and that this Amended
and Restated Certificate of Incorporation, hereby amends, restates and
integrates the provisions of the Certificate of Incorporation of the
Corporation as currently in effect (the "Certificate of Incorporation") before
payment for stock and has been duly adopted in accordance with the provisions of
Sections 241 and 245 of the General Corporation Law of the State of Delaware.
The text of the Certificate of Incorporation is hereby amended and restated to
read in its entirety as follows:
FIRST: The name of the Corporation is "Rock of Ages Corporation"
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1201 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "DGCL"). The Corporation will have perpetual existence.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 47,500,000 shares of capital stock, consisting
of (i) 2,500,000 shares of preferred stock, each having a par value of one penny
($.01) ("Preferred Stock"), (ii) 30,000,000 shares of Class A common stock, each
having a par value of one penny ($.01) ("Class A Common Stock"), and (iii)
15,000,000 shares of class B common stock, each having a par value of one penny
($.01) ("Class B Common
<PAGE> 2
Stock" and, together with Class A Common Stock, "Common Stock").
A. COMMON STOCK
------------
(1) RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK. All
preferences, voting powers, relative, participating, optional or other special
rights and privileges and qualifications, limitations or restric tions of the
Common Stock are expressly made subject to those that may be fixed with respect
to any shares of Preferred Stock.
(2) VOTING RIGHTS.
(a) Except as otherwise required by law or this Certificate of
Incorporation, the holders of shares of Class A Common Stock and the holders of
shares of Class B Common Stock shall vote together as a single class, provided,
however, that with respect to each matter properly brought before the
stockholders for their consideration and vote, each share of Class A Common
Stock shall entitle the registered holder thereof to one vote and, subject to
subparagraph (b) immediately below, each share of Class B Common Stock shall
entitle the registered holder thereof to ten votes. There shall be no cumulative
voting.
(b) Notwithstanding the immediately preceding subparagraph (a), in the
case of each share of Class B Common Stock held of record by a bank, voting
trustee, broker, dealer, clearing agency or any nominee thereof, or by any other
nominee of the beneficial owner of such share, if (i) the Corporation or the
transfer agent for the Class B Common Stock (which may be either the
Corporation or any third party retained by it for such purpose) delivers to
such record holder a written request (a "Certification Request") that such
record holder certify, on a form provided to such record holder with such
Certification Request (a "Class B Common Stock Ownership Certificate"), that
such share of Class B Common Stock held of record by such record holder has
been and continues to be beneficially owned continuously from the date of
issuance by the original beneficial owner (whose name and address must be
certified to the Corporation by such record holder as part of the Class B
Common Stock Ownership Certificate), or by a Permitted Transferee (as defined
in paragraph A(4) of Article Fourth hereof) of such original beneficial owner,
and (ii) such record holder
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<PAGE> 3
has not within twenty (20) days after delivery to such record holder of a
Certification Request, duly executed and filed with the transfer agent for the
Class B Common Stock a Class B Common Stock Ownership Certificate, each such
share of Class B Common Stock held by such record holder shall entitle such
record holder to only one vote unless and until such record holder establishes
to the satisfaction of the Corporation that such share of Class B Common Stock
has been, and continues to be, beneficially owned continuously from the date of
issuance by the original beneficial owner or a Permitted Transferee of such
original beneficial owner.
(3) CONVERSION.
(a) Each share of Class B Common Stock shall be convertible at any
time, at the option of the registered holder thereof, into one fully paid and
nonassessable share of Class A Common Stock of the Corporation.
(b) No fractional shares of Class A Common Stock shall be issued upon
such conversion, but in lieu thereof the Corporation shall pay to the holder an
amount in cash equal to the fair market value (as determined by the
Corporation's Board of Directors) of such fractional share.
(c) To convert shares of Class B Common Stock under this paragraph
A(3), the registered holder thereof shall surrender the certificate or
certificates representing such shares, duly endorsed to the Corporation or in
blank (which endorsement shall correspond exactly with the name or names of the
registered holder or holders set forth on the face of the certificates and on
the stock transfer records of the Corporation), at the office of the transfer
agent for the shares of Class B Common Stock (which may be either the
Corporation or any third party retained by it for such purpose), and shall give
written notice to the transfer agent and the Corporation that such holder
elects to convert all or part of the shares represented thereby, stating therein
the name or names (with the address or addresses) in which the certificate or
certificates for shares of Class A Common Stock are to be issued.
(d) If the registered holder fully complies with paragraph A(3)(c),
the Corporation shall, as soon as practicable thereafter, deliver (if the
Corpora-
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<PAGE> 4
tion is then the transfer agent for the shares of Class B Common Stock), or
instruct the transfer agent to deliver, to such holder, or to such holder's
nominee or nominees, a certificate or certificates for the number of shares of
Class A Common Stock to which such holder shall be entitled, rounded to the
nearest whole number of shares, and a check for any amount payable hereunder in
lieu of any fractional share, along with a certificate representing any shares
of Class B Common Stock that the holder has not elected to convert hereunder but
which constituted part of the shares of Class B Common Stock represented by the
certificate or certificates surrendered.
(e) Shares of Class B Common Stock shall be deemed to have been
converted as of the close of business on the date of the due surrender of the
certificates representing the shares to be converted as provided above, and the
person or persons entitled to receive the shares of Class A Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Class A Common Stock at such time.
(f) If the Corporation shall in any manner split or subdivide the
outstanding shares of Class A Common Stock or Class B Common Stock, the
outstanding shares of the other such class of Common Stock shall be split or
subdivided in the same manner, proportionately and on the same basis per share.
(g) When shares of Class B Common Stock have been converted pursuant
to this paragraph A(3), they shall be irrevocably canceled and not reissued.
(4) TRANSFERS OF CLASS B COMMON STOCK. No holder of shares of Class B
Common Stock shall transfer, and the Corporation shall not register (and shall
not permit the transfer agent for the Class B Common Stock to register) the
transfer of, any shares of Class B Common Stock or any interest therein, whether
by sale, assignment, gift, bequest, pledge, hypothecation, encumbrance, or any
other disposition, except to a "Permitted Transferee" of such person (as
defined below). If a holder of shares of Class B Common Stock transfers any such
shares to any person or entity other than a Permitted Transferee, such
transfer, without any further action of any party or the Corporation, shall
automatically and irrevocably convert such shares into an equal number of
shares
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<PAGE> 5
of Class A Common Stock from the date of such transfer. "Permitted Transferee"
shall mean only:
(a) the spouse and any lineal descendant (including adopted children)
of any person duly holding shares of Class B Common Stock (a "Qualified
Holder"), and any spouse of any such lineal descendant (all such spouses and
lineal descendants being hereinafter referred to as "Family Members");
(b) the trustee of a trust for the sole benefit of a Qualified Holder
or Family Member;
(c) a partnership comprised exclusively of Qualified Holders or Family
Members or a corporation or limited liability company wholly owned by Qualified
Holders or Family Members, provided, however, that as of the date that such
partnership, corporation or limited liability company is no longer comprised
exclusively of or owned exclusively by Qualified Holders or Family Members, such
partnership, corporation or limited liability company will no longer be a
Permitted Transferee and any Class B Common Stock held by it shall automatically
and irrevocably be converted into Class A Common Stock without any further
action of any party or the Corporation; or
(d) the executor, administrator or personal representative of the
estate of a Qualified Holder or of any Family Member, or the guardian or
conservator of a Qualified Holder or any Family Member who has been adjudged
disabled by a court of competent jurisdiction.
(5) DIVIDENDS. Subject to the preferential rights of holders of Preferred
Stock, if any, the holders of shares of Common Stock shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
(the "Board of Directors"), out of the assets of the Corporation which are by
law available therefor, dividends payable either in cash, in property or in
shares of capital stock. No dividend shall be declared or paid in respect of
any Common Stock unless the holders of both the Class A Common Stock and the
Class B Common Stock receive the same per share dividend, payable in the same
amount and type of consideration, as if such classes constituted a single
class, except that if any dividend is declared that is payable in shares of, or
in subscrip tion or other rights to acquire shares of, Class A Common Stock or
Class B Common Stock, such dividend shall be
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<PAGE> 6
declared and paid at the same rate per share with respect to the Class A Common
Stock and the Class B Common Stock, and the dividend payable on shares of Class
A Common Stock shall be payable only in shares of, or in subscription or other
rights to acquire shares of, Class A Common Stock and the dividend payable on
shares of Class B Common Stock shall be payable only in shares of, or in
subscription or other rights to acquire shares of, Class B Common Stock.
(6) DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
holders of shares of Preferred Stock, unless otherwise required by law, holders
of shares of Common Stock shall be entitled to receive all the remaining assets
of the Corporation of whatever kind available for distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by them
respectively. The holders of the Class A Common Stock and the Class B Common
Stock shall participate in such assets as if such classes constituted a single
class of stock. A dissolution, liquidation or winding-up of the Corporation, as
such terms are used in this paragraph A(6), shall not be deemed to be occasioned
by or to include any consolidation or merger of the Corporation with or into any
other corporation or corporations or other entity or a sale, lease, exchange or
conveyance of all or a part of the assets of the Corporation.
B. PREFERRED STOCK
---------------
(1) GENERAL. The Board of Directors is expressly authorized
to provide for the issuance of all or any shares of the Preferred Stock in one
or more classes or series, and to fix for each such class or series such voting
powers, full or limited, or no voting powers, and such distinctive designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the DGCL.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition,
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<PAGE> 7
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The number of directors that shall constitute the whole Board of
Directors shall from time to time be fixed exclusively by the Board of Directors
by a resolution adopted by a majority of the whole Board of Directors serving at
the time of that vote. In no event shall the number of directors that constitute
the whole Board of Directors be less than three. No decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Election of directors need not be by written ballot unless the By-Laws
so provide.
(3) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the DGCL, this
Certificate of Incorporation, and any By-Laws adopted by the stockholders;
provided, however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
By-Laws had not been adopted.
(4) The directors shall be divided into three classes designated Class
I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. The initial division of the Board of Directors into classes
shall be made by the decision of the affirmative vote of a majority of the
entire Board of Directors. The term of the initial Class I directors shall
terminate on the date of the 1998 annual meeting; the term of the initial Class
II directors shall terminate on the date of the 1999 annual meeting; and the
term of the initial Class III directors shall terminate on the date of the 2000
annual meeting. At each succeeding annual meeting of stockholders begin ning in
1998, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned
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<PAGE> 8
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be duly elected and shall
duly qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of Directors
that results from an increase in the number of directors may be filled by a
majority of the directors then in office, provided that a quorum is present, and
any other vacancy occurring in the Board of Directors may be filled by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall have the same remaining term
as that of his predecessor and shall hold office until his successor shall be
duly elected and shall duly qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
(5) The presence of a majority of the total number of directors shall
constitute a quorum for the transaction of business and, except as otherwise
provided herein, the vote of a majority of such quorum shall be required in
order for the Board of Directors to act.
(6) Any director may be removed from office as a director, but only
for cause, by the affirmative vote of stockholders who are entitled to cast at
least two-thirds (66 2/3%) of the total number of votes entitled to be cast.
(7) Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies, removal and other features of such directorships shall be governed by
the terms of the instrument creating such class or series of Preferred Stock,
and such directors so elected shall not be divided into classes pursuant to
8
<PAGE> 9
this Article FIFTH unless expressly provided by such terms.
SIXTH: Unless otherwise required by the DGCL, special meetings of
stockholders, for any purpose or purposes, may be called only by (i) the
Chairman of the Board of Directors (if there be one), (ii) the President of the
Corporation, (iii) any Vice President of the Corporation (if there be one), (iv)
the Secretary of the Corporation or (v) any Assistant Secretary of the Corpo-
ration (if there be one), and shall be called by any such officer at the request
in writing of a majority of the Board of Directors. Stockholders shall not be
entitled to call a special meeting of stockholders, nor to require the Board of
Directors to call such a special meeting.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered to adopt, amend or repeal any provision of the By-Laws
of the Corporation. The affirmative vote of at least a majority of the entire
Board of Directors shall be required to adopt, amend, alter or repeal the
Corporation's By-Laws. The By-Laws of the Corporation also may be adopted,
amended or repealed by the stockholders by the affirmative vote of stockholders
who are entitled to cast at least two thirds (66 2/3%) of the total number of
votes to be cast at an election of directors.
EIGHTH: The Corporation shall indemnify its directors and officers to
the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal repre-
sentatives) in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors. The right to indemnification conferred by this
Article EIGHTH shall include the right to be paid by the Corporation the
expenses incurred in defending or otherwise participating in any proceeding in
advance of its final disposition.
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<PAGE> 10
The Corporation may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article EIGHTH to directors and officers of the Corporation.
The rights to indemnification and to the ad vance of expenses
conferred in this Article EIGHTH shall not be exclusive of any other right which
any person may have or hereafter acquire under this Certificate of
Incorporation, the By-Laws of the Corporation, any statute, agreement, vote of
stockholders or disinterested directors or otherwise.
Any repeal or modification of this Article EIGHTH shall not adversely
affect any rights to indemnification and to the advancement of expenses of a
director of officer of the Corporation existing at the time of such repeal or
modification with respect to any acts or omissions occurring prior to such
repeal or modification.
NINTH: No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereto is not permitted under the DGCL as the same exists or may hereafter be
amended. If the DGCL is amended hereafter to authorize the further elimination
or limitation of the liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
authorized by the DGCL, as so amended. Any repeal or modification of this
Article NINTH shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.
TENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
ELEVENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained
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in this Certificate of Incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred upon stockholders herein are granted
subject to this reservation; provided, however, that, notwithstanding any other
provision of this Certificate of Incorporation (and in addition to any other
vote that may be required by law), the affirmative vote of stockholders who are
entitled to cast at least eighty five percent (85%) of the total number of votes
to be cast, shall be required to amend, alter, change or repeal, or to adopt any
provision as part of this Certificate of Incorporation inconsistent with the
purpose and intent of, Articles FIFTH, SIXTH or SEVENTH, or this Article
ELEVENTH, of this Certificate of Incorporation.
IN WITNESS WHEREOF, ROCK OF AGES CORPORATION has caused this
Certificate of Incorporation to be executed in its corporate name this 4th day
of August, 1997.
ROCK OF AGES CORPORATION
By /S/ Deborah M. Reusch
-------------------------------------------
Name: Deborah M. Reusch
Title:
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EXHIBIT 3.2
BY-LAWS
OF
ROCK OF AGES CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
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SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
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SECTION 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders for
the election of directors shall be held on such date and at such time as shall
be designated from time to time by the Board of Directors.
SECTION 3. NATURE OF BUSINESS AT ANNUAL MEETINGS. No business may be
transacted at an Annual Meeting of Stockholders, other than business that is
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the Annual Meeting by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the Annual Meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date
of the giving of the notice provided for in this Section 3 and on the record
date for the determination of stockholders entitled to vote at such Annual
Meeting and (ii) who complies with the notice procedures set forth in this
Section 3.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, such stockholder
must
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have given timely notice thereof in proper written form to the Secretary of the
Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding Annual Meeting of
Stockholders; PROVIDED, HOWEVER, that in the event that the Annual Meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the Annual Meeting was mailed or
such public disclosure of the date of the Annual Meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
Annual Meeting (i) a brief description of the business desired to be brought
before the Annual Meeting and the reasons for conducting such business at the
Annual Meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock
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of the Corporation which are owned beneficially or of record by such
stockholder, (iv) a description of all arrangements or understandings between
such stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a representation
that such stockholder intends to appear in person or by proxy at the Annual
Meeting to bring such business before the meeting.
No business shall be conducted at the Annual Meeting of Stockholders
except business brought before the Annual Meeting in accordance with the
procedures set forth in this Section 3; PROVIDED, HOWEVER, that, once business
has been properly brought before the Annual Meeting in accordance with such
procedures, nothing in this Section 3 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an Annual Meeting
determines that business was not properly brought before the Annual Meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the Annual Meeting and
such business shall not be transacted.
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SECTION 4. SPECIAL MEETINGS. Unless otherwise required by law or by
the certificate of incorporation of the Corporation, as amended and restated
from time to time (the "Certificate of Incorporation"), Special Meetings of
Stockholders, for any purpose or purposes, may be called only by (i) the
Chairman (if there be one), (ii) the President, (iii) any Vice President (if
there be one), (iv) the Secretary or (v) any Assistant Secretary (if there be
one), and shall be called by any such officer at the request in writing of a
majority of the Board of Directors. Such request shall state the purpose or
purposes of the proposed meeting. At a Special Meeting of Stockholders, only
such business shall be conducted as shall be specified in the notice of meeting
(or any supplement thereto).
SECTION 5. NOMINATION OF DIRECTORS AT ANNUAL AND SPECIAL MEETINGS.
Only persons who are nominated in accordance with the following procedures shall
be eligible for election as directors of the Corporation, except as may be
otherwise provided in the Certificate of Incorporation with respect to the
right of holders of preferred stock of the Corporation to nominate and elect a
specified number of directors in certain circumstances. Nominations of persons
for election to the Board of
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Directors may be made at any Annual Meeting of Stockholders, or at any Special
Meeting of Stockholders called for the purpose of electing directors, (a) by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section 5
and on the record date for the determination of stockholders entitled to vote at
such meeting and (ii) who complies with the notice procedures set forth in this
Section 5.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an Annual Meeting, not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the immediately
preceding Annual Meeting of Stockholders; PROVIDED, HOWEVER, that in the event
that the Annual Meeting is called for a date that is not within thirty (30) days
before or after such anniversary
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date, notice by the stockholder in order to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which such notice of the date of the Annual Meeting was mailed or such public
disclosure of the date of the Annual Meeting was made, whichever first occurs;
and (b) in the case of a Special Meeting of Stockholders called for the purpose
of electing directors, not later than the close of business on the tenth (10th)
day following the day on which notice of the date of the Special Meeting was
mailed or public disclosure of the date of the Special Meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies
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for election of directors pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the notice, (i) the
name and record address of such stockholder, (ii) the class or series and
number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in such stockholder's notice and (v)
any other information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
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No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 5. If the Chairman of the meeting determines that a nomina tion was
not made in accordance with the foregoing proce dures, the Chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
SECTION 6. NOTICE. Whenever stockholders are required or permitted to
take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Unless
otherwise re quired by law, the written notice of any meeting shall be given not
less than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
SECTION 7. ADJOURNMENTS. Any meeting of the stockholders may be
adjourned from time to time to recon vene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the
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Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 8. QUORUM. Unless otherwise required by law or the Certificate
of Incorporation, the holders of capital stock of the Corporation representing a
majority of the total votes represented by all outstanding capital stock of the
Corporation, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business. A
quorum, once established, shall not be broken by the withdrawal of enough votes
to leave less than a quorum. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, in the manner provided in Section 7,
until a quorum shall be present or represented.
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SECTION 9. VOTING. Unless otherwise required by law, the Certificate
of Incorporation or these By-laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the
vote of the holders of a majority of the total number of votes of the capital
stock represented and entitled to vote thereat, voting as a single class.
Subject to Section 5 of Article V hereof, each stockholder represented at a
meeting of stockholders shall be entitled to cast the number of votes as
provided in the Certificate of Incorporation. Such votes may be cast in person
or by proxy but no proxy shall be voted on or after three years from its date,
unless such proxy provides for a longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in such officer's discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
SECTION 10. ACTION BY CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Unless otherwise provided in the Certificate of Incorporation, any action
required or permitted to be taken at any Annual or Special Meeting of
Stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a
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consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock 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 and voted and
shall be delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by this Section 10 to
the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are
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recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing and who, if the action had been taken at a
meeting, would have been entitled to notice of the meeting if the record date
for such meeting had been the date that written consents signed by a sufficient
number of holders to take the action were delivered to the Corporation as
provided above in this section.
SECTION 11. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall
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also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 12. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 11 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 13. CONDUCT OF MEETINGS. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or
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order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the meeting
to stockholders of record of the Corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (vi) limitations on the time allotted to questions or
comments by participants.
ARTICLE III
DIRECTORS
---------
SECTION 1. ELECTION OF DIRECTORS. Except as otherwise required by law
or the Certificate of Incorporation, directors shall be elected by a plurality
of the votes cast at the Annual Meetings of Stockholders and each director so
elected shall hold office until the next Annual Meeting of Stockholders and
until such director's successor is duly elected and qualified, or until such
director's earlier death, resignation or removal. Any
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director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
SECTION 2. DUTIES AND POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws required to be exercised or done by the stockholders.
SECTION 3. MEETINGS. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman (if
there be one), the Chief Executive Officer (if there be one), the President, or
by any other officer of the Corporation upon the request of a majority of the
directors then in office. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than forty-eight
(48) hours before the date of the meeting, by telephone or telegram on
twenty-four (24) hours' notice, or on such
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shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
SECTION 4. QUORUM. Except as otherwise required by law or the
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present.
SECTION 5. ACTIONS BY WRITTEN CONSENT. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
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SECTION 6. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Members of the
Board of Directors of the Corporation, or any committee thereof, may participate
in a meeting of the Board of Directors or such committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 6 shall constitute presence in person at such
meeting.
SECTION 7. COMMITTEES. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified mem-
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ber. Any committee, to the extent permitted by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Each committee shall keep regular
minutes and report to the Board of Directors when required.
SECTION 8. COMPENSATION. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid
such other compensation as may be determined by the Board of Directors from
time to time.
SECTION 9. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one 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 or committee thereof which authorizes
the contract or transaction, or solely because the director or officer's vote is
counted for such purpose if (i) the material facts as to the director or
officer's relation ship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the
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contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to the director or officer's relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) 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, a committee thereof
or the stockholders. 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 which authorizes the contract or transaction.
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ARTICLE IV
OFFICERS
--------
SECTION 1. GENERAL. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, also may choose a Chief Executive
Officer, Chairman of the Board of Directors (who must be a director) and one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless otherwise
prohibited by law or the Certificate of Incorporation. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
SECTION 2. ELECTION. The Board of Directors, at its first meeting held
after each Annual Meeting of Stockholders (or action by written consent of
stockholders in lieu of the Annual Meeting of Stockholders), shall elect the
officers of the Corporation who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors; and all
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officers of the Corporation shall hold office until their successors are chosen
and qualified, or until their earlier death, resignation or removal. Any officer
elected by the Board of Directors may be removed at any time by the affirmative
vote of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chief Executive Officer (if there be
one), the President or any Vice President or any other officer authorized to do
so by the Board of Directors and any such officer may, in the name of and on
behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by reso-
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lution, from time to time confer like powers upon any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS; CHIEF EXECUTIVE
OFFICER. The Chairman of the Board of Directors (if there be one) shall preside
at all meetings of the stockholders and of the Board of Directors. Except where
by law the signature of the President is required, each of the Chairman of the
Board of Directors (if there be one) and the Chief Executive Officer (if there
be one) shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized by
the Board of Directors. During the absence or disability of the President, the
Chairman of the Board of Directors or the Chief Executive Officer, as the Board
of Directors shall determine, shall exercise all the powers and discharge all
the duties of the President. The Chairman of the Board of Directors and the
Chief Executive Officer shall also perform such other duties and may exercise
such other powers as may from time to time be assigned by these By-Laws or by
the Board of Directors.
SECTION 5. PRESIDENT. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chief Executive Officer, have
general
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supervision of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. The President shall also perform such other duties and may
exercise such other powers as may from time to time be assigned to such officer
by these By-Laws or by the Board of Directors.
SECTION 6. VICE PRESIDENTS. At the request of the President or in the
President's absence or in the event of the President's inability or refusal to
act (and if there be no Chief Executive Officer or Chairman of the Board of
Directors), the Vice President, or the Vice Presidents if there is more than one
(in the order designated by the Board of Directors), shall perform the
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duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Each Vice President shall
perform such other duties and have such other powers as the Board of Directors
from time to time may prescribe. If there be no Chairman of the Board of
Directors, Chief Executive Officer or Vice President, the Board of Directors
shall designate the officer of the Corporation who, in the absence of the
President or in the event of the inability or refusal of the President to act,
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of
Directors when required. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board of Directors (if there be one), the
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Chief Executive Officer (if there be one) or the President, under whose
supervision the Secretary shall be. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors, the Chief Executive Officer (if
there be one) or the President may choose another officer to cause such notice
to be given. The Secretary shall have custody of the seal of the Corporation,
and the Secretary or any Assistant Secretary (if there be one) shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by the signature of the Secretary or by the signature of any
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest to the
affixing by such officer's signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
SECTION 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and
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<PAGE> 27
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Chief Executive Officer (if there
be one), the President or the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Chief Executive Officer
(if there be one), the President or the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chief Executive Officer
(if there be one), the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all
transactions as Treasurer and of the financial condition of the Corporation. If
required by the Board of Directors, the Treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of the Treasurer and for the restoration to the Corporation, in case of the
Treasurer's death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in the
Treasurer's possession or under the Treasurer's control belonging to the
Corporation.
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<PAGE> 28
SECTION 9. ASSISTANT SECRETARIES. Assistant Secretaries, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer (if
there be one), the President, any Vice President (if there be one) or the
Secretary, and in the absence of the Secretary or in the event of the
Secretary's disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer (if
there be one), the President, any Vice President (if there be one) or the
Treasurer, and in the absence of the Treasurer or in the event of the
Treasurer's disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be
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<PAGE> 29
satisfactory to the Board of Directors for the faithful performance of the
duties of the office of Assistant Treasurer and for the restoration to the
Corporation, in case of the Assistant Treasurer's death, resignation, re-
tirement or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in the Assistant Treasurer's possession or under the
Assis tant Treasurer's control belonging to the Corporation.
SECTION 11. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
-----
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secre-
29
<PAGE> 30
tary of the Corporation, certifying the number of shares owned by such
stockholder in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue 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 such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
30
<PAGE> 31
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued. No transfer of stock shall be valid as
against the Corporation for any purpose until it shall have been entered in the
stock records of the Corporation by an entry showing from and to whom
transferred.
SECTION 5. RECORD DATE.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board
31
<PAGE> 32
of Directors, and which record date shall not be more than sixty nor less than
ten days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action.
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<PAGE> 33
If no record date is fixed, the record date for determining stockholders for
any such purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.
SECTION 6. RECORD OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise required by
law.
ARTICLE VI
NOTICES
-------
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail or by a
nationally recognized overnight delivery service, addressed to such director,
member of a committee or stockholder, at such person's address as it ap-
33
<PAGE> 34
pears on the records of the Corporation, with postage thereon prepaid if by
mail, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail or if applicable, entrusted to such
nationally recognized overnight delivery service. Written notice may also be
given personally or by telegram, telex or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a person at a
meeting, present in person or represented by proxy, shall constitute a waiver
of notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
34
<PAGE> 35
ARTICLE VII
GENERAL PROVISIONS
------------------
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the requirements of the General Corporation Law of the
State of Delaware and the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors (or any action by written consent in lieu
thereof in accordance with Section 5 of Article III hereof), and may be paid in
cash, in property or in shares of the Corporation's capital stock. Before pay-
ment of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
35
<PAGE> 36
or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
INDEMNIFICATION
---------------
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or investi-
gative (other than an action by or in the right of the Corporation) by reason of
the fact that such person is or was a director or officer of the Corporation, or
is or was a director or officer of the Corporation serving at the request of the
Corporation as a director or officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such
37
<PAGE> 38
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that such person's conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR
IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees)
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<PAGE> 39
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the
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<PAGE> 40
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion or (iii) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity of authorization in the specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on the records or books of
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another
40
<PAGE> 41
enterprise or on information or records given or reports made to the Corporation
or another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Corporation or
another enterprise. The term "another enterprise" as used in this Section 4
shall mean any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise of which such person is or was serving
at the request of the Corporation as a director, officer, employee or agent. The
provisions of this Section 4 shall not be deemed to be exclusive or to limit in
any way the circumstances in which a person may be deemed to have met the
applicable standard of conduct set forth in Section 1 or 2 of this Article VIII,
as the case may be.
SECTION 5. INDEMNIFICATION BY A COURT. Not withstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this
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<PAGE> 42
Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it
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shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
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SECTION 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as
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a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by, or granted
pursuant
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to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
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ARTICLE IX
AMENDMENTS
----------
SECTION 1. AMENDMENTS. Subject to the voting requirements set forth in
the Certificate of Incorporation, these By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the stockholders
or by the Board of Directors.
SECTION 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
* * *
47
<PAGE> 1
Exhibit 10.1
ROCK OF AGES CORPORATION
FORM OF AMENDED AND RESTATED 1994 STOCK PLAN
1. Purpose. This Amended and Restated 1994 Stock Plan (the "Plan")
is intended to benefit and provide incentives:
(a) to the employees of Rock of Ages Corporation, a Delaware
corporation (the "Company"), its parent (if any) and any present or future
subsidiaries of the Company (collectively, "Related Corporations"), by
providing them with opportunities to purchase stock in the Company pursuant to
options granted hereunder which qualify as "incentive stock options" ("ISO" or
"ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code");
(b) to employees, directors and consultants of the Company and
Related Corporations by providing them with opportunities to purchase stock in
the Company pursuant to options granted hereunder which do not qualify as ISOs
("Non-Qualified Option" or "Non-Qualified Options"); and
(c) to employees, directors and consultants of the Company and
Related Corporations by providing them with awards or opportunities to make
direct purchases, of stock in the Company ("Awards").
Both ISOs and Non-Qualified Options are referred to hereinafter
individually as an "Option" and collectively as "Options." Options and Awards
are referred to hereinafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.
2. Administration of the Plan.
A. Board or Committee Administration. The Plan shall be
administered by a Committee of not less than two (2) persons, each of whom
shall be a "Non-Employee Director" within the meaning of Rule
16b-3(b)(3)(i) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and an "outside director" within the meaning
of Section 162(m) of the Code. The members of the Committee shall be
appointed by the Company's Board of Directors (the "Board") and shall
serve at the pleasure of the Board. If no Committee has been appointed to
administer the Plan, the functions of the Committee specified in the Plan
shall be carried out by
<PAGE> 2
the Board, except that at any time after a registration of any of the
Company's stock under the Exchange Act or the Company otherwise becomes
subject to the reporting requirements of the Exchange Act, administration
by a Committee is required. Subject to the terms of the Plan, the
Committee shall have the authority to:
(i) determine the employees of the Company and Related
Corporations (from among the class of employees eligible under paragraph 3
to receive ISOs) to whom ISOs may be granted, and to determine (from among
the class of individuals and entities eligible under paragraph 3 to
receive Non-Qualified Options and Awards) to whom Non-Qualified Options
and Awards may be granted;
(ii) determine the time or times at which Options or
Awards may be granted;
(iii) determine the option price of shares subject to
each Option, which price shall not be less than the minimum price
specified in paragraph 6, and the purchase price (if any) of shares
subject to each Award;
(iv) determine whether each Option granted shall be an
ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or
times when each Option shall become exercisable and the duration of the
exercise period;
(vi) determine whether restrictions such as repurchase
rights and other vesting restrictions are to be imposed on shares subject
to Options and Awards and the nature of such restrictions, if any; and
(vii) interpret the Plan and prescribe and rescind rules
and regulations relating to it.
If the Committee determines to issue a Non-Qualified Option,
it shall designate the Non-Qualified Option as such upon grant and in the
agreement governing such Non-Qualified Option. The interpretation and
construction by the Committee of any provisions of the Plan or of any
Stock Right granted under it shall be final unless otherwise determined by
the Board. The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem best. No member of
the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Stock Right granted
under the Plan.
2
<PAGE> 3
B. Committee Actions. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and place as
it may determine. Acts by a majority of the Committee, or acts reduced to
or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee. All references in this Plan to
the Committee shall mean the Board if no Committee has been appointed.
3. Eligible Employees and Others. ISOs may be granted to any
employee (including employees who serve as officers or directors) of the Company
or any Related Corporation. Non-Qualified Options and Awards may be granted to
any employee (including an employee who serves as an officer or director),
director or consultant (including a consultant who also serves as a director)
of the Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant a Stock Right. No participant in the Plan shall be granted Stock Rights
which in the aggregate exceed 50% of the total number of shares of Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), and Class B
Common Stock, par value $.01 per share, of the Company (collectively, the
"Common Stock"), authorized to be issued with respect to such Stock Rights
pursuant to the Plan. The granting of any Stock Right to any individual or
entity shall neither entitle that individual or entity to, nor disqualify him
from, participation in any other grant of Stock Rights.
4. Stock. The stock subject to Options and Awards shall be
authorized but unissued shares of Common Stock or shares of Common Stock
reacquired by the Company in any manner; provided that the stock subject to
Options granted on or after the date of consummation of the Company's initial
public offering shall be Class A Common Stock only. The aggregate number of
shares which may be issued pursuant to the Plan is 1,500,000, (which aggregate
number of shares reflects (i) the adjustment, pursuant to Section 13 of the Plan
as in effect at the time, and as a result, of the reincorporation merger of Rock
of Ages Corporation, a Vermont corporation and the predecessor to the Company,
with and into the Company on August 12, 1997 (the "Reincorporation Merger"),
including the 1-for-2 reverse stock split effected pursuant to the
Reincorporation Merger, and (ii) and a 500,000 share increase in such aggregate
number of shares approved by the Board as of August , 1997 in connection with
the approval and adoption by the Board of the Plan as set forth in Section 15
hereof, subject to adjustment as provided in paragraph 13. Any such shares may
be issued pursuant to ISOs, Non-Qualified Options or Awards, so long as the
number of shares so issued does not exceed such number, as adjusted. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, or if the Company shall reacquire any unvested shares issued
pursuant to Awards, the unpurchased shares subject to such Options and any
unvested shares so reacquired by the Company shall again be available for grants
of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the
Plan at any time on or after November 21, 1994 and prior to November 21, 2004.
The date of grant of a Stock Right under the Plan will be the date specified by
the Committee at the time it grants the Stock Right; provided, however, that
such date shall not be prior to the date on which the Committee acts to approve
the grant. The Committee shall
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<PAGE> 4
have the right, with the consent of the optionee, to convert an ISO granted
under the Plan to a Non-Qualified Option pursuant to paragraph 16.
6. Minimum Option Price; ISO Limitations.
A. Price for Non-Qualified Options. The exercise price per
share specified in the agreement relating to each Non-Qualified Option
granted under the Plan shall in no event be less than the par value per
share of Common Stock as of the date of grant.
B. Exercise Price for ISOs. The exercise price per share of
Common Stock specified in the agreement relating to each ISO granted under
the Plan shall not be less than the fair market value per share of Common
Stock on the date of such grant. In the case of an ISO to be granted to an
employee owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten percent (110%)
of the fair market value per share of Common Stock on the date of such
grant.
C. $100,000 Annual Limitation on ISOs. Each eligible employee
may be granted ISOs only to the extent that, in the aggregate under this
Plan and all incentive stock option plans of the Company and any Related
Corporation, such ISOs do not become exercisable for the first time by
such employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined
at the time the ISOs were granted) of Common Stock in that year. Any
options granted to an employee in excess of such amount will be granted as
Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an
Option is granted under the Plan, the Company's Common Stock is publicly
traded, "fair market value" shall be determined as of the last business
day for which the prices or quotes referred to in this sentence are
available prior to the date such Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on
the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market, if the Common Stock is not
then traded on a na-
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<PAGE> 5
tional securities exchange; or (iii) the closing bid price (or average bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not then listed on the
Nasdaq National Market. However, if the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market
value" shall be deemed to be the fair value of the Common Stock as
determined by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions negotiated at
arm's length.
7. Option Duration. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years from the date of grant in the case of
Non-Qualified Options and in the case of ISOs generally, and (ii) five years
from the date of grant in the case of ISOs granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Related Corporation. Subject to earlier
termination as provided in paragraphs 9 and 10, the term of each ISO shall be
the term set forth in the original instrument granting such ISO, except with
respect to any part of such ISO that is converted into a Non-Qualified Option
pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option (or any portion thereof) shall either
be fully exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination
of the Option, unless otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be
exercised at any time or from time to time, in whole or in part, for up to
the total number of shares with respect to which it is then exercisable.
D. Acceleration of Vesting. The Committee shall have the right
to accelerate the date of exercise of any installment of any Option;
provided, that the Committee shall not, without the consent of an
optionee, accel-
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erate the exercise date of any installment of any Option granted to any
employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
9. Termination of Employment. If an ISO optionee ceases to be
employed by the Company and all Related Corporations other than by reason of
death or disability as defined in paragraph 10, no further installments of his
ISOs shall become exercisable (unless otherwise approved by the Committee), and
his ISOs which are exercisable on the date of termination of his employment
shall terminate after the passage of three months from the date of termination
of his employment, but in no event later than on their specified expiration
dates, except (i) in the case of termination for "Misconduct," as defined in the
instrument granting such ISOs, in which case such ISOs shall terminate
automatically on the date of such termination, and (ii) to the extent that such
ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to paragraph 16. Employment shall be considered
as continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service);
provided, that the period of such leave does not exceed three months or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval of
the Committee shall not be considered an interruption of employment under the
Plan, provided, that such written approval contractually obligates the Company
or any Related Corporation to continue the employment of the optionee after the
approved period of absence. ISOs granted under the Plan shall not be affected by
any change of employment within or among the Company and Related Corporations,
so long as the optionee continues to be an employee of the Company or any
Related Corporation. Nothing in the Plan shall be deemed to give any grantee of
any Stock Right the right to be retained in employment or other service by the
Company or any Related Corporation for any period of time.
10. Death; Disability.
A. Death. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his death, any ISO of
his may be exercised, to the extent of the number of shares with respect
to which he could have exercised it on the date of his death, by his
estate, personal representative or beneficiary who has acquired the ISO by
will or by the laws of descent and
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distribution, at any time prior to the earlier of the specified expiration
date of the ISO or 180 days from the date of the optionee's death or such
longer period not in excess of one year as the Committee shall determine.
B. Disability. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his disability, he shall
have the right to exercise any ISO held by him on the date of termination
of employment, to the extent of the number of shares with respect to which
he could have exercised it on that date, at any time prior to the earlier
of the specified expiration date of the ISO or 180 days from the date of
the termination of the optionee's employment or such longer period not in
excess of one year as the Committee shall determine. For the purposes of
the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or successor
statute.
11. Assignability. No Option shall be assignable or transferable by
the optionee except by will or by the laws of descent and distribution or, if
then permitted under Rule 16b-3 of the Exchange Act, pursuant to a qualified
domestic relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The Option shall be
exercisable during the lifetime of the optionee only by such optionee or his
guardian or legal representative. Notwithstanding the foregoing, to the extent
the instrument evidencing any Non-Qualified Option so provides, and subject to
the conditions that the Committee may prescribe, an optionee may, upon providing
written notice to the President of the Company, elect to transfer the Options
granted to such optionee pursuant to such instrument, without consideration
therefor. The terms of such Option shall be binding upon any recipient of such
Option.
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options (including, without limitation, rights of
repurchase by the Company and, in the event of an underwritten public offering
of the Company's securities, restrictions on any sale or distribution by the
optionee of any of the Company's common equity for a period of time as the
underwriters in such public offering
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<PAGE> 8
shall determine). In granting any Non-Qualified Option, the Committee may
specify that such Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination, cancellation
and other provisions not inconsistent with the Plan as the Committee may
determine. The Committee may from time to time confer authority and
responsibility on one or more of its own members or one or more officers of the
Company to execute and deliver such instruments. The proper officers of the
Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events,
an optionee's rights with respect to Options granted to him hereunder shall be
adjusted as and to the extent hereinafter required, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of
shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. Consolidations or Mergers. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all
or substantially all of the Company's assets or otherwise (an
"Acquisition"), the committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate provision
for the continuation of such Options by (A) substituting on an equitable
basis for the shares then subject to such Options the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition or (B) making such other equitable changes
or adjustments in the terms of such Options (including without limitation
the type or number of shares of capital stock subject to such Options and
the respective exercise prices thereof) as the Successor Board shall deem
necessary or appropriate; (ii) upon written notice to the optionees,
provide that all Options must be exercised, to the extent then exercisable
(or in the discretion of the Committee or the Successor Board, also
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<PAGE> 9
provide that all unvested Options shall be, or become at the time which
the Committee shall determine, immediately exercisable), within a
specified number of days of the date of such notice, at the end of which
period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment or other consideration equal to the excess of
the fair market value of the shares subject to such Options (to the extent
then exercisable, or in the discretion of the Committee or the Successor
Board, whether or not then exercisable) over the exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an optionee upon
exercising an Option shall be entitled to receive for the purchase price
paid upon such exercise, the securities he would have received if he had
exercised his Option immediately prior to such recapitalization or
reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs, it may refrain from
making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such
other time and subject to such other conditions as shall be determined by
the Committee.
F. Issuances of Securities. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to Options. No adjustments shall be made
for dividends paid in cash or in property other than securities of the
Company.
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<PAGE> 10
G. Fractional Shares. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company cash in
lieu of such fractional shares.
H. Adjustments. Upon the happening of any of the events
described in subparagraphs A, B or C above, the class and aggregate number
of shares set forth in paragraph 4 hereof that are subject to Stock Rights
which previously have been or subsequently may be granted under the Plan
shall also be appropriately adjusted to reflect the events described in
such subparagraphs. If changes in the capitalization of the Company shall
occur other than those referred to above in this Paragraph 13, the
Committee shall make such adjustments, if any, in the number of shares
covered by each Option and in the per share purchase price as the
Committee in its discretion may consider appropriate. The Committee or, if
applicable, the Successor Board, shall determine the specific adjustments
to be made under this paragraph 13 and its determination shall be
conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of a Stock Right made hereunder receives shares or securities or cash
in connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. Means of Exercising Options. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal executive office or to the transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code or (d) at the discretion
of the Committee, by any combination of (a), (b) or (c) above. If the Committee
exercises
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<PAGE> 11
its discretion to permit payment of the exercise price of an Option by means of
the methods set forth in clauses (b), (c) or (d) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the Option
in question. In connection with any payment pursuant to clause (c) above, the
Committee may require the optionee to concurrently execute and deliver to the
Company a pledge agreement in a form reasonably satisfactory to the Company,
together with a stock certificate or certificates representing shares of the
Company's Common Stock (having an aggregate fair market value equal as of the
date of exercise to at least the value of the principal amount of the note),
duly endorsed or accompanied by a stock power or powers duly endorsed, to secure
the optionee's obligations under such personal recourse note. The holder of an
Option shall not have the rights of a shareholder with respect to the shares
covered by his Option until the date of issuance of a stock certificate to him
for such shares. Except as expressly provided above in paragraph 13 with respect
to changes in capitalization and stock dividends, no adjustment shall be made
for dividends or similar rights for which the record date is before the date
such stock certificate is issued.
15. Term and Amendment of Plan. The Plan was originally adopted by
the Board and the shareholders of the Company on November 21, 1994. The Plan was
amended by action of the Board which, on December 16, 1996, approved and adopted
an amendment and restatement thereof, effective on December 31, 1996, which
amendment and restatement was approved by the sole shareholder of the Company on
December 31, 1996. The Plan as currently in effect was approved and adopted by
the Board as of August , 1997 and was approved by the shareholders of the
Company as of August , 1997. The Plan shall expire at the end of the day on
November 21, 2004 (except as to Stock Rights outstanding on that date). The
Board may terminate or amend the Plan in any respect at any time; provided, that
no such amendment or termination shall adversely affect any Plan participant's
rights under any Stock Right previously granted, without such participant's
written consent.
16. Conversion of ISOs into Non-Qualified Options; Termination of
ISOs. The Committee, at the written request of any optionee, may in its
discretion, take such actions as may be necessary to convert such optionee's
ISOs (or any installments or portions of installments thereof) that have not
been exercised on the date of conversion into Non-Qualified Options at any time
prior to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may
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<PAGE> 12
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such ISOs. At the time of such
conversion, the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Committee in its discretion may determine; provided, that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee's ISOs converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Committee takes
appropriate action. The Committee, with the consent of the optionee, may also
terminate any portion of any ISO that has not been exercised at the time of such
conversion.
17. Governmental Regulation. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
18. Tax Withholding. Upon the exercise of a Non-Qualified Option,
the grant of an Award or the making of a purchase of Common Stock for less than
its fair market value pursuant to an Award, the making of a Disqualifying
Disposition (as defined in paragraph 19) or the vesting of Restricted Stock (as
defined in paragraph 20), the Company, in accordance with Section 3402(a) of the
Code, may require the optionee or Award recipient to pay withholding taxes in
respect of the amount that is considered compensation required to be included in
such person's gross income. The Committee, in its discretion, may condition (i)
the exercise of an Option, (ii) the grant of an Award, (iii) the making of a
purchase of Common Stock for less than its fair market value pursuant to an
Award or (iv) the vesting of Restricted Stock on the grantee's payment of such
withholding taxes. The Committee shall have the sole discretion to determine the
form in which payment of such withholding taxes will be made (i.e., cash,
securities or a combination thereof).
19. Notice to Company of Disqualifying Disposition. Each employee
who receives an ISO must agree to notify the Company in writing immediately
after the employee makes a Disqualifying Disposition of any Common Stock
acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period
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requirements do not apply and no Disqualifying Disposition can occur thereafter.
20. Provisions Related to Restricted Stock and Other Awards.
A. Awards of shares of Common Stock may be granted either
alone, in addition to or in tandem with other awards granted under the
Plan or cash awards made outside the Plan, and such shares may be subject
to repurchase by the Company upon such terms and conditions as the
Committee may determine (such shares subject to such repurchase being
referred to as "Restricted Stock"). The Committee shall determine the
eligible persons to whom, and the time or times at which, Awards will be
made, the number of shares to be awarded, the price (if any) to be paid by
the Award recipient, in the case of Restricted Stock, the time or times
within which such shares of Restricted Stock may be subject to forfeiture
and all other terms and conditions of any such Award. The Committee may
condition an Award or the vesting of Restricted Stock upon the attainment
of specified performance goals or such other factors as the Committee may
determine in its sole discretion. The terms and conditions of Awards need
not be the same for each recipient.
B. The prospective recipient of an Award shall not have any
rights with respect to such Award, unless and until such recipient has
executed an agreement evidencing the Award and has delivered a fully
executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such Award.
(i) The consideration for shares issued pursuant to an
Award shall be equal to or greater than their par value.
(ii) Awards must be accepted within a period of sixty
(60) days (or such shorter period as the Committee may specify at grant)
after the Award date, by executing an Award agreement and paying whatever
price (if any) is required under the Award.
(iii) A stock certificate in respect of shares of Common
Stock which are the subject of an Award shall be issued in the name of the
participant receiving such Award, and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Award.
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(iv) The Committee may require that the stock
certificates evidencing shares of Restricted Stock be held in custody by
the Company until the restrictions thereon shall have lapsed, and that, as
a condition of any Restricted Stock Award, the participant shall have
delivered a stock power, endorsed in blank, relating to the shares of
Restricted Stock covered by such Award.
C. Awards of shares of Restricted Stock under the Plan shall
be subject to the following restrictions and conditions (in addition to
other restrictions and conditions set forth in the Award agreement with
respect to such shares not inconsistent with this Plan which the Committee
shall determine in its sole discretion):
(i) Subject to the provisions of the Plan and the Award
agreement, during a period set by the Committee commencing with the date
of such Award (the "Restricted Period"), the participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
issued pursuant to an Award. The Committee, in its sole discretion, may
provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part, based on
service, performance or such other factors or criteria as the Committee
may determine, in its sole discretion. The Award agreement may contain
other restrictions and conditions not inconsistent with the Plan as the
Committee shall deem appropriate, including without limitation, rights of
repurchase by the Company and, in the event of an underwritten public
offering of the Company's securities, restrictions on any sale or
distribution by the Award recipient of any of the Company's common equity
for a period of time as the underwriters in such public offering shall
determine.
(ii) Except as provided herein, the recipient shall
have, with respect to shares of Restricted Stock issued pursuant to an
Award, all of the rights of a shareholder of the Company, including the
right to vote the shares, and the right to receive any cash dividends. The
Committee may, in its sole discretion, at the time of the grant of an
Award of Restricted Stock, permit or require the payment of cash dividends
with respect to such Restricted Stock to be deferred and, if the Committee
so determines, reinvested, in additional shares of Restricted Stock to the
extent shares are available under the Plan, or otherwise reinvested. Stock
dividends issued with respect to Restricted Stock shall be treated as
additional shares of Restricted Stock that are subject to the same
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<PAGE> 15
restrictions and other terms and conditions that apply to the shares with
respect to which such dividends are issued.
(iii) Subject to the applicable provisions of the Award
agreement, if and when the Restricted Period expires without a prior
forfeiture of the Restricted Stock subject to such Restricted Period,
certificates for an appropriate number of unrestricted shares (without any
legend referred to in subparagraph (iii) of subsection B of Section 20)
shall be delivered to the participant promptly upon the surrender and
cancellation of the previously issued certificate(s) representing such
shares.
21. Governing Law; Construction. The validity and construction of
the Plan and the instruments evidencing Stock Rights shall be governed by the
laws of the State of Vermont, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized. In construing this Plan,
the singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the contest otherwise requires.
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<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 3rd day of January, 1996, and effective
as of January 1, 1996, by and among SWENSON GRANITE COMPANY, INC., a New
Hampshire corporation, with a principal place of business at 369 North State
Street, Concord, NH 03301 ("Swenson"), ROCK OF AGES CORPORATION, a Vermont
corporation, with a principal place of business at Main Street, Graniteville,
Barre, Vermont 05654 ("ROAC") and PAULA A. PLANTE ("Employee") residing at Camp
St. Ext., Barre, Vermont 05641.
FACTUAL BACKGROUND:
1. ROAC wishes to employ Employee with such duties and
responsibilities, and in such positions, as ROAC may assign to Employee; and
Employee wishes to accept such employment subject to the terms and conditions of
this agreement.
2. ROAC manufactures granite memorials and other granite products,
performs services related thereto, and markets such products and services in the
United States and in various foreign countries (ROAC's "Business") and has
accumulated valuable and confidential information including trade secrets and
know-how relating to technology, manufacturing procedures, formulas, machines,
marketing plans, sources of supply, business strategies and other business
records.
3. Agreement by Employee to enter into the covenants contained herein
is a condition precedent to the employment of Employee. Employee acknowledges
that the same and her execution of this agreement are express conditions of her
employment; and that said covenants are given as material consideration for such
employment and the other benefits conferred upon her by this agreement.
4. Swenson is a party to this agreement solely for purposes of agreeing
to and undertaking joint and several responsibility with ROAC for ROAC's
agreements, covenants, duties and undertakings hereunder and agreeing to the
provisions of Section 7 hereof.
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. Employment. ROAC agrees to employ Employee, and Employee accepts
employment, all upon the terms and conditions hereinafter set forth. ROAC agrees
that Employee's employment hereunder shall not require her to relocate from the
Central Vermont geographic region.
<PAGE> 2
2. Duties and Policies.
(a) Duties. The Employee agrees to devote her full time and
best efforts to her employment duties in such positions to which Employee is
assigned during the Term (as hereinafter defined). ROAC reserves the right in
its sole discretion to request Employee to perform no duties for it under this
agreement from time to time or at any time for such periods of time during the
Term as it in its sole discretion may determine and in the event ROAC takes such
action, Employee will thereafter not be eligible for any further increases in
her Annual Base Salary or for any bonuses until ROAC requests, if ever, Employee
return to active work.
(b) Policies. Employee agrees to abide by the policies, rules,
regulations or procedures applicable to all ROAC employees as established by
ROAC from time to time and provided to Employee in writing.
3. Term. The term of this agreement (the "Term") shall be five (5)
years, beginning with the day after the date on which the Effective Time (as
defined in the Agreement and Plan of Reorganization by and among ROAC, Swenson,
Rock of Ages Quarries, Inc. ("ROAQ"), Lawson Granite Company, Inc., Employee and
others) occurs, unless terminated earlier pursuant to the provisions of Section
6 below.
4. Compensation. For all services to be rendered by Employee in any
capacity hereunder, the Company shall pay Employee the following:
(a) Salary. The Company shall pay Employee an annual salary of
Sixty Thousand Dollars ($60,000.00) less withholding and other taxes required by
federal and state law (the "Annual Base Salary"), payable in equal monthly
installments, or as otherwise required by law. Employee shall be eligible to
receive increases in Employee's Annual Base Salary pursuant to periodic salary
reviews consistent with ROAC's corporate policies; it being understood such
increases are not guaranteed, but are subject to Employee's job performance and
the determination by ROAC's President or Board of Directors, in her or its sole
discretion, to award salary increases to Employee.
(b) Bonus. Employee may also be awarded a bonus or bonuses
from time to time during the Term at such time, if any, as ROAC's President or
its Board of Directors may determine, in her or its sole discretion, to award
such bonuses.
(c) Standards. ROAC agrees that the standards to be used by
its Board of Directors in awarding salary increases and bonuses to Employee will
be the same standards used by the Boards of Swenson and ROAQ (as hereinafter
defined) in awarding the same to executive officers of those corporations,
provided, however, that such salary increases and bonuses will be based on the
performance of the Swenson Corporate Group.
- 2 -
<PAGE> 3
5. Fringe Benefits. During the term of this agreement, Employee shall
be entitled to participate in such fringe benefits as, from time to time, may be
applicable to the Company's similarly situated executive employees, subject to
the terms and conditions of such fringe benefit plans and to the following
fringe benefits:
(i) Medical and major medical health insurance, paid
for by ROAC;
(ii) Life Insurance paid for by ROAC equal to one and
one-half (1 1/2) times Employee's Annual Base Salary;
(iii) Participation in ROAC's qualified 401(k) profit
sharing plan pursuant to the terms thereof;
(iv) Participation in ROAC's qualified defined
benefit Salaried Employees Pension Plan pursuant to the terms
thereof;
(v) The use of an automobile comparable to the
automobiles provided to other similar employees of ROAC and
payment by ROAC of the costs of operation and maintenance of
the automobile; and
(vi) Vacation in accordance with ROAC's employee
policies, in effect from time to time with credit given for
years of service for Employee's service with Lawson Granite
Company, Inc.
Fringe benefits provided to Employee will, in addition, generally be
not less advantageous to Employee than those provided by Swenson to its
executive employees. Fringe benefits as used in this Section do not include cash
compensation, stock options or other compensation.
6. Termination.
(a) Termination because of Death or Total Disability. This
agreement will terminate automatically upon the date of Employee's death or
Total Disability. The Employee shall be deemed to have incurred a Total
Disability:
(i) if ROAC maintains a long term disability policy
in effect for the benefit of Employee, on the date when the
Employee shall have received total disability benefits under
said policy for a period of six (6) months;
(ii) if no such long term disability insurance policy
is in effect, on the date when the Employee suffers from a
physical or mental disability of such magnitude and effect
that the Employee is unable to perform the essential functions
of Employee's assigned position with or without reasonable
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<PAGE> 4
accommodation and such disability continues during a period of
twelve (12) continuous or noncontinuous months within the
eighteen (18) month period beginning on the first day of the
month in which the first day of disability occurs;
(iii) if Employee illegally uses drugs and, as a
result, performance of her duties and/or employment with ROAC
is in any way impaired; or
(iv) on the date when Employee receives her first
payment under the Social Security Act because of determination
by the Social Security administration that Employee is totally
disabled.
Total Disability as set forth in subsections (ii), (iii) or (iv) above shall be
deemed to have occurred upon the written certification to ROAC thereof by the
Employee's personal physician, which certification may be requested in writing
by ROAC. If the Employee does not have a personal physician or refuses to
consult with his personal physician, ROAC may select a licensed Vermont
physician, board-certified in internal medicine or family practice, to examine
the Employee, which physician shall, for purposes hereof, be deemed to be the
Employee's personal physician; provided, that if the Employee refuses to be
examined by this deemed personal physician within thirty (30) days after the
physician's appointment by ROAC, then the Employee may at ROAC's election be
conclusively presumed to have become Totally Disabled as of the close of such
thirty (30) day period. If ROAC disagrees with the opinion of the Employee's
personal physician, then ROAC may select a second licensed, board-certified
Vermont physician to examine the Employee. The personal physician and this
second physician shall then select a third licensed, board-certified Vermont
physician to examine the Employee. Upon examination of the Employee by the three
(3) physicians, each physician shall render an opinion with respect to the
condition of the Employee in regards to his Total Disability, and the opinion of
a majority of the physicians shall be binding upon all parties.
(b) Termination Without Cause. ROAC shall have the right to
terminate this agreement and Employee's employment under this agreement without
cause at any time (any such termination by ROAC is herein sometimes referred to
as a "Termination Without Cause"). It shall also be deemed a Termination Without
Cause by ROAC if the Employee shall voluntarily resign from employment because
of a required relocation contrary to the provisions of Section 1 of this
agreement.
(c) Termination With Cause. ROAC may terminate this agreement
and the employment of the Employee at any time with cause and without further
notice upon the occurrence of any of the following events: (i) abandonment by
Employee of, or chronic, habitual or continuous failure by, Employee to perform,
over a period of thirty (30) or more days, Employee's duties as an Employee
hereunder; (ii) embezzlement or other theft of ROAC's property or the commission
of other criminal activity against ROAC or its employees, agents and customers;
or (iii) conviction of a crime which ROAC's Board of
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<PAGE> 5
Directors reasonably determines will have a material adverse affect on the
reputation, business and/or financial affairs of ROAC or the Swenson Corporate
Group (as defined in Section 7 hereof) (any such termination is herein sometimes
referred to as a "Termination With Cause" or as "Terminated With Cause").
(d) Termination by the Employee. Employee may resign from
employment at any time for any reason and terminate this agreement by giving
thirty (30) days' written notice to ROAC (any such termination is herein
sometimes referred to as a "Voluntary Termination") of such intention. In such
event, ROAC may, in its discretion, permit the Employee to work through the
notice period or accept the Employee's immediate resignation. In the event of a
Voluntary Termination, Employee shall not be entitled to payment of any further
compensation or benefits under the terms of this agreement, except for salary
earned, and bonuses declared, if any, prior to the date thereof.
7. Expenses Upon Termination and Swenson Corporate Group. In the event
that Employee's employment is terminated for any reason or Employee resigns in
lieu of such termination, Employee shall only be entitled to be paid any
expenses she has incurred prior to the termination and for which she is entitled
to reimbursement hereunder, and such prorated salary as she may have earned up
to the date of termination. ROAC, ROAQ and Swenson and their direct and indirect
subsidiaries, affiliates and successors and assigns are sometimes herein
sometimes referred to as the "Swenson Corporate Group."
8. Severance Payments. If Employee's employment under this agreement
and this agreement are terminated, then in consideration thereof and as
liquidated damages incurred by Employee because of such termination and not as a
penalty, Employee agrees to accept and ROAC agrees to pay to Employee, as
Employee's sole entitlement because of any such termination, severance payments
(the "Severance Payment") pursuant to the following schedule:
<TABLE>
<S> <C>
Termination Without Cause or Severance Payment Equal to: $420,000,
termination because of Death or payable in five (5) equal annual payments
Total Disability during the First of $84,000 each with the first such
Year through the Fifth Year of payment being due on the first day of the
the Term: month following the date of the termination
(the "First Date") and the remaining four
on the second (2nd) through the fifth (5th)
annual anniversaries of the First Date.
</TABLE>
If Employee is Terminated with Cause or Voluntarily Terminates,
Employee will still be entitled to a Severance Payment in the amount set forth
above but payment thereof shall be made over seven (7) years instead of five (5)
years in seven equal installments of Sixty
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<PAGE> 6
Thousand Dollars ($60,000.00) each commencing on the First Date and continuing
on the second (2nd) through the seventh (7th) annual anniversaries of the First
Date.
If at the end of the Term, Employee does not continue to work for ROAC,
then she will be entitled to a Severance Payment in the amount set forth above
paid in the same seven (7) year fashion as if she had Voluntarily Terminated her
employment with Company.
If at the end of the Term, Employee continues to work for ROAC any
Severance Payments will be negotiated between Employee and Company as a part of
a new employment agreement between them.
Employee, in consideration of the payment of the severance payments set
forth in this Section 8, hereby waives and releases, all members of the Swenson
Corporate Group from any and all lawsuits, claims, damages, expenses, costs,
(including attorneys fees) which Employee may incur or suffer because of
Employee's termination of employment under this agreement.
9. Non-Disclosure of Confidential Information. Employee acknowledges
that during her employment, she will become fully familiar with all aspects of
the ROAC's Businesses and the Swenson Corporate Group's businesses and will
obtain access to confidential and proprietary information relating to such
businesses. Employee understands and agrees that such information is valuable
and Employee has no property interest in it. Therefore, Employee covenants and
agrees that during her employment with ROAC and thereafter Employee will not
use, disclose, communicate or divulge such information to any person not
employed by ROAC or use such information except as may be necessary to perform
her duties as an Employee under this agreement. Such obligation shall survive
the expiration of the term of this agreement and/or termination of Employee's
employment with ROAC for any reason whatsoever.
10. Non-Solicitation of Employees, Clients and Customers. During the
Term of this agreement and for the period of Employee's non-competition covenant
set forth in Section 12 hereof, following the termination this agreement,
Employee agrees not to, on her own behalf or on behalf of any other person,
corporation, firm or entity, directly or indirectly, solicit or induce any
client, customer, employee or sales representative of ROAC or the Swenson
Corporate Group to stop doing business with or to leave any of said companies
for any reason whatsoever or to hire any of their employees.
11. Return of Company Property. Upon termination or nonrenewal of this
agreement for any reason, Employee agrees to immediately return all ROAC and
Swenson Corporate Group property, whether confidential or not, without keeping
any copies or excerpts thereof, including but not limited to computers,
printers, customer lists, samples, product information, financial information,
price lists, marketing materials, keys, credit cards, automobiles, technical
data, research, blueprints, trade secrets information, and all confidential or
proprietary information.
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<PAGE> 7
12. Non-Competition Covenant by Employee. ROAC and the Employee agree
that ROAC is currently engaged in the business of manufacturing, marketing and
selling granite memorials and other granite products (herein referred to as the
"Restricted Business") and ROAC is engaged in the Restricted Business in all of
the states of the United States and in all of the provinces of Canada (herein
the territory of all such states and provinces is referred to as the "Restricted
Territory") and has hired the Employee to expand and grow the Restricted
Business in the Restricted Territory. Accordingly, as a material and essential
inducement to ROAC to hire the Employee and in consideration of ROAC's and
Swenson's agreements with the Employee under this agreement, including without
limitation the Severance Payments, Employee agrees that during the Term of this
agreement and, if this agreement is terminated for any reason, lapses, is not
renewed for any reason, or Employee is not employed by ROAC after the end of the
Term hereof for any reason, for a period equal to the greater of (a) two (2)
years; or (b) the periods during which ROAC is paying Severance Payments to
Employee pursuant to Section 8 hereof, the Employee will not, in the Restricted
Territory, directly or indirectly, in any manner whatsoever:
(a) compete with ROAC, its successor and assigns, or the
Swenson Corporate Group, its successors and assigns, in the Restricted
Business;
(b) engage in the Restricted Business, except as an employee
of ROAC or the Swenson Corporate Group;
(c) have any ownership interest in (other than the ownership
of less than five percent (5%) of the ownership interests of a company
whose stock or other ownership interests are publicly traded) any
business entity which engages in the Restricted Business in the
Restricted Territory except for any ownership interest owned by
Employee during the Term of this agreement, and after termination of
this agreement, in any member of the Swenson Corporate Group;
(d) contract, subcontract, work for, solicit work from,
solicit ROAC or Swenson Corporate Group employees for, or solicit
customers for, advise or become affiliated with, any business entity
which engages in the Restricted Business in the Restricted Territory
except as an employee of ROAC or of the Swenson Corporate Group; or
(e) lend money or provide anything of value to any entity
which engages in the Restricted Business in the Restricted Territory.
The term "compete" as used in this Section 12 means engage in
competition, either as an owner, agent, member, consultant, partner, sole
proprietor, stockholder, or any other ownership or other capacity.
While the restrictions as set forth herein are considered by the
parties hereto to be reasonable in all circumstances, it is recognized that any
one or more of such restrictions
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<PAGE> 8
might fail for unforeseen reasons. Accordingly, it is hereby agreed and declared
that if any of such restrictions shall be adjudged to be void as unreasonable in
all circumstances for the protection of ROAC and the Swenson Corporate Group and
their interests, but would be valid if part of the wording thereof were deleted,
the period thereof reduced, or the range of activities or area dealt with
reduced in scope, such restrictions shall apply with the minimum modification as
may be necessary to make them valid and effective, while still affording to ROAC
and the Swenson Corporate Group the maximum amount of protection contemplated
thereby.
Employee represents that she has carefully reviewed Employee's
restrictive non-competition covenant set forth in this Section 12 and has
determined that this covenant will not impose undue hardship, financial or
otherwise, on Employee; that its Restrictive Territory and duration will not
impose a hardship on Employee; that it protects ROAC's and the Swenson Corporate
Group's legitimate interests in their investment in Employee and their
Restricted Business; and that in Employee's opinion Employee not being able to
compete in the Restrictive Territory for the duration of this covenant will not
be injurious to the public interest.
Employee agrees that Employee's breach of her covenants in this Section
12 will cause irreparable harm to ROAC and the Swenson Corporate Group.
Employee, therefore, further agrees that if she so breaches, ROAC may cease to
make any Severance Payments remaining due to Employee on the date of the breach
and ROAC's obligation to make any further Severance Payments to Employee will,
therefore, terminate and be null, void and of no further force and effect.
13. Loyalty. Employee shall devote her full time and best efforts to
the performance of her employment under this agreement. During the term of this
agreement, Employee shall not at any time or place whatsoever, either directly
or indirectly, engage in the Restricted Business or any other profession or
active business to any extent whatsoever, except on or pursuant to the terms of
this agreement, or with the prior written consent of ROAC. Employee agrees that
she will not, while this agreement is in effect, do any unlawful acts or engage
in any unlawful habits or usages which injure, directly or indirectly, ROAC and
its business. ROAC agrees that if it exercises its rights in Section 2(a) hereof
to have Employee perform no duties for it, then during such period of time
during the Term as Employee is so not performing her duties, Employee may engage
in other employment which does not violate her non-competition covenant in
Section 12 and her other covenants in Sections 9, 10 and 11 of this agreement.
14. Governing Law, Jurisdiction and Venue. This agreement shall be
governed by and construed in accordance with the laws of the state of Vermont.
The parties agree that because performance of this agreement will take place
predominantly in Washington County, Vermont, the Washington County Superior
Court, Vermont, or the U.S. District Court for the District of Vermont, in said
State are the sole and exclusive forums for any actions or claims by the parties
of this agreement and each party hereto consents to the jurisdiction of
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<PAGE> 9
said courts in any action brought by another party hereto and agrees that no
claims or actions relating to any matter hereunder will be brought by them in
any other courts in this State, any other state or any other country.
15. Headings. The descriptive headings of the several sections of this
agreement are inserted for convenience of reference only and shall not control
or affect the meanings or construction of any of the provisions hereof.
16. Severability and Violation of Laws. If any provision of this
agreement shall be held invalid or unenforceable according to law, such
provision shall be modified to the extent necessary to bring it within the legal
requirements. Any such invalidity or unenforceability shall not affect the
remaining provisions of this agreement, and such remaining provisions shall
continue in full force and effect.
17. Specific Performance. The Employee hereby agrees and stipulates
that it would be impossible to measure in monetary terms the damages which would
be suffered by ROAC in the event of any breach by Employee of Sections 8, 9, 10,
11, 12 and 13 of this agreement. Therefore, if ROAC shall institute any action
in equity to enforce such sections of this agreement, it is agreed that the
Employee waives any claim or defense that ROAC has an adequate remedy at law,
and Employee agrees ROAC is entitled to specific performance of such terms of
the agreement.
18. Notices. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service for next business
day delivery, fee prepaid, return receipt or other confirmation of delivery
requested or (iv) when telecopied or sent by facsimile transmission if an
additional notice is also given under (i), (ii) or (iii) above within three days
thereafter. Any such notice or communication shall be directed to a party at its
address set forth below or at such other address as may be designated by a party
in a notice given to all other parties hereto in accordance with the provisions
of this Section.
For the ROAC:
Mr. Kurt M. Swenson
Chairman and Chief Executive Officer
Swenson Granite Company, Inc.
369 North State Street
Concord, NH 03302
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<PAGE> 10
with a copy to:
John R. Monson, Esquire
Wiggin & Nourie, P.A.
20 Market Street, P. O. Box 808
Manchester, New Hampshire 03105-0808
For the Employee:
Ms. Paula A. Plante
Camp St. Ext.
Barre, Vermont 05641
with a copy to:
John R. Nicholls, Esq.
Abare, Nicholls & Parker, P.C.
59 North Main Street
Barre, VT 05641
19. Assignment. The rights and obligations of ROAC together with its
obligations and all of the Employee's covenants and agreements hereunder may be
assigned by ROAC to any third party by operation of law or by contractual
assignment; provided, however, that Swenson remains liable under this agreement
after such assignment as set forth in Section 23 hereof and upon such assignment
ROAC shall be relieved of all of its obligations, agreements, duties and
covenants hereunder. The rights and obligations of the Employee under this
agreement are not assignable.
20. Complete and Entire Agreement. This agreement contains all of the
terms agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, representations and warranties of the parties
as to the subject matter hereof.
21. Amendments. This agreement may be amended, or any provision of the
agreement may be waived, provided that any such amendment or waiver will be
binding on the parties only if such amendment or waiver is set forth in a
writing executed by all parties hereto. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any other breach.
22. Survival. Sections 8, 9, 10, 11, 12, 14, 16 and 17 shall survive
expiration of the term of this agreement and/or termination of Employee's
employment under this agreement.
23. Swenson as a Party. Swenson hereby agrees to joint and several
liability with ROAC for all of ROAC's agreements, covenants, duties and
undertakings under this
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<PAGE> 11
agreement and Employee agrees that Swenson has all of ROAC's rights under this
agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement, all
as of the date first written above.
WITNESS: ROCK OF AGES CORPORATION
/s/ By: /s/ Kurt M. Swenson
- -------------------------------- -------------------------------
Kurt M. Swenson, Chairman and
Chief Executive Officer
WITNESS: SWENSON GRANITE COMPANY, INC.
/s/ By: /s/ Kurt M. Swenson
- -------------------------------- -------------------------------
Kurt M. Swenson, President
WITNESS: EMPLOYEE
/s/ /s/ Paula A. Plante
- -------------------------------- -------------------------------
Paula A. Plante
- 11 -
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 3rd day of January, 1996, and
effective as of January 1, 1996, by and among SWENSON GRANITE COMPANY, INC., a
New Hampshire corporation, with a principal place of business at 369 North State
Street, Concord, New Hampshire 03301 ("Swenson"), ROCK OF AGES CORPORATION, a
Vermont corporation, with a principal place of business at Main Street,
Graniteville, Barre, Vermont 05654 ("ROAC") and PETER FRIBERG ("Employee")
residing at 15 Tamarack Lane, Barre, Vermont 05641.
FACTUAL BACKGROUND:
1. ROAC wishes to employ Employee, initially as Senior Vice
President of Sales and Marketing (the "Position") and with such other duties and
responsibilities, and such other or different positions, as ROAC may assign to
Employee; and Employee wishes to accept such employment subject to the terms and
conditions of this agreement.
2. ROAC manufactures granite memorials and other granite products,
performs services related thereto, and markets such products and services in the
United States and in various foreign countries (ROAC's "Business") and has
accumulated valuable and confidential information including trade secrets and
know-how relating to technology, manufacturing procedures, formulas, machines,
marketing plans, sources of supply, business strategies and other business
records.
3. Agreement by Employee to enter into the covenants contained
herein is a condition precedent to the employment of Employee in the Position.
Employee acknowledges that the same and his execution of this agreement are
express conditions of his employment; and that said covenants are given as
material consideration for such employment and the other benefits conferred upon
him by this agreement.
4. Swenson is a party to this agreement solely for purposes of
agreeing to and undertaking joint and several responsibility with ROAC for
ROAC's agreements, covenants, duties and undertakings hereunder and agreeing to
the provisions of Section 7 hereof.
<PAGE> 2
NOW, THEREFORE, in consideration of such employment and other
valuable consideration, receipt of which is hereby acknowledged the parties
hereto agree as follows:
1. Employment. ROAC agrees to employ Employee, and Employee accepts
employment in the Position, initially reporting to the President and COO of
ROAC, all upon the terms and conditions hereinafter set forth. ROAC agrees that
Employee's employment hereunder shall not require him to relocate from the
Central Vermont geographic region.
2. Duties and Policies.
(a) Duties. The Employee agrees to devote his full time and
best efforts to his employment duties in the Position or, subject to the rights
of ROAC in the second sentence of this Section 2(a), in such other comparable
position to which Employee is assigned during the Term (as hereinafter defined),
and to such other comparable duties as may be assigned to him from time to time
by ROAC. ROAC reserves the right in its sole discretion to request Employee to
perform no duties for it under this agreement from time to time or at any time
for such periods of time during the Term as it in its sole discretion may
determine and in the event ROAC takes such action, Employee will thereafter not
be eligible for any further increases in his Annual Base Salary or for any
bonuses until ROAC requests, if ever, Employee return to active work.
(b) Policies. Employee agrees to abide by the policies, rules,
regulations or usages applicable to Employee as established by ROAC from time to
time and provided to Employee in writing.
3. Term. The term of this agreement (the "Term") shall be five (5)
years, beginning with the day after the date on which the Effective Time (as
defined in the Agreement and Plan of Reorganization by and among ROAC, Swenson,
Rock of Ages Quarries, Inc ("ROAQ"), Anderson-Friberg Company, Inc., Employee
and others) occurs, unless terminated earlier pursuant to the provisions of
Section 6 below.
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<PAGE> 3
4. Compensation. For all services to be rendered by Employee in any
capacity hereunder, the Company shall pay Employee the following:
(a) Salary. The Company shall pay Employee an annual salary of
One Hundred Forty Thousand Dollars ($140,000) less withholding and other taxes
required by federal and state law (the "Annual Base Salary"), payable in equal
monthly installments, or as otherwise required by law. Employee shall be
eligible to receive increases in Employee's Annual Base Salary pursuant to
periodic salary reviews consistent with ROAC's corporate policies, it being
understood such increases are not guaranteed, but are subject to Employee's job
performance and the determination by ROAC's Board of Directors, in its sole
discretion, to award salary increases to Employee.
(b) Bonus. Employee may also be awarded a bonus or bonuses
from time to time during the Term at such time, if any, as ROAC's Board of
Directors may determine, in its sole discretion, to award such bonuses.
(c) Standards. ROAC agrees that the standards to be used by
its Board of Directors in awarding salary increases and bonuses to Employee will
be the same standards used by the Boards of Swenson and ROAQ (as hereinafter
defined) in awarding the same to executive officers of those corporations,
provided, however, that such salary increases and bonuses will be based on the
performance of the Swenson Corporate Group.
5. Fringe Benefits. During the term of this agreement, Employee
shall be entitled to participate in such fringe benefits as, from time to time,
may be applicable to the Company's similarly situated executive employees,
subject to the terms and conditions of such fringe benefit plans and to the
following fringe benefits:
i) Medical and major medical health insurance, paid for
by ROAC;
ii) Life Insurance paid for by ROAC equal to one and
one-half (1-1/2) times Employee's Annual Base Salary;
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<PAGE> 4
iii) Participation in ROAC's qualified 401(k) profit
sharing plan pursuant to the terms thereof;
iv) Participation in ROAC's qualified defined benefit
Salaried Employees Pension Plan pursuant to the terms
thereof;
v) The use of an automobile comparable to the
automobiles provided to other executive officers of ROAC and
payment by ROAC of the costs of operation and maintenance of
the automobile;
vi) Vacation in accordance with ROAC's employee
policies, in effect from time to time with credit given for
years of service for Employee's service with Anderson-Friberg
Company, Inc. ("AFCO"); and
vii) Participation in an ROAC Salary Continuation
Agreement pursuant to the terms thereof.
Fringe Benefits provided to Employee will, in addition, generally be
not less advantageous to Employee than those provided by Swenson to its
executive employees. Fringe benefits as used in this Section do not include cash
compensation, stock options or other compensation.
6. Termination.
(a) Termination because of Death or Total Disability. This
agreement will terminate automatically upon the date of Employee's death or
Total Disability. The Employee shall be deemed to have incurred a Total
Disability:
i) if ROAC maintains a long term disability policy in
effect for the benefit of Employee, on the date when the
Employee shall have received total disability benefits under
said policy for a period of six (6) months;
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<PAGE> 5
ii) if no such long term disability insurance policy is
in effect, on the date when the Employee suffers from a
physical or mental disability of such magnitude and effect
that the Employee is unable to perform the essential functions
of Employee's assigned position with or without reasonable
accommodation and such disability continues during a period of
twelve (12) continuous or noncontinuous months within the
eighteen (18) month period beginning on the first day of the
month in which the first day of disability occurs;
iii) if Employee illegally uses drugs and, as a result,
performance of his duties and/or employment with ROAC is in
any way impaired; or
iv) on the date when Employee receives his first
payment under the Social Security Act because of determination
by the Social Security administration that Employee is totally
disabled.
Total Disability as set forth in subsections (ii), (iii) or (iv) above shall be
deemed to have occurred upon the written certification to ROAC thereof by the
Employee's personal physician, which certification may be requested in writing
by ROAC. If the Employee does not have a personal physician or refuses to
consult with his personal physician, ROAC may select a licensed Vermont
physician, board-certified in internal medicine or family practice, to examine
the Employee, which physician shall, for purposes hereof, be deemed to be the
Employee's personal physician; provided, that if the Employee refuses to be
examined by this deemed personal physician within thirty (30) days after the
physician's appointment by ROAC, then the Employee may at ROAC's election be
conclusively presumed to have become Totally Disabled as of the close of such
thirty (30) day period. If ROAC disagrees with the opinion of the Employee's
personal physician, then ROAC may select a second licensed, board-certified
Vermont physician to examine the Employee. The personal physician and this
second physician shall then select a third licensed, board-certified Vermont
physician to examine the Employee. Upon examination of the
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<PAGE> 6
Employee by the three (3) physicians, each physician shall render an opinion
with respect to the condition of the Employee in regards to his Total
Disability, and the opinion of a majority of the physicians shall be binding
upon all parties.
(b) Termination Without Cause. ROAC shall not have the right
to terminate this agreement and Employee's employment under this agreement
except for a Termination for Cause (as defined in Section 6(c) below) unless
ROAC pays Employee the severance payments set forth in Section 8 hereof on the
terms and conditions of said Section 8 (any such termination by ROAC is herein
sometimes referred to as a "Termination Without Cause"). It shall also be deemed
a Termination Without Cause by ROAC if the Employee shall voluntarily resign
from employment because of a required relocation contrary to the provisions of
Section 1 of this agreement or a violation by ROAC of the provisions of Section
2(a) regarding assigning Employee to a position not comparable to the Position
or to duties not comparable to the Position.
(c) Termination With Cause. ROAC may terminate this agreement
and the employment of the Employee at any time with cause and without further
notice upon the occurrence of any of the following events: (i) abandonment by
Employee of, or chronic, habitual or continuous failure by, Employee to perform,
over a period of thirty (30) or more days, Employee's duties as an Employee
hereunder; (ii) embezzlement or other theft of ROAC's property or the commission
of other criminal activity against ROAC or its employees, agents and customers;
or (iii) conviction of a crime which ROAC's Board of Directors reasonably
determines will have a material adverse affect on the reputation, business
and/or financial affairs of ROAC or the Swenson Corporate Group (as defined in
Section 7 hereof)(any such termination is herein sometimes referred to as a
"Termination With Cause" or as "Terminated With Cause"). In the event that
Employee's employment is Terminated With Cause or Employee resigns in lieu of
such termination, Employee shall only be entitled to be paid any expenses he has
incurred prior to the termination and for which he is entitled to reimbursement
hereunder, and such pro-rated salary as he may have earned up to the date of
termination.
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<PAGE> 7
(d) Termination by the Employee. Employee may resign from
employment at any time for any reason and terminate this agreement by giving
thirty (30) days' written notice to ROAC (any such termination is herein
sometimes referred to as a "Voluntary Termination") of such intention. In such
event, ROAC may, in its discretion, permit the Employee to work through the
notice period or accept the Employee's immediate resignation. In the event of a
Voluntary Termination, Employee shall not be entitled to payment of any further
compensation or benefits under the terms of this agreement, except for salary
earned, and bonuses declared, if any, prior to the date thereof.
7. Board of Directors Positions. As long as Employee is an employee
of ROAC under this agreement and is not prohibited by law from serving as a
member of the Boards of Directors hereafter named, Swenson will cause Rock of
Ages Quarries, Inc. ("ROAQ") and ROAC to elect Employee to their respective
Boards of Directors. A separate agreement between Employee and others governs
Employee's election as a member of the Board of Directors of Swenson. Employee
agrees that if he incurs a Voluntary Termination hereunder he will submit his
resignation from all of the above-referenced Boards of Directors, including
Swenson's, simultaneously with his Voluntary Termination. ROAC, ROAQ and Swenson
and their direct and indirect subsidiaries, affiliates and successors and
assigns are sometimes herein sometimes referred to as the "Swenson Corporate
Group."
8. Severance Payments. If Employee's employment under this agreement
and this agreement are terminated because of Employee's death or Total
Disability or by ROAC by virtue of a Termination Without Cause under Section
6(c) hereof, then in consideration thereof and as liquidated damages incurred by
Employee because of such termination and not as a penalty, Employee agrees to
accept and ROAC agrees to pay to Employee, as Employee's sole entitlement
because of the Termination Without Cause, severance payments (the "Severance
Payment") pursuant to the following schedule:
7
<PAGE> 8
<TABLE>
<CAPTION>
TERMINATION WITHOUT CAUSE SEVERANCE PAYMENT EQUAL
DURING THE: TO:
<S> <C>
First Year of the Term: $840,000
Second Year of the Term: $700,000
Third Year of the Term: $560,000
Fourth Year of the Term: $420,000
Fifth Year of the Term: Severance Payment Equal to
the sum of: the balance
of Annual Base Salary owed
from date of termination
to end of 5th year and
$280,000
</TABLE>
In addition, ROAC agrees that if at the end of the Term of this
agreement, ROAC does not offer Employee an Employment Agreement for at least an
additional two (2) years at a Base Annual Salary equal to Employee's Annual Base
Salary in the fifth (5th) year of the Term, but having other provisions deemed
necessary, appropriate and in ROAC's best interests, none of which will
necessarily be similar or the same as the other provisions of this agreement
(the "New Agreement") then ROAC will pay a $280,000 severance payment payable
monthly as hereinafter indicated to Employee; provided however, that if ROAC
offers such a New Agreement and Employee does not accept it no such additional
$280,000 will be paid to Employee and no other severance payment will be due
Employee under the New Agreement, irrespective of how it may be terminated
thereafter by either party to it or upon its nonrenewal at the end of its term.
Employee agrees that any Severance Payments payable under this
Section may be paid at the rate of $11,667 per month, commencing on the first
day of the month after the month in which the Termination Without Cause occurs
or on the first day of the month after the end of the Term of this agreement.
Employee further agrees that no Severance Payments are due to Employee under
this Section if Employee's employment is terminated because of Employee's death,
Total Disability, Termination With Cause or Voluntary Termination. Employee, in
consideration of the payment of the severance payments
8
<PAGE> 9
set forth in this Section 8, hereby waives and releases, all members of the
Swenson Corporate Group from any and all lawsuits, claims, damages, expenses,
costs, (including attorneys fees) which Employee may incur or suffer because of
Employee's Termination Without Cause.
9. Non-Disclosure of Confidential Information. Employee acknowledges
that during his employment, he will become fully familiar with all aspects of
the ROAC's Businesses and the Swenson Corporate Group's businesses and will
obtain access to confidential and proprietary information relating to such
businesses. Employee understands and agrees that such information is valuable
and Employee has no property interest in it. Therefore, Employee covenants and
agrees that during his employment with ROAC and thereafter Employee will not
use, disclose, communicate or divulge such information to any person not
employed by ROAC or use such information except as may be necessary to perform
his duties as an Employee under this agreement. Such obligation shall survive
the expiration of the term of this agreement and/or termination of Employee's
employment with ROAC for any reason whatsoever.
10. Non-Solicitation of Employees, Clients and Customers. During the
Term of this agreement and for the period of Employee's non-competition covenant
set forth in Section 12 hereof, following the termination of this agreement,
Employee agrees not to, on his own behalf or on behalf of any other person,
corporation, firm or entity, directly or indirectly, solicit or induce any
client, customer, employee or sales representative of ROAC or the Swenson
Corporate Group to stop doing business with or to leave any of said companies
for any reason whatsoever or to hire any of their employees.
11. Return of Company Property. Upon termination or nonrenewal of
this agreement for any reason, Employee agrees to immediately return all ROAC
and Swenson Corporate Group property, whether confidential or not, without
keeping any copies or excerpts thereof, including but not limited to computers,
printers, customer lists, samples, product information, financial information,
price lists, marketing materials, keys, credit cards, automobiles, technical
data, research, blueprints, trade secrets information, and all confidential or
proprietary information.
9
<PAGE> 10
12. Non-Competition Covenant by Employee. ROAC and the Employee
agree that ROAC is currently engaged in the business of manufacturing, marketing
and selling granite memorials and other granite products (herein referred to as
the "Restricted Business") and ROAC is engaged in the Restricted Business in all
of the states of the United States and in all of the provinces of Canada (herein
the territory of all such states and provinces is referred to as the "Restricted
Territory") and has hired the Employee to expand and grow the Restricted
Business in the Restricted Territory. Accordingly, as a material and essential
inducement to ROAC to hire the Employee and in consideration of ROAC's and
Swenson's agreements with the Employee under this agreement, including without
limitation the Severance Payments, Employee agrees that during the Term of this
agreement and, if this agreement is terminated for any reason, lapses, is not
renewed for any reason, or Employee is not employed by ROAC after the end of the
Term hereof for any reason, for a period equal to the greater of (a) two (2)
years; (b) or the periods during which ROAC is paying Severance Payments to
Employee pursuant to Section 8 hereof, the Employee will not, in the Restricted
Territory, directly or indirectly, in any manner whatsoever:
(a) compete with ROAC, its successor and assigns, or the
Swenson Corporate Group, its successors and assigns, in the Restricted Business;
(b) engage in the Restricted Business, except as an employee
of ROAC or the Swenson Corporate Group;
(c) have any ownership interest in (other than the ownership
of less than five percent (5%) of the ownership interest of a company whose
stock or other ownership interests are publicly traded) any business entity
which engages in the Restricted Business in the Restricted Territory except for
any ownership interest owned by Employee during the Term of this agreement, and
after termination of this agreement, in any member of the Swenson Corporate
Group;
(d) contract, subcontract, work for, solicit work from,
solicit ROAC or Swenson Corporate Group employees for, or solicit customers for,
advise or
10
<PAGE> 11
become affiliated with, any business entity which engages in the Restricted
Business in the Restricted Territory except as an employee of ROAC or of the
Swenson Corporate Group; or
(e) lend money or provide anything of value to any entity
which engages in the Restricted Business in the Restricted Territory.
The term "compete" as used in this Section 12 means engage in
competition, either as an owner, agent, member, consultant, partner, sole
proprietor, stockholder, or any other ownership or other capacity.
While the restrictions as set forth herein are considered by the
parties hereto to be reasonable in all circumstances, it is recognized that any
one or more of such restrictions might fail for unforeseen reasons. Accordingly,
it is hereby agreed and declared that if any of such restrictions shall be
adjudged to be void as unreasonable in all circumstances for the protection of
ROAC and the Swenson Corporate Group and their interests, but would be valid if
part of the wording thereof were deleted, the period thereof reduced, or the
range of activities or area dealt with reduced in scope, such restrictions shall
apply with the minimum modification as may be necessary to make them valid and
effective, while still affording to ROAC and the Swenson Corporate Group the
maximum amount of protection contemplated thereby.
Employee represents that he has carefully reviewed Employee's
restrictive non-competition covenant set forth in this Section 12 and has
determined that this covenant will not impose undue hardship, financial or
otherwise, on Employee; that its Restrictive Territory and duration will not
impose a hardship on Employee; that it protects ROAC's and the Swenson Corporate
Group's legitimate interests in their investment in Employee and their
Restricted Business; and that in Employee's opinion Employee not being able to
compete in the Restrictive Territory for the duration of this covenant will not
be injurious to the public interest.
Employee agrees that Employee's breach of his covenants in this
Section 12 will cause irreparable harm to ROAC and the Swenson Corporate Group.
Employee, therefore, further agrees that if he so breaches, ROAC
11
<PAGE> 12
may cease to make any Severance Payments remaining due to Employee on the date
of the breach and ROAC's obligation to make any further Severance Payments to
Employee will, therefore, terminate and be null, void and of no further force
and effect.
13. Loyalty. Employee shall devote his full time and best efforts to
the performance of his employment under this agreement. During the term of this
agreement, Employee shall not at any time or place whatsoever, either directly
or indirectly, engage in the Restricted Business or any other profession or
active business to any extent whatsoever, except on or pursuant to the terms of
this agreement, or with the prior written consent of ROAC. Employee agrees that
he will not, while this agreement is in effect, do any unlawful acts or engage
in any unlawful habits or usages which injure, directly or indirectly, ROAC and
its business. ROAC agrees that if it exercises its rights in Section 2(a) hereof
to have Employee perform no duties for it, then during such period of time
during the Term as Employee is so not performing his duties, Employee may engage
in other employment which does not violate his non-competition covenant in
Section 12 and his other covenants in Sections 9, 10 and 11 of this agreement.
14. Governing Law, Jurisdiction and Venue. This agreement shall be
governed by and construed in accordance with the laws of the state of Vermont.
The parties agree that because performance of this agreement will take place
predominantly in Washington County, Vermont, the Washington County Superior
Court, Vermont, or the U.S. District Court for the District of Vermont, in said
State are the sole and exclusive forums for any actions or claims by the parties
of this agreement and each party hereto consents to the jurisdiction of said
courts in any action brought by another party hereto and agrees that no claims
or actions relating to any matter hereunder will be brought by them in any other
courts in this State, any other state or any other country.
15. Headings. The descriptive headings of the several sections of
this agreement are inserted for convenience of reference only and shall not
control or affect the meanings or construction of any of the provisions
hereof.
12
<PAGE> 13
16. Severability and Violation of Laws. If any provisions of this
agreement shall be held invalid or unenforceable according to law, such
provision shall be modified to the extent necessary to bring it within the legal
requirements. Any such invalidity or unenforceability shall not affect the
remaining provisions of this agreement, and such remaining provisions shall
continue in full force and effect.
17. Specific Performance. The Employee hereby agrees and stipulates
that it would be impossible to measure in monetary terms the damages which would
be suffered by ROAC in the event of any breach by Employee of Sections 9, 10,
11, 12 and 13 of this agreement. Therefore, if ROAC shall institute any action
in equity to enforce such sections of this agreement, it is agreed that the
Employee waives any claim or defense that ROAC has an adequate remedy at law,
and Employee agrees ROAC is entitled to specific performance of such terms of
the agreement.
18. Notices. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service for next business
day delivery, fee prepaid, return receipt or other confirmation of delivery
requested or (iv) when telecopied or sent by facsimile transmission if an
additional notice is also given under (i), (ii) or (iii) above within three days
thereafter. Any such notice or communication shall be directed to a party at its
address set for the below or at such other address as may be designated by a
party in a notice given to all other parties hereto in accordance with the
provisions of this Section.
For the ROAC:
Mr. Kurt M. Swenson
Chairman and Chief Executive Officer
Swenson Granite Company, Inc.
369 North State Street
Concord, New Hampshire 03302
13
<PAGE> 14
with a copy to:
John R. Monson, Esquire
Wiggin & Nourie, P.A.
20 Market Street
P.O. Box 808
Manchester, New Hampshire 03105-0808
For the Employee:
Mr. Peter Friberg
15 Tamarack Lane
Barre, Vermont 05641
with a copy to:
Alan D. Port, Esq.
Paul, Frank & Collins, Inc.
P.O. Box 1307, One Church Street
Burlington, Vermont 05402-1307
19. Assignment. The rights and obligations of ROAC together with its
obligations and all of the Employee's covenants and agreements hereunder may be
assigned by ROAC to any third party by operation of law or by contractual
assignment; provided, however, that Swenson remains liable under this agreement
after such assignment as set forth in Section 24 hereof and upon such assignment
ROAC shall be relieved of all of its obligations, agreements, duties and
covenants hereunder. The rights and obligations of the Employee under this
agreement are not assignable.
20. Complete and Entire Agreement. This agreement contains all of
the terms agreed upon by the parties with respect to the subject matter hereof
and supersedes all prior agreements, representations and warranties of the
parties as to the subject matter hereof.
21. Amendments. This agreement may be amended, or any provision of
the agreement may be waived, provided that any such amendment or waiver will be
binding on the parties only if such amendment or waiver is set forth in a
writing executed by all parties hereto. The waiver by any party hereto of a
breach of any provi-
14
<PAGE> 15
sion of this agreement shall not operate or be construed as a waiver of any
other breach.
22. Officer Shareholder Agreement. In consideration of ROAC and
Swenson entering into this agreement and ROAC employing Employee hereunder,
Employee agrees to enter into an Officer Shareholder Agreement with Swenson
dated even date herewith.
23. Survival. Sections 8, 9, 10, 11, 12, 14, 16 and 17 shall survive
expiration of the term of this agreement and/or termination of Employee's
employment under this agreement.
24. Swenson as a Party. Swenson hereby agrees to joint and several
liability with ROAC for all of ROAC's agreements, covenants, duties and
undertakings under this agreement and Employee agrees that Swenson has all of
ROAC's rights under this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement,
all as of the date first written above.
WITNESS: ROCK OF AGES CORPORATION
By: /s/ Kurt M. Swenson
- -------------------------- -------------------------------------
Kurt M. Swenson, Chairman and
Chief Executive Officer
WITNESS: SWENSON GRANITE COMPANY, INC.
By: /s/Kurt M. Swenson
- -------------------------- -------------------------------------
Kurt M. Swenson, President
WITNESS: EMPLOYEE
By: /s/ Peter Friberg
- -------------------------- -------------------------------------
Peter Friberg
15
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 3rd day of January, 1996, and effective
as of January 1, 1996, by and among SWENSON GRANITE COMPANY, INC., a New
Hampshire corporation, with a principal place of business at 369 North State
Street, Concord, NH 03301 ("Swenson"), ROCK OF AGES CORPORATION, a Vermont
corporation, with a principal place of business at Main Street, Graniteville,
Barre, Vermont 05654 ("ROAC") and ALBERT GHERARDI, JR. ("Employee") residing at
Harborwatch Condominium, Apt. 14, Burlington, Vermont 05401.
FACTUAL BACKGROUND:
1. ROAC wishes to employ Employee, initially as Vice President (the
"Position") with such duties and responsibilities as ROAC may assign to
Employee; and Employee wishes to accept such employment subject to the terms and
conditions of this agreement.
2. ROAC manufactures granite memorials and other granite products,
performs services related thereto, and markets such products and services in the
United States and in various foreign countries (ROAC's "Business") and has
accumulated valuable and confidential information including trade secrets and
know-how relating to technology, manufacturing procedures, formulas, machines,
marketing plans, sources of supply, business strategies and other business
records.
3. Agreement by Employee to enter into the covenants contained herein
is a condition precedent to the employment of Employee in the Position. Employee
acknowledges that the same and his execution of this agreement are express
conditions of his employment; and that said covenants are given as material
consideration for such employment and the other benefits conferred upon him by
this agreement.
4. Swenson is a party to this agreement solely for purposes of agreeing
to and undertaking joint and several responsibility with ROAC for ROAC's
agreements, covenants, duties and undertakings hereunder and agreeing to the
provisions of Section 7 hereof.
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. Employment. ROAC agrees to employ Employee, and Employee accepts
employment in the Position, initially reporting to the President and COO of
ROAC, all upon the terms and conditions hereinafter set forth. ROAC agrees that
Employee's employment hereunder shall not require him to relocate from the
Central Vermont geographic region.
<PAGE> 2
2. Duties and Policies.
(a) Duties. The Employee agrees to devote his full time and
best efforts to his employment duties during the Term (as hereinafter defined).
ROAC reserves the right in its sole discretion to request Employee: (i) to work
in a different position during the Term with different duties and
responsibilities, and (ii) to perform no duties for it under this agreement from
time to time or at any time for such periods of time during the Term as it in
its sole discretion may determine and in the event ROAC takes such action,
Employee will thereafter not be eligible for any further increases in his Annual
Base Salary or for any bonuses until ROAC requests, if ever, Employee return to
active work.
(b) Policies. Employee agrees to abide by the policies, rules,
regulations or procedures applicable to all ROAC employees as established by
ROAC from time to time and provided to Employee in writing.
3. Term. The term of this agreement (the "Term") shall be five (5)
years, beginning with the day after the date on which the Effective Time (as
defined in the Agreement and Plan of Reorganization by and among ROAC, Swenson,
Rock of Ages Quarries, Inc. ("ROAQ"), Lawson Granite Company, Inc., Employee and
others) occurs, unless terminated earlier pursuant to the provisions of Section
6 below.
4. Compensation. For all services to be rendered by Employee in any
capacity hereunder, the Company shall pay Employee the following:
(a) Salary. The Company shall pay Employee an annual salary of
One Hundred Forty Thousand Dollars ($140,000.00) less withholding and other
taxes required by federal and state law (the "Annual Base Salary"), payable in
equal monthly installments, or as otherwise required by law. Employee shall be
eligible to receive increases in Employee's Annual Base Salary pursuant to
periodic salary reviews consistent with ROAC's corporate policies; it being
understood such increases are not guaranteed, but are subject to Employee's job
performance and the determination by ROAC's Board of Directors, in its sole
discretion, to award salary increases to Employee.
(b) Bonus. Employee may also be awarded a bonus or bonuses
from time to time during the Term at such time, if any, as ROAC's Board of
Directors may determine, in its sole discretion, to award such bonuses.
(c) Standards. ROAC agrees that the standards to be used by
its Board of Directors in awarding salary increases and bonuses to Employee will
be the same standards used by the Boards of Swenson and ROAQ (as hereinafter
defined) in awarding the same to executive officers of those corporations,
provided, however, that such salary increases and bonuses will be based on the
performance of the Swenson Corporate Group.
- 2 -
<PAGE> 3
5. Fringe Benefits. During the term of this agreement, Employee shall
be entitled to participate in such fringe benefits as, from time to time, may be
applicable to the Company's similarly situated executive employees, subject to
the terms and conditions of such fringe benefit plans and to the following
fringe benefits:
(i) Medical and major medical health insurance, paid
for by ROAC;
(ii) Life Insurance paid for by ROAC equal to one and
one-half (1 1/2) times Employee's Annual Base Salary;
(iii) Participation in ROAC's qualified 401(k) profit
sharing plan pursuant to the terms thereof;
(iv) Participation in ROAC's qualified defined
benefit Salaried Employees Pension Plan pursuant to the terms
thereof;
(v) The use of an automobile comparable to the
automobiles provided to other executive officers of ROAC and
payment by ROAC of the costs of operation and maintenance of
the automobile;
(vi) Vacation in accordance with ROAC's employee
policies, in effect from time to time with credit given for
years of service for Employee's service with Lawson Granite
Company, Inc.; and
(vii) Participation in an ROAC Salary Continuation
Agreement pursuant to the terms thereof.
Fringe benefits provided to Employee will, in addition, generally be
not less advantageous to Employee than those provided by Swenson to its
executive employees. Fringe benefits as used in this Section do not include cash
compensation, stock options or other compensation.
6. Termination.
(a) Termination because of Death or Total Disability. This
agreement will terminate automatically upon the date of Employee's death or
Total Disability. The Employee shall be deemed to have incurred a Total
Disability:
(i) if ROAC maintains a long term disability policy
in effect for the benefit of Employee, on the date when the
Employee shall have received total disability benefits under
said policy for a period of six (6) months;
- 3 -
<PAGE> 4
(ii) if no such long term disability insurance policy
is in effect, on the date when the Employee suffers from a
physical or mental disability of such magnitude and effect
that the Employee is unable to perform the essential functions
of Employee's assigned position with or without reasonable
accommodation and such disability continues during a period of
twelve (12) continuous or noncontinuous months within the
eighteen (18) month period beginning on the first day of the
month in which the first day of disability occurs;
(iii) if Employee illegally uses drugs and, as a
result, performance of his duties and/or employment with ROAC
is in any way impaired; or
(iv) on the date when Employee receives his first
payment under the Social Security Act because of determination
by the Social Security administration that Employee is totally
disabled.
Total Disability as set forth in subsections (ii), (iii) or (iv) above shall be
deemed to have occurred upon the written certification to ROAC thereof by the
Employee's personal physician, which certification may be requested in writing
by ROAC. If the Employee does not have a personal physician or refuses to
consult with his personal physician, ROAC may select a licensed Vermont
physician, board-certified in internal medicine or family practice, to examine
the Employee, which physician shall, for purposes hereof, be deemed to be the
Employee's personal physician; provided, that if the Employee refuses to be
examined by this deemed personal physician within thirty (30) days after the
physician's appointment by ROAC, then the Employee may at ROAC's election be
conclusively presumed to have become Totally Disabled as of the close of such
thirty (30) day period. If ROAC disagrees with the opinion of the Employee's
personal physician, then ROAC may select a second licensed, board-certified
Vermont physician to examine the Employee. The personal physician and this
second physician shall then select a third licensed, board-certified Vermont
physician to examine the Employee. Upon examination of the Employee by the three
(3) physicians, each physician shall render an opinion with respect to the
condition of the Employee in regards to his Total Disability, and the opinion of
a majority of the physicians shall be binding upon all parties.
(b) Termination Without Cause. ROAC shall have the right to
terminate this agreement and Employee's employment under this agreement without
cause at any time (any such termination by ROAC is herein sometimes referred to
as a "Termination Without Cause"). It shall also be deemed a Termination Without
Cause by ROAC if Employee shall voluntarily resign from employment because of a
required relocation contrary to the provisions of Section 1 of this agreement.
(c) Termination With Cause. ROAC may terminate this agreement
and the employment of the Employee at any time with cause and without further
notice upon the occurrence of any of the following events: (i) abandonment by
Employee of, or chronic,
- 4 -
<PAGE> 5
habitual or continuous failure by, Employee to perform, over a period of thirty
(30) or more days, Employee's duties as an Employee hereunder; (ii) embezzlement
or other theft of ROAC's property or the commission of other criminal activity
against ROAC or its employees, agents and customers; or (iii) conviction of a
crime which ROAC's Board of Directors reasonably determines will have a material
adverse affect on the reputation, business and/or financial affairs of ROAC or
the Swenson Corporate Group (as defined in Section 7 hereof) (any such
termination is herein sometimes referred to as a "Termination With Cause" or as
"Terminated With Cause").
(d) Termination by the Employee. Employee may resign from
employment at any time for any reason and terminate this agreement by giving
thirty (30) days' written notice to ROAC (any such termination is herein
sometimes referred to as a "Voluntary Termination") of such intention. In such
event, ROAC may, in its discretion, permit the Employee to work through the
notice period or accept the Employee's immediate resignation. In the event of a
Voluntary Termination, Employee shall not be entitled to payment of any further
compensation or benefits under the terms of this agreement, except for salary
earned, and bonuses declared, if any, prior to the date thereof.
7. Swenson Corporate Group. ROAC, ROAQ and Swenson and their direct and
indirect subsidiaries, affiliates and successors and assigns are sometimes
herein sometimes referred to as the "Swenson Corporate Group."
8. Expense Reimbursement and Salary Upon Termination. In the event that
Employee's employment is terminated for any reason or Employee resigns in lieu
of such termination, Employee shall only be entitled to be paid any expenses he
has incurred prior to the termination and for which he is entitled to
reimbursement hereunder, and such pro-rated salary as he may have earned up to
the date of termination.
9. Non-Disclosure of Confidential Information. Employee acknowledges
that during his employment, he will become fully familiar with all aspects of
the ROAC's Businesses and the Swenson Corporate Group's businesses and will
obtain access to confidential and proprietary information relating to such
businesses. Employee understands and agrees that such information is valuable
and Employee has no property interest in it. Therefore, Employee covenants and
agrees that during his employment with ROAC and thereafter Employee will not
use, disclose, communicate or divulge such information to any person not
employed by ROAC or use such information except as may be necessary to perform
his duties as an Employee under this agreement. Such obligation shall survive
the expiration of the term of this agreement and/or termination of Employee's
employment with ROAC for any reason whatsoever.
10. Non-Solicitation of Employees, Clients and Customers. During the
Term of this agreement and for the period of Employee's non-competition covenant
set forth in Section 12 hereof, following the termination this agreement,
Employee agrees not to, on his own behalf or on behalf of any other person,
corporation, firm or entity, directly or
- 5 -
<PAGE> 6
indirectly, solicit or induce any client, customer, employee or sales
representative of ROAC or the Swenson Corporate Group to stop doing business
with or to leave any of said companies for any reason whatsoever or to hire any
of their employees.
11. Return of Company Property. Upon termination or nonrenewal of this
agreement for any reason, Employee agrees to immediately return all ROAC and
Swenson Corporate Group property, whether confidential or not, without keeping
any copies or excerpts thereof, including but not limited to computers,
printers, customer lists, samples, product information, financial information,
price lists, marketing materials, keys, credit cards, automobiles, technical
data, research, blueprints, trade secrets information, and all confidential or
proprietary information.
12. Non-Competition Covenant by Employee. ROAC and the Employee agree
that ROAC is currently engaged in the business of manufacturing, marketing and
selling granite memorials and other granite products (herein referred to as the
"Restricted Business") and ROAC is engaged in the Restricted Business in all of
the states of the United States and in all of the provinces of Canada (herein
the territory of all such states and provinces is referred to as the "Restricted
Territory") and has hired the Employee to expand and grow the Restricted
Business in the Restricted Territory. Accordingly, as a material and essential
inducement to ROAC to hire the Employee and in consideration of ROAC's and
Swenson's agreements with the Employee under this agreement, Employee agrees
that during the Term of this agreement and, if this agreement is terminated for
any reason, lapses, is not renewed for any reason, or Employee is not employed
by ROAC after the end of the Term hereof for any reason, for a period equal to
two (2) years, the Employee will not, in the Restricted Territory, directly or
indirectly, in any manner whatsoever:
(a) compete with ROAC, its successor and assigns, or the
Swenson Corporate Group, its successors and assigns, in the Restricted
Business;
(b) engage in the Restricted Business, except as an employee
of ROAC or the Swenson Corporate Group;
(c) have any ownership interest in (other than the ownership
of less than five percent (5%) of the ownership interests of a company
whose stock or other ownership interests are publicly traded) any
business entity which engages in the Restricted Business in the
Restricted Territory except for any ownership interest owned by
Employee during the Term of this agreement, and after termination of
this agreement, in any member of the Swenson Corporate Group;
(d) contract, subcontract, work for, solicit work from,
solicit ROAC or Swenson Corporate Group employees for, or solicit
customers for, advise or become affiliated with, any business entity
which engages in the Restricted Business in the Restricted Territory
except as an employee of ROAC or of the Swenson Corporate Group; or
- 6 -
<PAGE> 7
(e) lend money or provide anything of value to any entity
which engages in the Restricted Business in the Restricted Territory.
The term "compete" as used in this Section 12 means engage in
competition, either as an owner, agent, member, consultant, partner, sole
proprietor, stockholder, or any other ownership or other capacity.
While the restrictions as set forth herein are considered by the
parties hereto to be reasonable in all circumstances, it is recognized that any
one or more of such restrictions might fail for unforeseen reasons. Accordingly,
it is hereby agreed and declared that if any of such restrictions shall be
adjudged to be void as unreasonable in all circumstances for the protection of
ROAC and the Swenson Corporate Group and their interests, but would be valid if
part of the wording thereof were deleted, the period thereof reduced, or the
range of activities or area dealt with reduced in scope, such restrictions shall
apply with the minimum modification as may be necessary to make them valid and
effective, while still affording to ROAC and the Swenson Corporate Group the
maximum amount of protection contemplated thereby.
Employee represents that he has carefully reviewed Employee's
restrictive non-competition covenant set forth in this Section 12 and has
determined that this covenant will not impose undue hardship, financial or
otherwise, on Employee; that its Restrictive Territory and duration will not
impose a hardship on Employee; that it protects ROAC's and the Swenson Corporate
Group's legitimate interests in their investment in Employee and their
Restricted Business; and that in Employee's opinion Employee not being able to
compete in the Restrictive Territory for the duration of this covenant will not
be injurious to the public interest.
13. Loyalty. Employee shall devote his full time and best efforts to
the performance of his employment under this agreement. During the term of this
agreement, Employee shall not at any time or place whatsoever, either directly
or indirectly, engage in the Restricted Business or any other profession or
active business to any extent whatsoever, except on or pursuant to the terms of
this agreement, or with the prior written consent of ROAC. Employee agrees that
he will not, while this agreement is in effect, do any unlawful acts or engage
in any unlawful habits or usages which injure, directly or indirectly, ROAC and
its business. ROAC agrees that if it exercises its rights in Section 2(a) hereof
to have Employee perform no duties for it, then during such period of time
during the Term as Employee is so not performing his duties, Employee may engage
in other employment which does not violate his non-competition covenant in
Section 12 and his other covenants in Sections 9, 10 and 11 of this agreement.
14. Governing Law, Jurisdiction and Venue. This agreement shall be
governed by and construed in accordance with the laws of the state of Vermont.
The parties agree that because performance of this agreement will take place
predominantly in Washington County, Vermont, the Washington County Superior
Court, Vermont, or the U.S. District Court for
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<PAGE> 8
the District of Vermont, in said State are the sole and exclusive forums for any
actions or claims by the parties of this agreement and each party hereto
consents to the jurisdiction of said courts in any action brought by another
party hereto and agrees that no claims or actions relating to any matter
hereunder will be brought by them in any other courts in this State, any other
state or any other country.
15. Headings. The descriptive headings of the several sections of this
agreement are inserted for convenience of reference only and shall not control
or affect the meanings or construction of any of the provisions hereof.
16. Severability and Violation of Laws. If any provision of this
agreement shall be held invalid or unenforceable according to law, such
provision shall be modified to the extent necessary to bring it within the legal
requirements. Any such invalidity or unenforceability shall not affect the
remaining provisions of this agreement, and such remaining provisions shall
continue in full force and effect.
17. Specific Performance. The Employee hereby agrees and stipulates
that it would be impossible to measure in monetary terms the damages which would
be suffered by ROAC in the event of any breach by Employee of Sections 8, 9, 10,
11, 12 and 13 of this agreement. Therefore, if ROAC shall institute any action
in equity to enforce such sections of this agreement, it is agreed that the
Employee waives any claim or defense that ROAC has an adequate remedy at law,
and Employee agrees ROAC is entitled to specific performance of such terms of
the agreement.
18. Notices. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service for next business
day delivery, fee prepaid, return receipt or other confirmation of delivery
requested or (iv) when telecopied or sent by facsimile transmission if an
additional notice is also given under (i), (ii) or (iii) above within three days
thereafter. Any such notice or communication shall be directed to a party at its
address set forth below or at such other address as may be designated by a party
in a notice given to all other parties hereto in accordance with the provisions
of this Section.
For the ROAC:
Mr. Kurt M. Swenson
Chairman and Chief Executive Officer
Swenson Granite Company, Inc.
369 North State Street
Concord, NH 03302
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<PAGE> 9
with a copy to:
John R. Monson, Esquire
Wiggin & Nourie, P.A.
20 Market Street, P. O. Box 808
Manchester, New Hampshire 03105-0808
For the Employee:
Mr. Albert Gherardi, Jr.
Harborwatch Condominium
Apt. 14
Burlington, Vermont 05401
with a copy to:
John R. Nicholls, Esq.
Abare, Nicholls & Parker, P.C.
59 North Main Street
Barre, VT 05641
19. Assignment. The rights and obligations of ROAC together with its
obligations and all of the Employee's covenants and agreements hereunder may be
assigned by ROAC to any third party by operation of law or by contractual
assignment; provided, however, that Swenson remains liable under this agreement
after such assignment as set forth in Section 23 hereof and upon such assignment
ROAC shall be relieved of all of its obligations, agreements, duties and
covenants hereunder. The rights and obligations of the Employee under this
agreement are not assignable.
20. Complete and Entire Agreement. This agreement contains all of the
terms agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, representations and warranties of the parties
as to the subject matter hereof.
21. Amendments. This agreement may be amended, or any provision of the
agreement may be waived, provided that any such amendment or waiver will be
binding on the parties only if such amendment or waiver is set forth in a
writing executed by all parties hereto. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any other breach.
22. Survival. Sections 8, 9, 10, 11, 12, 14, 16 and 17 shall survive
expiration of the term of this agreement and/or termination of Employee's
employment under this agreement.
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<PAGE> 10
23. Swenson as a Party. Swenson hereby agrees to joint and several
liability with ROAC for all of ROAC's agreements, covenants, duties and
undertakings under this agreement and Employee agrees that Swenson has all of
ROAC's rights under this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement, all
as of the date first written above.
WITNESS: ROCK OF AGES CORPORATION
/s/ By: /s/ Kurt M. Swenson
- ------------------------------- -------------------------------
Kurt M. Swenson, Chairman and
Chief Executive Officer
WITNESS: SWENSON GRANITE COMPANY, INC.
/s/ By: /s/ Kurt M. Swenson
- ------------------------------- -------------------------------
Kurt M. Swenson, President
WITNESS: EMPLOYEE
/s/ /s/ Albert Gherardi, Jr.
- ------------------------------- -------------------------------
Albert Gherardi, Jr.
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<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 3rd day of January, 1996, and effective
as of January 1, 1996, by and among SWENSON GRANITE COMPANY, INC., a New
Hampshire corporation, with a principal place of business at 369 North State
Street, Concord, NH 03301 ("Swenson"), ROCK OF AGES CORPORATION, a Vermont
corporation, with a principal place of business at Main Street, Graniteville,
Barre, Vermont 05654 ("ROAC") and MARK A. GHERARDI ("Employee") residing at
Grandview Farm Road, Barre, Vermont 05641.
FACTUAL BACKGROUND:
1. ROAC wishes to employ Employee, initially as Senior Vice President
of Manufacturing (the "Position") and with such other duties and
responsibilities, and such other or different positions, as ROAC may assign to
Employee; and Employee wishes to accept such employment subject to the terms and
conditions of this agreement.
2. ROAC manufactures granite memorials and other granite products,
performs services related thereto, and markets such products and services in the
United States and in various foreign countries (ROAC's "Business") and has
accumulated valuable and confidential information including trade secrets and
know-how relating to technology, manufacturing procedures, formulas, machines,
marketing plans, sources of supply, business strategies and other business
records.
3. Agreement by Employee to enter into the covenants contained herein
is a condition precedent to the employment of Employee in the Position. Employee
acknowledges that the same and his execution of this agreement are express
conditions of his employment; and that said covenants are given as material
consideration for such employment and the other benefits conferred upon him by
this agreement.
4. Swenson is a party to this agreement solely for purposes of agreeing
to and undertaking joint and several responsibility with ROAC for ROAC's
agreements, covenants, duties and undertakings hereunder and agreeing to the
provisions of Section 7 hereof.
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. Employment. ROAC agrees to employ Employee, and Employee accepts
employment in the Position, initially reporting to the President and COO of
ROAC, all upon the terms and conditions hereinafter set forth. ROAC agrees that
Employee's employment hereunder shall not require him to relocate from the
Central Vermont geographic region.
<PAGE> 2
2. Duties and Policies.
(a) Duties. The Employee agrees to devote his full time and
best efforts to his employment duties in the Position or, subject to the rights
of ROAC in the second sentence of this Section 2(a), in such other comparable
position to which Employee is assigned during the Term (as hereinafter defined),
and to such other comparable duties as may be assigned to him from time to time
by ROAC. ROAC reserves the right in its sole discretion to request Employee to
perform no duties for it under this agreement from time to time or at any time
for such periods of time during the Term as it in its sole discretion may
determine and in the event ROAC takes such action, Employee will thereafter not
be eligible for any further increases in his Annual Base Salary or for any
bonuses until ROAC requests, if ever, Employee return to active work.
(b) Policies. Employee agrees to abide by the policies, rules,
regulations or usages applicable to Employee as established by ROAC from time to
time and provided to Employee in writing.
3. Term. The term of this agreement (the "Term") shall be five (5)
years, beginning with the day after the date on which the Effective Time (as
defined in the Agreement and Plan of Reorganization by and among ROAC, Swenson,
Rock of Ages Quarries, Inc. ("ROAQ"), Lawson Granite Company, Inc., Employee and
others) occurs, unless terminated earlier pursuant to the provisions of Section
6 below.
4. Compensation. For all services to be rendered by Employee in any
capacity hereunder, the Company shall pay Employee the following:
(a) Salary. The Company shall pay Employee an annual salary of
One Hundred Forty Thousand Dollars ($140,000) less withholding and other taxes
required by federal and state law (the "Annual Base Salary"), payable in equal
monthly installments, or as otherwise required by law. Employee shall be
eligible to receive increases in Employee's Annual Base Salary pursuant to
periodic salary reviews consistent with ROAC's corporate policies; it being
understood such increases are not guaranteed, but are subject to Employee's job
performance and the determination by ROAC's Board of Directors, in its sole
discretion, to award salary increases to Employee.
(b) Bonus. Employee may also be awarded a bonus or bonuses
from time to time during the Term at such time, if any, as ROAC's Board of
Directors may determine, in its sole discretion, to award such bonuses.
(c) Standards. ROAC agrees that the standards to be used by
its Board of Directors in awarding salary increases and bonuses to Employee will
be the same standards used by the Boards of Swenson and ROAQ (as hereinafter
defined) in awarding the same to executive officers of those corporations,
provided, however, that such salary increases and bonuses will be based on the
performance of the Swenson Corporate Group.
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<PAGE> 3
5. Fringe Benefits. During the term of this agreement, Employee shall
be entitled to participate in such fringe benefits as, from time to time, may be
applicable to the Company's similarly situated executive employees, subject to
the terms and conditions of such fringe benefit plans and to the following
fringe benefits:
(i) Medical and major medical health insurance, paid
for by ROAC;
(ii) Life Insurance paid for by ROAC equal to one and
one-half (1 1/2) times Employee's Annual Base Salary;
(iii) Participation in ROAC's qualified 401(k) profit
sharing plan pursuant to the terms thereof;
(iv) Participation in ROAC's qualified defined
benefit Salaried Employees Pension Plan pursuant to the terms
thereof;
(v) The use of an automobile comparable to the
automobiles provided to other executive officers of ROAC and
payment by ROAC of the costs of operation and maintenance of
the automobile;
(vi) Vacation in accordance with ROAC's employee
policies, in effect from time to time with credit given for
years of service for Employee's service with Lawson Granite
Company, Inc.; and
(vii) Participation in an ROAC Salary Continuation
Agreement pursuant to the terms thereof.
Fringe benefits provided to Employee will, in addition, generally be
not less advantageous to Employee than those provided by Swenson to its
executive employees. Fringe benefits as used in this Section do not include cash
compensation, stock options or other compensation.
6. Termination.
(a) Termination because of Death or Total Disability. This
agreement will terminate automatically upon the date of Employee's death or
Total Disability. The Employee shall be deemed to have incurred a Total
Disability:
(i) if ROAC maintains a long term disability policy
in effect for the benefit of Employee, on the date when the
Employee shall have received total disability benefits under
said policy for a period of six (6) months;
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<PAGE> 4
(ii) if no such long term disability insurance policy
is in effect, on the date when the Employee suffers from a
physical or mental disability of such magnitude and effect
that the Employee is unable to perform the essential functions
of Employee's assigned position with or without reasonable
accommodation and such disability continues during a period of
twelve (12) continuous or noncontinuous months within the
eighteen (18) month period beginning on the first day of the
month in which the first day of disability occurs;
(iii) if Employee illegally uses drugs and, as a
result, performance of his duties and/or employment with ROAC
is in any way impaired; or
(iv) on the date when Employee receives his first
payment under the Social Security Act because of determination
by the Social Security administration that Employee is totally
disabled.
Total Disability as set forth in subsections (ii), (iii) or (iv) above shall be
deemed to have occurred upon the written certification to ROAC thereof by the
Employee's personal physician, which certification may be requested in writing
by ROAC. If the Employee does not have a personal physician or refuses to
consult with his personal physician, ROAC may select a licensed Vermont
physician, board-certified in internal medicine or family practice, to examine
the Employee, which physician shall, for purposes hereof, be deemed to be the
Employee's personal physician; provided, that if the Employee refuses to be
examined by this deemed personal physician within thirty (30) days after the
physician's appointment by ROAC, then the Employee may at ROAC's election be
conclusively presumed to have become Totally Disabled as of the close of such
thirty (30) day period. If ROAC disagrees with the opinion of the Employee's
personal physician, then ROAC may select a second licensed, board-certified
Vermont physician to examine the Employee. The personal physician and this
second physician shall then select a third licensed, board-certified Vermont
physician to examine the Employee. Upon examination of the Employee by the three
(3) physicians, each physician shall render an opinion with respect to the
condition of the Employee in regards to his Total Disability, and the opinion of
a majority of the physicians shall be binding upon all parties.
(b) Termination Without Cause. ROAC shall not have the right
to terminate this agreement and Employee's employment under this agreement
except for a Termination for Cause (as defined in Section 6(c) below) unless
ROAC pays Employee the severance payments set forth in Section 8 hereof on the
terms and conditions of said Section 8 (any such termination by ROAC is herein
sometimes referred to as a "Termination Without Cause"). It shall also be deemed
a Termination Without Cause by ROAC if Employee shall voluntarily resign from
employment because of a required relocation contrary to the provisions of
Section 1 of this agreement or a violation by ROAC of the provisions of Section
2(a) regarding assigning Employee to a position not comparable to the Position
or to duties not comparable to the Position.
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<PAGE> 5
(c) Termination With Cause. ROAC may terminate this agreement
and the employment of the Employee at any time with cause and without further
notice upon the occurrence of any of the following events: (i) abandonment by
Employee of, or chronic, habitual or continuous failure by, Employee to perform,
over a period of thirty (30) or more days, Employee's duties as an Employee
hereunder; (ii) embezzlement or other theft of ROAC's property or the commission
of other criminal activity against ROAC or its employees, agents and customers;
or (iii) conviction of a crime which ROAC's Board of Directors reasonably
determines will have a material adverse affect on the reputation, business
and/or financial affairs of ROAC or the Swenson Corporate Group (as defined in
Section 7 hereof) (any such termination is herein sometimes referred to as a
"Termination With Cause" or as "Terminated With Cause"). In the event that
Employee's employment is Terminated With Cause or Employee resigns in lieu of
such termination, Employee shall only be entitled to be paid any expenses he has
incurred prior to the termination and for which he is entitled to reimbursement
hereunder, and such pro-rated salary as he may have earned up to the date of
termination.
(d) Termination by the Employee. Employee may resign from
employment at any time for any reason and terminate this agreement by giving
thirty (30) days' written notice to ROAC (any such termination is herein
sometimes referred to as a "Voluntary Termination") of such intention. In such
event, ROAC may, in its discretion, permit the Employee to work through the
notice period or accept the Employee's immediate resignation. In the event of a
Voluntary Termination, Employee shall not be entitled to payment of any further
compensation or benefits under the terms of this agreement, except for salary
earned, and bonuses declared, if any, prior to the date thereof.
7. Board of Directors Positions. As long as Employee is an employee of
ROAC under this agreement and is not prohibited by law from serving as a member
of the Boards of Directors hereafter named, Swenson will cause Rock of Ages
Quarries, Inc. ("ROAQ") and ROAC to elect Employee to their respective Boards of
Directors. A separate agreement between Employee and others governs Employee's
election as a member of the Board of Directors of Swenson. Employee agrees that
if he incurs a Voluntary Termination hereunder he will submit his resignation
from all of the above-referenced Boards of Directors, including Swenson's,
simultaneously with his Voluntary Termination. ROAC, ROAQ and Swenson and their
direct and indirect subsidiaries, affiliates and successors and assigns are
sometimes herein sometimes referred to as the "Swenson Corporate Group."
8. Severance Payments. If Employee's employment under this agreement
and this agreement are terminated because of Employee's death or Total
Disability or by ROAC by virtue of a Termination Without Cause under Section
6(c) hereof, then in consideration thereof and as liquidated damages incurred by
Employee because of such termination and not as a penalty, Employee agrees to
accept and ROAC agrees to pay to Employee, as Employee's sole entitlement
because of the Termination Without Cause, severance payments (the "Severance
Payment") pursuant to the following schedule:
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<PAGE> 6
<TABLE>
<S> <C>
Termination Without Cause Severance Payment Equal to:
during the:
First Year of the Term: $840,000
Second Year of the Term: $700,000
Third Year of the Term $560,000
Fourth Year of the Term $420,000
Fifth Year of the Term Severance Payment Equal to the sum of:
the balance of Annual Base Salary owed
from date of termination to end of 5th year
and $280,000
</TABLE>
In addition, ROAC agrees that if at the end of the Term of this
agreement, ROAC does not offer Employee an Employment Agreement for at least an
additional two (2) years at a Base Annual Salary equal to Employee's Annual Base
Salary in the fifth (5th) year of the Term, but having other provisions deemed
necessary, appropriate and in ROAC's best interests, none of which will
necessarily be similar or the same as the other provisions of this agreement
(the "New Agreement") then ROAC will pay a $280,000 severance payment payable
monthly as hereinafter indicated to Employee; provided however, that if ROAC
offers such a New Agreement and Employee does not accept it no such additional
$280,000 will be paid to Employee and no other severance payment will be due
Employee under the New Agreement, irrespective of how it may be terminated
thereafter by either party to it or upon its nonrenewal at the end of its term.
Employee agrees that any Severance Payments payable under this Section
may be paid at the rate of $11,667 per month, commencing on the first day of the
month after the month in which the Termination Without Cause occurs or on the
first day of the month after the end of the Term of this agreement. Employee
further agrees that no Severance Payments are due to Employee under this Section
if Employee's employment is terminated because of Employee's death, Total
Disability, Termination With Cause or Voluntary Termination. Employee, in
consideration of the payment of the severance payments set forth in this Section
8, hereby waives and releases, all members of the Swenson Corporate Group from
any and all lawsuits, claims, damages, expenses, costs, (including attorneys
fees) which Employee may incur or suffer because of Employee's Termination
Without Cause.
9. Non-Disclosure of Confidential Information. Employee acknowledges
that during his employment, he will become fully familiar with all aspects of
the ROAC's Businesses and the Swenson Corporate Group's businesses and will
obtain access to confidential and proprietary information relating to such
businesses. Employee understands and agrees that such information is valuable
and Employee has no property interest in it.
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<PAGE> 7
Therefore, Employee covenants and agrees that during his employment with ROAC
and thereafter Employee will not use, disclose, communicate or divulge such
information to any person not employed by ROAC or use such information except as
may be necessary to perform his duties as an Employee under this agreement. Such
obligation shall survive the expiration of the term of this agreement and/or
termination of Employee's employment with ROAC for any reason whatsoever.
10. Non-Solicitation of Employees, Clients and Customers. During the
Term of this agreement and for the period of Employee's non-competition covenant
set forth in Section 12 hereof, following the termination this agreement,
Employee agrees not to, on his own behalf or on behalf of any other person,
corporation, firm or entity, directly or indirectly, solicit or induce any
client, customer, employee or sales representative of ROAC or the Swenson
Corporate Group to stop doing business with or to leave any of said companies
for any reason whatsoever or to hire any of their employees.
11. Return of Company Property. Upon termination or nonrenewal of this
agreement for any reason, Employee agrees to immediately return all ROAC and
Swenson Corporate Group property, whether confidential or not, without keeping
any copies or excerpts thereof, including but not limited to computers,
printers, customer lists, samples, product information, financial information,
price lists, marketing materials, keys, credit cards, automobiles, technical
data, research, blueprints, trade secrets information, and all confidential or
proprietary information.
12. Non-Competition Covenant by Employee. ROAC and the Employee agree
that ROAC is currently engaged in the business of manufacturing, marketing and
selling granite memorials and other granite products (herein referred to as the
"Restricted Business") and ROAC is engaged in the Restricted Business in all of
the states of the United States and in all of the provinces of Canada (herein
the territory of all such states and provinces is referred to as the "Restricted
Territory") and has hired the Employee to expand and grow the Restricted
Business in the Restricted Territory. Accordingly, as a material and essential
inducement to ROAC to hire the Employee and in consideration of ROAC's and
Swenson's agreements with the Employee under this agreement, including without
limitation the Severance Payments, Employee agrees that during the Term of this
agreement and, if this agreement is terminated for any reason, lapses, is not
renewed for any reason, or Employee is not employed by ROAC after the end of the
Term hereof for any reason, for a period equal to the greater of (a) two (2)
years; or (b) the periods during which ROAC is paying Severance Payments to
Employee pursuant to Section 8 hereof, the Employee will not, in the Restricted
Territory, directly or indirectly, in any manner whatsoever:
(a) compete with ROAC, its successor and assigns, or the
Swenson Corporate Group, its successors and assigns, in the Restricted
Business;
(b) engage in the Restricted Business, except as an employee
of ROAC or the Swenson Corporate Group;
- 7 -
<PAGE> 8
(c) have any ownership interest in (other than the ownership
of less than five percent (5%) of the ownership interests of a company
whose stock or other ownership interests are publicly traded) any
business entity which engages in the Restricted Business in the
Restricted Territory except for any ownership interest owned by
Employee during the Term of this agreement, and after termination of
this agreement, in any member of the Swenson Corporate Group;
(d) contract, subcontract, work for, solicit work from,
solicit ROAC or Swenson Corporate Group employees for, or solicit
customers for, advise or become affiliated with, any business entity
which engages in the Restricted Business in the Restricted Territory
except as an employee of ROAC or of the Swenson Corporate Group; or
(e) lend money or provide anything of value to any entity
which engages in the Restricted Business in the Restricted Territory.
The term "compete" as used in this Section 12 means engage in
competition, either as an owner, agent, member, consultant, partner, sole
proprietor, stockholder, or any other ownership or other capacity.
While the restrictions as set forth herein are considered by the
parties hereto to be reasonable in all circumstances, it is recognized that any
one or more of such restrictions might fail for unforeseen reasons. Accordingly,
it is hereby agreed and declared that if any of such restrictions shall be
adjudged to be void as unreasonable in all circumstances for the protection of
ROAC and the Swenson Corporate Group and their interests, but would be valid if
part of the wording thereof were deleted, the period thereof reduced, or the
range of activities or area dealt with reduced in scope, such restrictions shall
apply with the minimum modification as may be necessary to make them valid and
effective, while still affording to ROAC and the Swenson Corporate Group the
maximum amount of protection contemplated thereby.
Employee represents that he has carefully reviewed Employee's
restrictive non-competition covenant set forth in this Section 12 and has
determined that this covenant will not impose undue hardship, financial or
otherwise, on Employee; that its Restrictive Territory and duration will not
impose a hardship on Employee; that it protects ROAC's and the Swenson Corporate
Group's legitimate interests in their investment in Employee and their
Restricted Business; and that in Employee's opinion Employee not being able to
compete in the Restrictive Territory for the duration of this covenant will not
be injurious to the public interest.
Employee agrees that Employee's breach of his covenants in this Section
12 will cause irreparable harm to ROAC and the Swenson Corporate Group.
Employee, therefore, further agrees that if he so breaches, ROAC may cease to
make any Severance Payments remaining due to Employee on the date of the breach
and ROAC's obligation to make any
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<PAGE> 9
further Severance Payments to Employee will, therefore, terminate and be null,
void and of no further force and effect.
13. Loyalty. Employee shall devote his full time and best efforts to
the performance of his employment under this agreement. During the term of this
agreement, Employee shall not at any time or place whatsoever, either directly
or indirectly, engage in the Restricted Business or any other profession or
active business to any extent whatsoever, except on or pursuant to the terms of
this agreement, or with the prior written consent of ROAC. Employee agrees that
he will not, while this agreement is in effect, do any unlawful acts or engage
in any unlawful habits or usages which injure, directly or indirectly, ROAC and
its business. ROAC agrees that if it exercises its rights in Section 2(a) hereof
to have Employee perform no duties for it, then during such period of time
during the Term as Employee is so not performing his duties, Employee may engage
in other employment which does not violate his non-competition covenant in
Section 12 and his other covenants in Sections 9, 10 and 11 of this agreement.
14. Governing Law, Jurisdiction and Venue. This agreement shall be
governed by and construed in accordance with the laws of the state of Vermont.
The parties agree that because performance of this agreement will take place
predominantly in Washington County, Vermont, the Washington County Superior
Court, Vermont, or the U.S. District Court for the District of Vermont, in said
State are the sole and exclusive forums for any actions or claims by the parties
of this agreement and each party hereto consents to the jurisdiction of said
courts in any action brought by another party hereto and agrees that no claims
or actions relating to any matter hereunder will be brought by them in any other
courts in this State, any other state or any other country.
15. Headings. The descriptive headings of the several sections of this
agreement are inserted for convenience of reference only and shall not control
or affect the meanings or construction of any of the provisions hereof.
16. Severability and Violation of Laws. If any provision of this
agreement shall be held invalid or unenforceable according to law, such
provision shall be modified to the extent necessary to bring it within the legal
requirements. Any such invalidity or unenforceability shall not affect the
remaining provisions of this agreement, and such remaining provisions shall
continue in full force and effect.
17. Specific Performance. The Employee hereby agrees and stipulates
that it would be impossible to measure in monetary terms the damages which would
be suffered by ROAC in the event of any breach by Employee of Sections 8, 9, 10,
11, 12 and 13 of this agreement. Therefore, if ROAC shall institute any action
in equity to enforce such sections of this agreement, it is agreed that the
Employee waives any claim or defense that ROAC has an adequate remedy at law,
and Employee agrees ROAC is entitled to specific performance of such terms of
the agreement.
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<PAGE> 10
18. Notices. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service for next business
day delivery, fee prepaid, return receipt or other confirmation of delivery
requested or (iv) when telecopied or sent by facsimile transmission if an
additional notice is also given under (i), (ii) or (iii) above within three days
thereafter. Any such notice or communication shall be directed to a party at its
address set forth below or at such other address as may be designated by a party
in a notice given to all other parties hereto in accordance with the provisions
of this Section.
For the ROAC:
Mr. Kurt M. Swenson
Chairman and Chief Executive Officer
Swenson Granite Company, Inc.
369 North State Street
Concord, NH 03302
with a copy to:
John R. Monson, Esquire
Wiggin & Nourie, P.A.
20 Market Street
P. O. Box 808
Manchester, New Hampshire 03105-0808
For the Employee:
Mr. Mark A. Gherardi
Grandview Farm Road
Barre, Vermont 05641
with a copy to:
John R. Nicholls, Esq.
Abare, Nicholls & Parker, P.C.
59 North Main Street
Barre, VT 05641
19. Assignment. The rights and obligations of ROAC together with its
obligations and all of the Employee's covenants and agreements hereunder may be
assigned by ROAC to any third party by operation of law or by contractual
assignment; provided, however, that
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<PAGE> 11
Swenson remains liable under this agreement after such assignment as set forth
in Section 24 hereof and upon such assignment ROAC shall be relieved of all of
its obligations, agreements, duties and covenants hereunder. The rights and
obligations of the Employee under this agreement are not assignable.
20. Complete and Entire Agreement. This agreement contains all of the
terms agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, representations and warranties of the parties
as to the subject matter hereof.
21. Amendments. This agreement may be amended, or any provision of the
agreement may be waived, provided that any such amendment or waiver will be
binding on the parties only if such amendment or waiver is set forth in a
writing executed by all parties hereto. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any other breach.
22. Officer Shareholder Agreement. In consideration of ROAC and Swenson
entering into this agreement and ROAC employing Employee hereunder, Employee
agrees to enter into an Officer Shareholder Agreement with Swenson dated even
date herewith.
23. Survival. Sections 8, 9, 10, 11, 12, 14, 16 and 17 shall survive
expiration of the term of this agreement and/or termination of Employee's
employment under this agreement.
24. Swenson as a Party. Swenson hereby agrees to joint and several
liability with ROAC for all of ROAC's agreements, covenants, duties and
undertakings under this agreement and Employee agrees that Swenson has all of
ROAC's rights under this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement, all
as of the date first written above.
WITNESS: ROCK OF AGES CORPORATION
/s/ By: /s/ Kurt M. Swenson
- -------------------------- -------------------------------
Kurt M. Swenson, Chairman and
Chief Executive Officer
WITNESS: SWENSON GRANITE COMPANY, INC.
/s/ By: /s/ Kurt M. Swenson
- -------------------------- -------------------------------
Kurt M. Swenson, President
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<PAGE> 12
WITNESS: EMPLOYEE
/s/ /s/ Mark A. Gherardi
- -------------------------- -------------------------------
Mark A. Gherardi
- 12 -
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made as of the _____ day of ___________, 1997, by and among
ROCK OF AGES CORPORATION, a Vermont corporation, with a principal place of
business at 369 North State Street, Concord, NH 03301 ("Company"), and
___________________ ("Employee") residing at
_________________________________________.
FACTUAL BACKGROUND:
1. Company wishes to employ Employee, initially as ______________________,
reporting to the President of the Company, with principal responsibility for
national retail memorial sales by ROAM and with responsibility for identifying
and acquiring additional companies in the retail monument business and after
their acquisition installing sales and pricing systems in the acquired
businesses (the "Position") and with such other duties and responsibilities, and
such other or different positions, as Company may assign to Employee; and
Employee wishes to accept such employment subject to the terms and conditions of
this agreement.
2. Employee was a Principal Shareholder of Keith National Corporation
("KNC") and certain other corporations (KNC and its wholly owned subsidiary
Keith Monument Company ("KMC"), all of said other corporations and Keith
Lettering and Setting Corporation, ("KLS") being collectively referred to herein
as the "KMC Group") the Assets of which, along with the assets of KMC and KLS,
were acquired by Company pursuant to that certain Asset Purchase Agreement dated
July 30, 1997 (the "Asset Purchase Agreement") under which the members of the
KMC Group sold substantially all their Assets to Company because Company desired
to obtain the Assets and Businesses of the KMC Group and the services of
Employee for the ROAC Corporate Group (hereinafter in Section 7 defined).
3. Company and its affiliates and subsidiaries, including ROAM, quarry,
manufacture granite memorials and other granite products, perform services
related thereto, and market such products and services at wholesale and retail
in the United States and in various foreign countries (Company's "Business") and
have accumulated valuable and confidential information including trade secrets
and know-how relating to technology, manufacturing procedures, formulas,
machines, marketing plans, sources of supply, business strategies and other
business records.
<PAGE> 2
4. The agreement by Employee to enter into the covenants contained herein
is a condition precedent to the employment of Employee in the Position, Employee
acknowledges that the same and that his execution of this agreement are express
conditions of his employment; and that said covenants are given as material
consideration for such employment and the other benefits conferred upon him by
this agreement and the Asset Purchase Agreement.
5. As used herein the term Company shall refer to Company and where
applicable to any direct or indirect subsidiary or parent of Company for which
Employee may from time to time be performing services under this agreement.
6. Terms used herein and not defined herein shall have the meanings
ascribed to them in the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, receipt of which is hereby acknowledged, the parties thereto
agree as follows:
1. EMPLOYMENT. Company agrees to employ Employee, and Employee accepts
employment in the Position, initially reporting to the President of Company, all
upon the terms and conditions hereinafter set forth.
2. DUTIES AND POLICIES.
(a) DUTIES. The Employee agrees to devote his full time and best
efforts to his employment duties in the Position or, subject to the rights of
Company in the second sentence of this Section 2(a), in such other position to
which Employee is assigned during the Term (as hereinafter defined), and to such
other duties as may be assigned to him from time to time by Company. Company
reserves the right in its sole discretion to request Employee to perform no
duties for it under this agreement from time to time or at any time for such
periods of time during the Term as it in its sole discretion may determine and
in the event Company takes such action, Employee will thereafter not be eligible
for any further increases in his Annual Base Salary or for any bonuses until
Company requests, if ever, Employee return to active work.
(b) POLICIES. Employee agrees to abide by the policies, rules,
regulations or usages applicable to Employee as established by Company from time
to time and provided to Employee in writing.
3. TERM. The term of this agreement (the "Term") shall be five (5) years,
beginning with the day after the date on which the Closing Date occurs, unless
terminated earlier pursuant to the provisions of Section 6 below.
4. COMPENSATION. For all services to be rendered by Employee in any
capacity hereunder, the Company shall pay Employee the following:
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<PAGE> 3
(a) SALARY. The Company shall pay Employee an annual salary of One
Hundred Sixty-Five Thousand Dollars ($165,000.00) less withholding and other
taxes required by federal and state law (the "Annual Base Salary"), payable in
equal monthly installments, or as otherwise required by law. Employee shall be
eligible to receive increases in Employee's Annual Base Salary pursuant to
periodic salary reviews consistent with Company's corporate policies; it being
understood such increases are not guaranteed, but are subject to Employee's job
performance and the determination by Company's Board of Directors, in its sole
discretion, to award salary increases to Employee.
(b) BONUS. Employee may also be awarded a bonus or bonuses from time
to time during the Term at such time, if any, as ROAC Corporate Group's (as
hereinafter in Section 7 defined) Boards of Directors may determine, in its sole
discretion, to award such bonuses.
(c) STANDARDS. Company agrees that the standards to be used by its
Board of Directors in awarding salary increases and bonuses to Employee will be
the same standards used by the Board of Directors of Company in awarding the
same to its executive officers, provided, however, that such salary increases
and bonuses will be based on the performance of ROAM as a part of the ROAC
Corporate Group.
(d) INCENTIVE STOCK OPTIONS. Company agrees to grant Employee, under
its 1994 Stock Plan, as amended from time to time, (the "Plan") for employees,
an option to purchase a maximum of 125,000 shares of the class of common stock
of the Company prior to the IPO (as defined below) and prior to an anticipated
reverse stock split in anticipation of the IPO which will reduce the number of
shares offered under this option to approximately 62,500 shares of the class of
common stock offered to the public in the Company's initial public offering of
said class of common stock by the Company (the "IPO"). The exercise price per
share for this option will be the initial public offering price per share to the
public in the IPO, provided, however, that in the event the IPO does not take
place by December 20, 1997 and Employee is an employee of the Company under this
agreement on December 20, 1997, then the exercise price per share for this
option will be set by the Company's Board of Directors in accordance with the
Plan. The grant of this option will be pursuant to the Plan and the Incentive
Stock Option Agreement, substantially in the form attached hereto as Exhibit A;
provided that the number of shares subject to the option and the class of shares
will be adjusted in Exhibit A in accordance with the provisions thereof
depending upon when the option is granted by Company.
5. FRINGE BENEFITS. During the term of this agreement, Employee shall be
entitled to participate in such fringe benefits as, from time to time, may be
applicable to the Company's similarly situated executive employees, subject to
the terms and conditions of such fringe benefit plans and to the following
fringe benefits:
(i) Family medical and major medical health insurance, paid for
by Company;
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<PAGE> 4
(ii) Life Insurance paid for by Company equal to one and one-half
(1 1/2) times Employee's Annual Base Salary (capped at $280,000 while
working and $60,000 during retirement);
(iii) Participation in Company's qualified 401(k) profit sharing
plan pursuant to the terms thereof;
(iv) Participation in Company's qualified defined benefit
Salaried Employees Pension Plan pursuant to the terms thereof;
(v) Participation in Company's long term disability insurance
plan pursuant to the terms thereof;
(vi) The use of an automobile comparable to the automobiles
provided to other executive officers of Company and payment by Company
of the costs of operation and maintenance of the automobile; and
(vii) Vacation in accordance with Company's employee policies, in
effect from time to time with credit given for years of service for
Employee's service with Keith Monument Company.
Fringe benefits provided to Employee will, in addition, generally be not
less advantageous to Employee than those provided by Company to its executive
employees. Fringe benefits as used in this Section do not include cash
compensation, stock options or other compensation.
6. TERMINATION.
(a) TERMINATION BECAUSE OF DEATH OR TOTAL DISABILITY. This agreement
will terminate automatically upon the date of Employee's death or Total
Disability. The Employee shall be deemed to have incurred a Total Disability:
(i) if Company maintains a long term disability policy in effect
for the benefit of Employee, on the date when the Employee shall have
received total disability benefits under said policy for a period of
six (6) months;
(ii) if no such long term disability insurance policy is in
effect, on the date when the Employee suffers from a physical or
mental disability of such magnitude and effect that the Employee is
unable to perform the essential functions of Employee's assigned
position with or without reasonable accommodation and such disability
continues during a period of twelve (12) continuous or noncontinuous
months within the eighteen (18) month period beginning on the first
day of the month in which the first day of disability occurs;
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<PAGE> 5
(iii) if Employee illegally uses drugs and, as a result,
performance of his duties and/or employment with Company is in any way
impaired; or
(iv) on the date when Employee receives more than 12 weeks of
payments under the Social Security Act because of determination by the
Social Security administration that Employee is totally disabled.
Total Disability as set forth in subsections (ii) or (iii) above shall be deemed
to have occurred upon the written certification to Company thereof by the
Employee's personal physician, which certification may be requested in writing
by Company. If the Employee does not have a personal physician or refuses to
consult with his personal physician, Company may select a licensed Kentucky
physician, board-certified in internal medicine or family practice, at
Employee's cost, to examine the Employee, which physician shall, for purposes
hereof, be deemed to be the Employee's personal physician; provided, that if the
Employee refuses to be examined by this deemed personal physician within thirty
(30) days after the physician's appointment by Company, then the Employee may at
Company's election be conclusively presumed to have become Totally Disabled as
of the close of such thirty (30) day period. If Company disagrees with the
opinion of the Employee's personal physician, then Company may select a second
licensed, board-certified Kentucky physician, at Company's cost, to examine the
Employee. If said two (2) physicians disagree as to whether Employee is Totally
Disabled, then the personal physician and this second physician shall then
select a third licensed, board-certified Kentucky physician, with the cost of
this third physician to be split between Employee and Company, to examine the
Employee. Upon examination of the Employee by the three (3) physicians, each
physician shall render an opinion with respect to the condition of the Employee
in regards to his Total Disability, and the opinion of a majority of the
physicians shall be binding upon all parties.
(b) TERMINATION WITHOUT CAUSE. Company shall not have the right to
terminate this agreement and Employee's employment under this agreement except
for a Termination With Cause (as defined in Section 6(c) below).
(c) TERMINATION WITH CAUSE. Company may terminate this agreement and
the employment of the Employee at any time with cause and without further notice
upon the occurrence of any of the following events: (i) abandonment by Employee
of, or chronic, habitual or continuous failure by Employee to perform, over a
period of thirty (30) or more days, Employee's duties as an Employee hereunder
or violation of any of Employee's covenants under this agreement; (ii)
embezzlement or other theft of the property of Company, of the ROAC Corporate
Group or of the KMC Group or of any predecessor to the Company, to the ROAC
Corporate Group or to the KMC Group (collectively, the "Predecessors"), or the
commission of other criminal activity against Company, ROAC Corporate Group, the
KMC Group, or any of the Predecessors or their employees, agents and customers;
or (iii) conviction of a crime which after all appeals the Company's Board of
Directors reasonably determines will have or has had a material adverse affect
on the reputation, business and/or financial affairs of Company, the ROAC
Corporate Group or the
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<PAGE> 6
KMC Group (any such termination is herein sometimes referred to as a
"Termination With Cause" or as "Terminated With Cause"). In the event that
Employee's employment is Terminated With Cause or Employee resigns in lieu of
such termination, Employee shall only be entitled to be paid any expenses he has
incurred prior to the termination and for which he is entitled to reimbursement
hereunder, and such pro-rated salary as he may have earned up to the date of
termination.
(d) TERMINATION BY THE EMPLOYEE. Employee may resign from employment
at any time for any reason and terminate this agreement by giving thirty (30)
days' written notice to Company (any such termination is herein sometimes
referred to as a "Voluntary Termination") of such intention. In such event,
Company may, in its discretion, permit the Employee to work through the notice
period or accept the Employee's immediate resignation. In the event of a
Voluntary Termination, Employee shall not be entitled to payment of any further
compensation or benefits, under the terms of this agreement.
7. BOARD OF DIRECTORS POSITIONS AND ROAC CORPORATE GROUP. As long as
Employee is an employee of Company under this agreement and is not prohibited by
law from serving as a member of the Board of Directors of Company, and subject
to the fiduciary duties of the Board of Directors of the Company, Company will
nominate Employee for election to its Board of Directors by its shareholders.
Employee agrees that if he incurs a Voluntary Termination hereunder, is
Terminated With Cause or is requested by the Company to perform no services for
it pursuant to the second sentence of Section 2(a), he will immediately submit
his resignation from the Board of Directors of Company. Company and its direct
and indirect subsidiaries, affiliates, parent and successors and assigns are
sometimes herein sometimes referred to as the "ROAC Corporate Group."
8. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee acknowledges that
during his employment, he will become fully familiar with all aspects of the
Company's Businesses and the ROAC Corporate Group's businesses and will obtain
access to confidential and proprietary information relating to such businesses.
Employee understands, agrees and covenants that such information is valuable and
Employee has no property interest in it. Therefore, Employee covenants and
agrees that during his employment with Company and the ROAC Corporate Group and
thereafter Employee will not use, disclose, communicate or divulge such
information to any person not employed by Company and the ROAC Corporate Group
or use such information except as may be necessary to perform his duties as an
Employee under this agreement. Employee's obligations in this section shall
survive the expiration of the Term of this agreement and/or termination of
Employee's employment under this agreement for any reason whatsoever.
9. NON-SOLICITATION OF EMPLOYEES, CLIENTS AND CUSTOMERS. During the Term of
this agreement and for the period of Employee's non-competition covenant set
forth in Section 10 hereof, following the termination this agreement, Employee
agrees not to, on his own behalf or on behalf of any other person, corporation,
firm or entity, directly or indirectly, solicit or induce any client, customer,
employee or sales representative of
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<PAGE> 7
Company or the ROAC Corporate Group to stop doing business with or to leave any
of said companies for any reason whatsoever or to hire any of their employees.
10. RETURN OF PROPERTY. Upon termination or nonrenewal of this agreement
for any reason, Employee agrees to immediately return all Company and ROAC
Corporate Group property, whether confidential or not, without keeping any
copies or excerpts thereof, including, but not limited to, computers, printers,
customer lists, samples, product information, financial information, price
lists, marketing materials, keys, credit cards, automobiles, technical data,
research, blueprints, trade secrets information, and all confidential or
proprietary information.
11. NON-COMPETITION COVENANT BY EMPLOYEE. Company and the Employee agree
that Company is currently engaged in the business of quarrying, manufacturing,
marketing and selling granite memorials and other granite products at wholesale
and at retail (herein referred to as the "Restricted Business") and Company and
the ROAC Corporate Group are engaged in the Restricted Business in all of the
states of the United States and in all of the provinces of Canada (herein the
territory of all such states and provinces is referred to as the "Restricted
Territory") and has hired the Employee to expand and grow the Restricted
Business in the Restricted Territory. Accordingly, as a material and essential
inducement to Company to hire the Employee and in consideration of Company's
agreements with the Employee under this agreement, Employee agrees that during
the Term of this agreement and, if this agreement is terminated for any reason,
lapses, is not renewed for any reason, or Employee is not employed by Company
after the end of the Term hereof for any reason, for a period equal to two (2)
years thereafter, unless this agreement in terminated within the first two (2)
years of the Term hereof, in which case for the period of four (4) years
thereafter, Employee will not, in the Restricted Territory, directly or
indirectly, in any manner whatsoever:
(a) compete with Company, its successor and assigns, or the ROAC
Corporate Group, its successors and assigns, in the Restricted Business;
(b) engage in the Restricted Business, except as an employee of
Company or the ROAC Corporate Group;
(c) have any ownership interest in (other than the ownership of less
than five percent (5%) of the ownership interests of a company whose stock
or other ownership interests are publicly traded) any business entity which
engages, directly or indirectly, in the Restricted Business in the
Restricted Territory except for any ownership interest owned by Employee
during the Term of this agreement, and after termination of this agreement,
in the Company or in any member of the ROAC Corporate Group;
(d) contract, subcontract, work for, solicit work from, solicit
Company or ROAC Corporate Group employees for, or solicit customers for,
advise or become
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<PAGE> 8
affiliated with, any business entity which engages in the Restricted
Business in the Restricted Territory except as an employee of Company or of
the ROAC Corporate Group; or
(e) lend money or provide anything of value to any entity which
engages in the Restricted Business in the Restricted Territory.
The term "compete" as used in this Section 11 means engage in competition,
directly or indirectly, either as an owner, agent, member, consultant, partner,
sole proprietor, stockholder, or any other ownership form or other capacity.
While the restrictions as set forth herein are considered by the parties
hereto to be reasonable in all circumstances, it is recognized that any one or
more of such restrictions might fail for unforeseen reasons. Accordingly, it is
hereby agreed and declared that if any of such restrictions shall be adjudged to
be void as unreasonable in all circumstances for the protection of Company and
the ROAC Corporate Group and their interests, but would be valid if part of the
wording thereof were deleted, the period thereof reduced, or the range of
activities or area dealt with reduced in scope, such restrictions shall apply
with the minimum modification as may be necessary to make them valid and
effective, while still affording to Company and the ROAC Corporate Group the
maximum amount of protection contemplated thereby.
Employee represents that he has carefully reviewed Employee's restrictive
non-competition covenant set forth in this Section 11 and has determined that
this covenant will not impose undue hardship, financial or otherwise, on
Employee; that its Restrictive Territory and duration will not impose a hardship
on Employee; that it protects Company's and the ROAC Corporate Group's
legitimate interests in their investment in Employee and their Restricted
Business; and that in Employee's opinion Employee not being able to compete in
the Restrictive Territory for the duration of this covenant will not be
injurious to the public interest.
Company has also requested and Employee has covenanted and agreed to give
his restrictive non-competition covenant set forth in this Section 11 ancillary
to the sale of the Assets of each member of the KMC Group to the Company for the
Purchase Price set forth in the Asset Purchase Agreement.
Employee agrees that Employee's breach of his covenants in this Section 11
will cause irreparable harm to Company and the ROAC Corporate Group.
12. LOYALTY. Employee shall devote his full time and best efforts to the
performance of his employment under this agreement. During the term of this
agreement, Employee shall not at any time or place whatsoever, either directly
or indirectly, engage in the Restricted Business or any other profession or
active business to any extent whatsoever, except on or pursuant to the terms of
this agreement, or with the prior written consent of
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<PAGE> 9
Company. Employee agrees that he will not, while this agreement is in effect, do
any unlawful acts or engage in any unlawful habits or usages which injure,
directly or indirectly, Company and its Business or the ROAC Corporate Group and
its businesses. Company agrees that if it exercises its rights in Section 2(a)
hereof to have Employee perform no duties for it, then during such period of
time during the Term as Employee is so not performing his duties, Employee may
engage in other employment which does not violate the non-competition covenant
in Section 11 and his other covenants in Sections 8, 9, 10 and 12 of this
agreement.
13. GOVERNING LAW, JURISDICTION AND VENUE. This agreement shall be governed
by and construed in accordance with the laws of the State of New Hampshire; and
any actions brought pertaining to the same shall lie only in the Hardin County
Circuit Court, Kentucky, or the U.S. District Court for the Western District of
Kentucky, in said States all of which are the sole and exclusive forums for any
actions or claims by the parties to this agreement and each party hereto
consents to the jurisdiction of, and venue in, said courts in any action brought
by another party hereto and agrees that no claims or actions relating to any
matter hereunder will be brought by them in any other courts of said States, any
other state or any other country.
14. HEADINGS. The descriptive headings of the several sections of this
agreement are inserted for convenience of reference only and shall not control
or affect the meanings or construction of any of the provisions hereof.
15. SEVERABILITY AND VIOLATION OF LAWS. If any provision of this agreement
shall be held invalid or unenforceable according to law, such provision shall be
modified to the extent necessary to bring it within the legal requirements. Any
such invalidity or unenforceability shall not affect the remaining provisions of
this agreement, and such remaining provisions shall continue in full force and
effect.
16. SPECIFIC PERFORMANCE. The Employee hereby agrees and stipulates that it
would be impossible to measure in monetary terms the damages which would be
suffered by Company in the event of any breach by Employee of Sections 8, 9, 10,
11, 12, 13 and 16 of this agreement. Therefore, if either party hereto shall
institute any action in equity to enforce such sections of this agreement, it is
agreed that the other party hereto waives any claim or defense that the
plaintiff has an adequate remedy at law, and the other party hereto agrees that
the plaintiff is entitled to specific performance of such terms of the
agreement.
17. NOTICES. Any notice or other communication required or permitted under
this agreement shall be in writing and shall be deemed to have been duly given
(i) upon hand delivery, or (ii) on the third day following delivery to the U.S.
Postal Service as certified or registered mail, return receipt requested and
postage prepaid, or (iii) on the first day following delivery to a nationally
recognized United States overnight courier service for next business day
delivery, fee prepaid, return receipt or other confirmation of delivery
requested or (iv) when telecopied or sent by facsimile transmission if an
additional notice is also given
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<PAGE> 10
under (i), (ii) or (iii) above within three days thereafter. Any such notice or
communication shall be directed to a party at its address set forth below or at
such other address as may be designated by a party in a notice given to all
other parties hereto in accordance with the provisions of this Section.
For The Company:
----------------
Mr. Kurt M. Swenson
Chairman of the Board, President and Chief Executive Officer
Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Telephone: (603) 225-8397
Telecopy: (603) 225-4801
with a copy to:
John R. Monson, Esquire
Wiggin & Nourie, P.A.
20 Market Street
P. O. Box 808
Manchester, NH 03105-0808
Telephone: (603) 669-2211
Telecopy: (603) 623-8442
For The Employee:
-----------------
with a copy to:
James T. Whitlow, Esq.
Whitlow & Scott
45 Lincoln Square
Hodgenville, KY 42748
Telephone: (502) 358-4344
Telecopy: (502) 358-4536
18. ASSIGNMENT. The rights and obligations of Company together with its
obligations and all of the Employee's covenants and agreements hereunder may be
assigned by Company to any third party by operation of law or by contractual
assignment; and upon
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<PAGE> 11
such assignment Company shall be relieved of all of its obligations, agreements,
duties and covenants hereunder. The rights and obligations of the Employee under
this agreement are not assignable.
19. COMPLETE AND ENTIRE AGREEMENT. This agreement contains all of the terms
agreed upon by the parties with respect to the subject matter hereof and
supersedes all prior agreements, representations and warranties of the parties
as to the subject matter hereof.
20. AMENDMENTS. This agreement may be amended, or any provision of the
agreement may be waived, provided that any such amendment or waiver will be
binding on the parties only if such amendment or waiver is set forth in a
writing executed by all parties hereto. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any other breach.
21. SURVIVAL. Sections 8, 9, 10, 11, 12, 13, 15, 16, 17 and 21 shall
survive expiration of the Term of this agreement and/or termination of
Employee's employment under this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement, all as
of the date first written above.
WITNESS: ROCK OF AGES CORPORATION:
- -------- -------------------------
By: /S/ Kurt M. Swenson
- ----------------------------------- ---------------------------------
Kurt M. Swenson,
Chairman of the Board, President
and Chief Executive Officer
WITNESS:
- --------
- ----------------------------------- -------------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.9
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
KEYSTONE GRANITE COMPANY, INC.
SUPPLY AND DISTRIBUTION AGREEMENT
This Supply and Distribution Agreement made as of June 27, 1997 to be
effective as of the 30th day of June, 1997, by and among KEYSTONE GRANITE
COMPANY, INC., a Georgia corporation, with with an address of P. O. Box 516,
Elberton, Georgia 30635 (hereinafter referred to as "Keystone"), THE ESTATE OF
GEORGE T. OGLESBY, SR., deceased, with an address of P. O. Box 516, Elberton,
Georgia 30635 (hereinafter referred to as "Oglesby"), ROCK OF AGES CORPORATION,
a Vermont corporation, with a principal office located at 269 North Main Street,
Concord, New Hampshire 03301 (hereinafter referred to as "Rock of Ages") and
MISSOURI RED QUARRIES, INC., a Georgia corporation, with an address of P. O. Box
6077, Elberton, Georgia 30635 (hereinafter referred to as "Missouri Red").
RECITALS:
Missouri Red is Keystone's exclusive sales agent for Topaz. Keystone,
Missouri Red and Rock of Ages believe it is in their best long term interests
for Keystone and Missouri Red to supply Rock of Ages with Keystone granite
blocks and any other blocks quarried at the Keystone quarries and Topaz granite
blocks (collectively "Topaz") quarried by Keystone as required to meet Rock of
Ages, long-term requirements at prices agreed in advance, all upon the terms and
conditions as hereinafter set forth. In addition, Keystone and Missouri Red wish
to provide to Rock of Ages certain exclusive rights to sell Topaz outside of
North America and the parties hereto wish to evidence other agreements among
them, all upon and in the terms and conditions as hereinafter set forth.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are herein acknowledged, the parties hereto agree as
follows:
1. SUPPLY OF TOPAZ REQUIREMENTS. Keystone through Missouri Red and
Missouri Red agree to supply Rock of Ages and its subsidiaries, affiliates and
designees (hereinafter in this agreement, the term "Rock of Ages" shall be
deemed to include Rock of Ages and its subsidiaries, affiliates and designees)
with its requirements for Topaz for a term (herein the "Term") equal to the
greater of: (a) 20 years; or (b) the period of time while Keystone is
<PAGE> 2
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
owned to any extent by Oglesby, George T. Olgesby, Jr. and George T. Oglesby,
III (said Oglesby and all of said individuals being herein sometimes referred to
as the "Oglesby Family"). Rock of Ages agrees to purchase a minimum of *** cubic
feet of Topaz during each year of the Term and if in any *** (***) *** period
Rock of Ages does not purchase an aggregate of *** cubic feet of Topaz, Keystone
and Missouri Red can thereafter sell to other customers subject to Rock of Ages'
priority to purchase Topaz set forth in Section 3 of this agreement.
2. PRICE FOR TOPAZ. The price to be charged by Missouri Red or Keystone
for Topaz supplied to Rock of Ages pursuant to Section 1 of this agreement shall
be initially fixed at *** ($***) per cubic foot, FOB quarry ("Initial Price").
The Initial Price will be in force for *** (***) *** from the date of this
agreement. Keystone, Missouri Red and Rock of Ages will negotiate an adjustment
to the Initial Price at the end of each successive *** (***) *** period during
the Term. The Initial Price and subsequent prices for Topaz will be increased
based on the increased production costs of Keystone for Topaz; provided,
however, that the price for each *** (***) *** period after the first *** (***)
*** period during the Term cannot increase by more than *** percent (***%) over
the price for the preceding *** (***) *** period. Missouri Red will invoice Rock
of Ages on the first day of each calendar month during the Term for all Topaz
shipped during the previous month, which invoice shall be payable within thirty
(30) days during the first year of the Term and thereafter within sixty (60)
days from invoice date on a net basis.
3. ROCK OF AGES EXCLUSIVE RIGHT TO PURCHASE MONUMENTAL GRADE TOPAZ.
Keystone and Missouri Red agree that Rock of Ages will have the exclusive right
to purchase all monumental grade Topaz quarried by Keystone during the Term and
Rock of Ages agrees to purchase all monumental grade Topaz produced by Keystone
during the Term.
4. USE OF NAME. Keystone agrees after its execution of this agreement
that it will not market its granite products in a fashion which will cause
confusion between the name "Keystone" used by Rock of Ages for its granite
products and Keystone's granite products.
5. ADVICE RE: NONMONUMENTAL SALES OF TOPAZ. Keystone and/or Missouri
Red agrees to advise Rock of Ages within ten (10) days after the end of each
calendar quarter of all sales of nonmonumental Topaz to third parties.
Information to be included in the written advice of said sale will include the
quantity of nonmonumental Topaz sold, the price charged, the shipping terms, and
the name of the purchaser.
- 2 -
<PAGE> 3
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
6. SIZE ALLOWANCE FOR TOPAZ BLOCKS. Keystone agrees that all monumental
and nonmonumental Topaz blocks sold to Rock of Ages will have size allowances of
a minimum of ****** on each dimension.
7. EXCLUSIVE SALE RIGHTS OUTSIDE NORTH AMERICA. Keystone and Missouri
Red hereby appoint Rock of Ages as the exclusive distributor to buy and to sell
all grades of Topaz in the territory comprised of all of the world. The price to
be charged to Rock of Ages for Topaz to be sold and distributed by Rock of Ages
pursuant to this exclusive distributorship shall be the prices set forth in
Exhibit 7 to this agreement for the first *** (***) *** of the Term (the
"Initial Outside Sale Price"). Keystone, Missouri Red and Rock of Ages will
negotiate an adjustment to the Initial Outside Sale Price at the end of each
succeeding *** (***) *** period during the Term. The Initial Outside Sale Price
and subsequent prices will be increased based on the increased production costs
for Topaz; provided that the price for each *** (***) *** period after the first
*** (***) *** period during the Term cannot increase by more than *** percent
(***%) over the price for the preceding *** (***) year period. Missouri Red will
invoice Rock of Ages on the first day of each calendar month for Topaz of any
grade shipped to destinations outside of North America during the previous month
which invoice shall be payable within thirty (30) days during the first year of
the Term and thereafter within sixty (60) days from invoice date on a net basis.
8. RIGHT OF FIRST REFUSAL. In consideration of Rock of Ages acceptance
of its appointment as Keystone's exclusive sales distributor of Topaz and of the
merger of Keystone Memorials, Inc., a Georgia corporation, into Rock of Ages
pursuant to an Agreement and Plan of Reorganization dated on or about the date
hereof to which Missouri Red is a party and the importance of the MRG to Rock of
Ages, Keystone hereby grants Rock of Ages a right of first refusal on any sale
or other disposition by it of any of its quarries, land, buildings, or equipment
and Oglesby and the Oglesby Family, the only permitted future owners of said
capital stock, the current owner of all of the outstanding capital stock of
Keystone, hereby grants to Rock of Ages, on its own behalf and on behalf of the
Oglesby Family, a right of first refusal on any sale or other disposition,
including any disposition by gift, bequest or interstate distribution, by them,
of all or by any portion of the capital stock of Keystone; provided, however,
that this right of first refusal shall not apply to the sale or other
disposition of any of said capital stock by Oglesby to either member of the
Oglesby Family or by George T. Oglesby Jr. to George T. Oglesby, III. In the
event of any proposed bona fide sale or other disposition by Keystone or by
Oglesby or any member of the Oglesby Family of the assets or stock of Keystone
which is subject to this Section 8, they agree to give Rock of Ages written
notice of the same (hereinafter referred to as the "Rights Notice") and of the
terms and conditions of the proposed sale or other disposition. Rock of Ages
will have ninety (90) days after receipt of a Rights Notice to indicate in
writing to the sender of the Rights Notice (the "Sender") its exercise of its
right of first
- 3 -
<PAGE> 4
refusal with respect to the transaction described in the Rights Notice (the
"Acceptance Notice"). Within thirty (30) days of receipt of the Acceptance
Notice, the Sender will schedule a closing and notify Rock of Ages in writing
thereof. Subject to the next following sentence, at the closing the stock or
asset being sold or otherwise disposed of by the Sender will be purchased by
Rock of Ages on the terms set forth in the Rights Notice and the Sender will
sell to Rock of Ages the stock or asset being sold or otherwise disposed of free
and clear of any rights, charges, encumbrances or liens so that Rock of Ages
will receive good and marketable title thereto at the closing. In the event that
the disposition is a gift, bequest or interstate distribution of capital stock
of Keystone, then Rock of Ages will pay the Sender the book value of the capital
stock being acquired as of the fiscal year end preceding the date of the
closing. Keystone agrees to execute an instrument in writing satisfactory to
Rock of Ages to record the existence of Rock of Ages' right of first refusal set
forth herein in each Registry of Deeds or other appropriate recording office for
each country and city in which Keystone owns real estate. Oglesby and the
Oglesby Family members also agrees that a legend satisfactory to Rock of Ages
shall be applied to all Keystone capital stock certificates evidencing the right
of first refusal granted to Rock of Ages by Oglesby and the Oglesby Family so
that all permitted future holders thereof will take and hold their shares of
capital stock in Keystone subject to the right of first refusal set forth
herein.
9. COMPENSATION LIMITATIONS. In consideration of Rock of Ages'
agreements and obligations in this agreement, Keystone agrees that it will not
pay, directly or indirectly, G. Thomas Oglesby or George T. Oglesby, III, any
salary, bonus, expense reimbursement, or other compensation payment for services
rendered of any kind for any purpose without the prior written consent of Rock
of Ages.
10. ASSIGNMENT, SUCCESSORS AND ASSIGNS. This agreement is binding upon
and shall inure to the benefit of the parties hereto and their successors,
permitted assigns, heirs and personal representatives; provided, however, that
Keystone, Oglesby and the Oglesby Family, may not assign any of their rights,
duties and obligations under this agreement without the prior written consent of
Rock of Ages, but Rock of Ages may assign this agreement without limitation;
provided, however that Rock of Ages will remain liable hereunder after any
assignment by it of this agreement to a third party if Rock of Ages survives
said assignment.
11. NOTICES. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service, fee prepaid,
return receipt or other confirmation of delivery requested or (iv) when
telecopied or sent by facsimile transmission if an additional notice is also
given under (i), (ii) or (iii) above within three days thereafter. Any such
notice or communication shall be directed to a party at its address set forth
below or at such other address as may be designated by a party in a notice given
to all other parties hereto in accordance with the provisions of this Section.
- 4 -
<PAGE> 5
If to Keystone: Keystone Granite Company, Inc.
P. O. Box 516
Elberton, GA 30635
Phone:
If to Oglesby:
The Estate of George T. Oglesby, Sr.,
deceased
c/o George T. Oglesby, Jr., Executor
P. O. Box 516
Elberton, GA 30635
Phone:
with, in the case of notice R. Chris Phelps, Esq.
to Keystone and Phelps & Campbell
Oglesby, a copy to P. O. Drawer 1056
(which shall not Elberton, GA 30635
constitute notice): Phone: 706-283-5000
Fax: 706-283-5002
If to Rock of Ages: Kurt M. Swenson, Chairman and
Chief Executive Officer
Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Phone: 603-225-8397
Fax: 603-225-4801
with a copy to: John R. Monson, Esq.
(which shall not Wiggin & Nourie, P.A.
constitute notice) P.O. Box 808
Manchester, NH 03105
Phone: 603-669-2211
Fax: 603-623-8442
12. SECTION HEADINGS. Section headings are employed in this agreement
for reference purposes only and shall not affect the interpretation or meaning
of this agreement.
13. COMPLETE AGREEMENT. Neither this agreement nor any provision hereof
may be changed, waived, modified, discharged, amended or terminated orally but
only by an instrument in writing signed by all parties hereto. The waiver by any
party hereto of a breach of any provision of this agreement shall not operate or
be construed as a waiver of any other or any subsequent breach. The failure of
any party at any time or times to require performance of any provision hereof
shall in no manner affect its right at a later time to enforce the same. This
agreement, together with the Exhibits attached hereto or incorporated herein
pursuant to Section
- 5 -
<PAGE> 6
16 hereof, constitutes the only agreement among the parties hereto concerning
the subject matter hereof and supersedes all prior agreements, whether written
or oral, relating thereto.
14. GOVERNING LAW, JURISDICTION AND VENUE. This agreement shall be
governed by and construed in accordance with the laws of the State of New
Hampshire; and any actions brought pertaining to the same shall lie only in the
Merrimack County, New Hampshire Superior Court, in the United States District
Court for the District of New Hampshire, the Elbert County Superior Court,
Georgia, or the U.S. District Court for the Middle District of Georgia, all of
which courts are the sole and exclusive forums for any actions or claims by the
parties to this agreement; and each party hereto consents to the jurisdiction
of, and venue in, said courts in any action brought by another party hereto and
agrees that no claims or actions relating to any matter hereunder will be
brought by them in any other courts of said States, any other state or any other
country.
15. COUNTERPARTS. This agreement may be executed in counterparts and by
different parties on different counterparts with the same effect as if the
signatures were on the same instrument. This agreement shall be effective and
binding upon all parties hereto as of the time when all parties have executed a
counterpart of this agreement.
16. EXHIBITS. Each Exhibit or Schedule delivered pursuant to the terms
of this agreement shall be in writing and shall constitute a part of this
agreement. The parties may agree with respect to any Schedule or Exhibit
required to be attached to this agreement, that such Schedule or Exhibit, if
mutually satisfactory, may be attached to this agreement after the date of
execution hereof and after mutual approval thereof, such subsequently attached
Schedule or Exhibit shall be treated as if it were attached to this agreement as
of the date of execution of this agreement. All Exhibits and Schedules attached
hereto are specifically incorporated herein by reference and made a part hereof.
The words "agreement," "herein" and "hereof" as used herein shall in all
respects include the entirety of this agreement together with all Exhibits and
Schedules attached hereto and all documents required or permitted to be
delivered hereunder.
17. SPECIFIC PERFORMANCE. The parties hereto hereby agree and stipulate
it would be impossible to measure in monetary terms the damages which will be
suffered by any party hereto in the event of any breach by any of them of any
provision of this agreement. Therefore, if any party hereto should institute any
action in equity to enforce the provisions of this agreement, it is hereby
agreed by the other parties hereto, that they waive any claim or defense that
the party bringing the action has an adequate remedy at law and agree that the
party bringing the action is entitled to specific performance of the terms of
this agreement.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this agreement all
as of the date first above written.
WITNESS ROCK OF AGES CORPORATION
/s/ By: /s/ Kurt M. Swenson
- ------------------------------- --------------------------------
Kurt M. Swenson,
Chairman of the Board and
Chief Executive Officer
KEYSTONE GRANITE COMPANY, INC.
/s/ By: /S/ Josephine F. Oglesby
- ------------------------------- --------------------------------
Josephine F. Oglesby, President
/s/ /s/ George T. Oglesby, Jr.
- ------------------------------- ------------------------------------
George T. Oglesby, Jr.
/s/ /s/ George T. Oglesby, III
- ------------------------------- ------------------------------------
George T. Oglesby, III
THE ESTATE OF GEORGE T. OGLESBY,
SR., deceased
/s/ By: /s/ George T. Oglesby, Jr.
- ------------------------------- --------------------------------
George T. Oglesby, Jr., Executor
- 7 -
<PAGE> 8
EXHIBIT 7
TO
SUPPLY AND DISTRIBUTION AGREEMENT
The Initial Outside Sale Price will be negotiated on a case by case basis
by Keystone, Missouri Red and Rock of Ages for all grades of Topaz to be sold
and distributed pursuant to Rock of Ages' exclusive sale rights set forth in
Section 7 and once negotiated will then be adjusted as set forth in Section 7.
<PAGE> 1
EXHIBIT 10.10
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
MISSOURI RED QUARRIES, INC.
SUPPLY AND DISTRIBUTION AGREEMENT
This Supply and Distribution Agreement made as of June 27, 1997 to be
effective on the 30th day of June, 1997, by and among MISSOURI RED QUARRIES,
INC., a Georgia corporation, with its principal office located at 1595
Washington Highway, Elberton, Georgia 30635 (hereinafter referred to as
"Missouri Red"), GEORGE T. OGLESBY, JR. with an address of P. O. Box 6077,
Elberton, Georgia 30635 (hereinafter referred to as "Oglesby") and ROCK OF AGES
CORPORATION, a Vermont corporation, with a principal office located at 269 North
Main Street, Concord, New Hampshire 03301 (hereinafter referred to as "Rock of
Ages").
RECITALS:
Missouri Red and Rock of Ages believe it is in their best long term
interests for Missouri Red to supply Rock of Ages with Missouri Red Granite
Blocks ("MRG") quarried by Missouri Red as required to meet Rock of Ages,
long-term requirements at prices agreed in advance, all upon the terms and
conditions as hereinafter set forth. In addition, Missouri Red wishes to provide
to Rock of Ages certain exclusive rights to sell MRG outside of North America
and the parties hereto wish to evidence other agreements among them, all upon
and in the terms and conditions as hereinafter set forth.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are herein acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SUPPLY OF MRG REQUIREMENTS. Missouri Red agrees to
supply Rock of Ages and its subsidiaries, affiliates and designees (hereinafter
in this agreement, the term "Rock of Ages" shall be deemed to include Rock of
Ages and its subsidiaries, affiliates and designees) with its requirements for
MRG for a term (herein the "Term") equal to the greater of: (a) 20 years; or
(b) the period of time while Missouri Red is owned to any extent by Oglesby, his
spouse, his ancestors, his siblings and his descendants and any of their spouses
(all of said individuals being herein sometimes referred to as the "Oglesby
Family"). Rock of Ages agrees to purchase a minimum of *** cubic feet of MRG
during each year of the Term and if in any *** (***) *** period Rock of Ages
does not purchase an aggregate of *** cubic feet of MRG, Missouri Red can
thereafter sell to other customers, subject to Rock of Ages' priority to
purchase MRG set forth in Section 3 of this agreement.
- 1 -
<PAGE> 2
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
2. PRICE FOR MRG. The price to be charged by Missouri Red for MRG
supplied to Rock of Ages pursuant to Section 1 of this agreement shall be
initially fixed at *** ($***) per cubic foot, FOB quarry ("Initial Price"). The
Initial Price will be in force for *** (***) *** from the date of this
agreement. Missouri Red and Rock of Ages will negotiate an adjustment to the
Initial Price at the end of each successive *** (***) *** period during the
Term. The Initial Price and subsequent prices for MRG will be increased based on
the increased production costs of Missouri Red for MRG; provided, however, that
the price for each *** (***) *** period after the first *** (***) *** period
during the Term cannot increase by more than *** percent (***%) over the price
for the preceding *** (***) *** period. Missouri Red will invoice Rock of Ages
on the first day of each calendar month during the Term for all MRG shipped
during the previous month, which invoice shall be payable within thirty (30)
days during the first year of the Term and thereafter within sixty (60) days
from invoice date on a net basis.
3. ROCK OF AGES PRIORITY FOR MONUMENTAL GRADE MRG. Missouri Red agrees
that Rock of Ages will have first priority to purchase all monumental grade MRG
quarried by Missouri Red during the Term and only after Rock of Ages has
declined in writing to purchase any such monumental grade MRG will Missouri Red,
subject to Section 4 below, have the right to sell the same to third parties.
4. SALE OF MONUMENTAL GRADE MRG TO THIRD PARTIES. Missouri Red agrees
that all monumental grade MRG sold to third parties will be sold to them through
Rock of Ages, and Rock of Ages may make an invoicing and administration charge
of at least *** ($***) per cubic foot for its services on each such block of MRG
so sold by it. Rock of Ages agrees to honor Missouri Red's commitment to
Anderson Quarries in Ada, Oklahoma.
5. ADVICE RE: NONMONUMENTAL SALES OF MRG. Missouri Red agrees to advise
Rock of Ages within ten (10) days after the end of each calendar quarter of all
sales of nonmonumental MRG to third parties. Information to be included in the
written advice of said sale will include the quantity of nonmonumental MRG sold,
the price charged, the shipping terms, and the name of the purchaser.
6. SIZE ALLOWANCE FOR MRG BLOCKS. Missouri Red agrees that all
monumental and nonmonumental blocks sold by it to Rock of Ages or sold by Rock
of Ages pursuant to the provisions of Section 4 of this agreement to third
parties will have size allowances of a minimum ******* on each dimension.
7. EXCLUSIVE SALE RIGHTS. Missouri Red hereby appoints Rock of Ages as
its exclusive distributor for monumental granites of MRG to buy and to sell all
grades of MRG in the territory comprised of all of the world. Any non-monumental
grade MRG sales to Eurimex
- 2 -
<PAGE> 3
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
or to Japan will go through Rock of Ages in the same fashion as is set forth in
Section 4. The price to be charged by Missouri Red to Rock of Ages for MRG to be
sold and distributed by Rock of Ages pursuant to this exclusive distributorship
shall be the prices set forth in Exhibit 7 to this agreement for the first ***
(***) *** of the Term (the "Initial Outside Sale Price"). Missouri Red and Rock
of Ages will negotiate an adjustment to the Initial Outside Sale Price at the
end of each succeeding *** (***) *** period during the Term. The Initial Outside
Sale Price and subsequent prices will be increased based on the increased
production costs of Missouri Red for MRG; provided that the price for each ***
(***) *** period after the first *** (***) *** period during the Term cannot
increase by more than *** percent (***%) over the price for the preceding ***
(***) *** period. Missouri Red will invoice Rock of Ages on the first day of
each calendar month for MRG of any grade shipped to destinations outside of
North America during the previous month which invoice shall be payable within
thirty (30) days during the first year of the Term and thereafter within sixty
(60) days from invoice date on a net basis; provided, however that the price to
be charged to Eurimex and to customers in Japan for non- monumental MRG will be
negotiated between Missouri Red and Rock of Ages on a case by case basis.
8. RIGHT OF FIRST REFUSAL. In consideration of Rock of Ages acceptance
of its appointment as Missouri Red's exclusive sales distributor of MRG and of
the merger of Keystone Memorials, Inc., a Georgia corporation, into Rock of Ages
pursuant to an Agreement and Plan of Reorganization dated on or about the date
hereof to which Missouri Red is a party and the importance of the MRG to Rock of
Ages, Missouri Red hereby grants Rock of Ages a right of first refusal on any
sale or other disposition by it of any of its quarries, land, buildings, or
equipment and Oglesby, the current owner of all of the outstanding capital stock
of Missouri Red, hereby grants to Rock of Ages, on his own behalf and on behalf
of the Oglesby Family, a right of first refusal on any sale or other
disposition, other than a gift or transfer to a member of the Oglesby Family or
to a trust for the benefit of a member of the Oglesby Family by him or any
successor to him in ownership of said capital stock in the Oglesby Family, of
all or any portion of the capital stock of Missouri Red. In the event of any
proposed bona fide sale or other disposition by Missouri Red or any member of
the Oglesby Family of the assets or stock of Missouri Red which is subject to
this Section 8, they agree to give Rock of Ages written notice of the same
(hereinafter referred to as the "Rights Notice") and of the terms and conditions
of the proposed sale or other disposition. Rock of Ages will have ninety (90)
days after receipt of a Rights Notice to indicate in writing to the sender of
the Rights Notice (the "Sender") its exercise of its right of first refusal with
respect to the transaction described in the Rights Notice (the "Acceptance
Notice"). Within thirty (30) days of receipt of the Acceptance Notice, the
Sender will schedule a closing and notify Rock of Ages in writing thereof. At
the closing the stock or asset being sold by the Sender will be purchased by
Rock of Ages on the terms set forth in the Rights Notice and the Sender will
sell to Rock of Ages the stock or asset
- 3 -
<PAGE> 4
being sold free and clear of any rights, charges, encumbrances or liens so that
Rock of Ages will receive good and marketable title thereto at the closing.
Missouri Red agrees to execute an instrument in writing satisfactory to Rock of
Ages to record the existence of Rock of Ages' right of first refusal set forth
herein in each Registry of Deeds or other appropriate recording office for each
country and city in which Missouri Red owns real estate. Oglesby will notify
Rock of Ages in writing of any disposition of Missouri Red capital stock not
subject to Rock of Ages right of first refusal set forth in this Section.
Oglesby also agrees that a legend satisfactory to Rock of Ages shall be applied
to all Missouri Red capital stock certificates evidencing the right of first
refusal granted to Rock of Ages by Oglesby so that all future holders thereof
will take and hold their shares of capital stock in Missouri Red subject to the
right of first refusal set forth herein.
9. COMPENSATION LIMITATIONS. In consideration of Rock of Ages'
agreements and obligations in this agreement, Missouri Red agrees that it will
not pay, directly or indirectly, Oglesby or George T. Oglesby, III, any salary,
bonus, expense reimbursement, or other compensation payment for services
rendered of any kind for any purpose without the prior written consent of Rock
of Ages.
10. ASSIGNMENT, SUCCESSORS AND ASSIGNS. This agreement is binding upon
and shall inure to the benefit of the parties hereto and their successors,
permitted assigns, heirs and personal representatives; provided, however, that
Missouri Red and Oglesby, may not assign any of their rights, duties and
obligations under this agreement without the prior written consent of Rock of
Ages, but Rock of Ages may assign this agreement without limitation; provided,
however, that Rock of Ages will remain liable hereunder after any amount by it
of this agreement to a third party if Rock of Ages survives said assignment.
11. NOTICES. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service, fee prepaid,
return receipt or other confirmation of delivery requested or (iv) when
telecopied or sent by facsimile transmission if an additional notice is also
given under (i), (ii) or (iii) above within three days thereafter. Any such
notice or communication shall be directed to a party at its address set forth
below or at such other address as may be designated by a party in a notice given
to all other parties hereto in accordance with the provisions of this Section.
If to Missouri Red: Missouri Red Quarries, Inc.
P. O. Box 6077
Elberton, GA 30635
Phone: (706) 283-5402
Telecopy: (706) 283-4758
If to George T. Oglesby, Jr.: Mr. George T. Oglesby, Jr.
- 4 -
<PAGE> 5
P. O. Box 6077
Elberton, GA 30635
Phone: (706) 283-5402
Telecopy: (706) 283-4758
with, in the case of notice R. Chris Phelps, Esq.
to Missouri Red and Phelps & Campbell
George T. Oglesby, Jr., P. O. Drawer 1056
a copy to (which shall not Elberton, GA 30635
constitute notice): Phone: 706-283-5000
Fax: 706-283-5002
If to Rock of Ages: Kurt M. Swenson, Chairman and
Chief Executive Officer
Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Phone: 603-225-8397
Fax: 603-225-4801
with a copy to: John R. Monson, Esq.
(which shall not Wiggin & Nourie, P.A.
constitute notice) P.O. Box 808
Manchester, NH 03105
Phone: 603-669-2211
Fax: 603-623-8442
12. SECTION HEADINGS. Section headings are employed in this agreement
for reference purposes only and shall not affect the interpretation or meaning
of this agreement.
13. COMPLETE AGREEMENT. Neither this agreement nor any provision hereof
may be changed, waived, modified, discharged, amended or terminated orally but
only by an instrument in writing signed by all parties hereto. The waiver by any
party hereto of a breach of any provision of this agreement shall not operate or
be construed as a waiver of any other or any subsequent breach. The failure of
any party at any time or times to require performance of any provision hereof
shall in no manner affect its right at a later time to enforce the same. This
agreement, together with the Exhibits attached hereto or incorporated herein
pursuant to Section 16 hereof, constitutes the only agreement among the parties
hereto concerning the subject matter hereof and supersedes all prior agreements,
whether written or oral, relating thereto.
14. GOVERNING LAW, JURISDICTION AND VENUE. This agreement shall be
governed by and construed in accordance with the laws of the State of New
Hampshire; and any actions brought pertaining to the same shall lie only in the
Merrimack County, New Hampshire Superior Court, in the United States District
Court for the District of New Hampshire, the Elbert County
- 5 -
<PAGE> 6
Superior Court, Georgia, or the U.S. District Court for the Middle District of
Georgia, all of which courts are the sole and exclusive forums for any actions
or claims by the parties to this agreement; and each party hereto consents to
the jurisdiction of, and venue in, said courts in any action brought by another
party hereto and agrees that no claims or actions relating to any matter
hereunder will be brought by them in any other courts of said States, any other
state or any other country.
15. COUNTERPARTS. This agreement may be executed in counterparts and by
different parties on different counterparts with the same effect as if the
signatures were on the same instrument. This agreement shall be effective and
binding upon all parties hereto as of the time when all parties have executed a
counterpart of this agreement.
16. EXHIBITS. Each Exhibit or Schedule delivered pursuant to the terms
of this agreement shall be in writing and shall constitute a part of this
agreement. The parties may agree with respect to any Schedule or Exhibit
required to be attached to this agreement, that such Schedule or Exhibit, if
mutually satisfactory, may be attached to this agreement after the date of
execution hereof and after mutual approval thereof, such subsequently attached
Schedule or Exhibit shall be treated as if it were attached to this agreement as
of the date of execution of this agreement. All Exhibits and Schedules attached
hereto are specifically incorporated herein by reference and made a part hereof.
The words "agreement," "herein" and "hereof" as used herein shall in all
respects include the entirety of this agreement together with all Exhibits and
Schedules attached hereto and all documents required or permitted to be
delivered hereunder.
17. SPECIFIC PERFORMANCE. The parties hereto hereby agree and stipulate
it would be impossible to measure in monetary terms the damages which will be
suffered by the party bringing the action in the event of any breach by any of
them of any provision of this agreement. Therefore, if any party hereto should
institute any action in equity to enforce the provisions of this agreement, it
is hereby agreed by the other parties hereto, that they waive any claim or
defense that the party bringing the action has an adequate remedy at law and
agree that the party bringing the action is entitled to specific performance of
the terms of this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement all
as of the date first above written.
WITNESS ROCK OF AGES CORPORATION
/s/ By: /S/ Kurt M. Swenson
-------------------------------- -------------------------
Kurt M. Swenson,
Chairman of the Board and
Chief Executive Officer
MISSOURI RED QUARRIES, INC.
- 6 -
<PAGE> 7
/s/ By: /s/ George T. Oglesby, Jr.
-------------------------------- ----------------------------------
George T. Oglesby, Jr., President
/s/ /s/ George T. Oglesby, Jr.
-------------------------------- -------------------------------------
George T. Oglesby, Jr.
- 7 -
<PAGE> 8
EXHIBIT 7
TO
SUPPLY AND DISTRIBUTION AGREEMENT
The Initial Outside Sales Price will be negotiated on a case-by-case
basis by Missouri Red and Rock of Ages for all grades of MRG to be sold and
distributed pursuant to Rock of Ages' exclusive sale rights set forth in Section
7 and once negotiated will then be adjusted as set forth in Section 7.
<PAGE> 1
EXHIBIT 10.11
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
July 25, 1997
Mr. Chuck Monson
DAKOTA GRANITE CO., INC.
PO Box 1351
Milbank, SD 57252
Dear Chuck
This letter will outline our agreement that Dakota Granite Co., Inc.
(DGC) will purchase from Rock of Ages Corporation (ROA) its requirements for
Barre granite monuments, either blank or sandblasted as DGC requests, and that
ROA will purchase from DGC its requirements of Dakota Mahogany granite
monuments, either blank or sandblasted as ROA requests, on the following terms
and conditions.
1. EXCLUSIVE SOURCING. ROA agrees that it will source its blocks, slabs
and finished monuments of Dakota Mahogany granite exclusively from DGC, and DGC
agrees that it will source its blocks, slabs, and finished monuments of Barre
Gray exclusively from ROA during the term of this agreement. Both DGC and ROA
retain the right to manufacture monuments from each other's blocks or slabs in
their own plants during the term of this agreement. DGC and ROA agree to supply
the other with blocks, slabs and finished monuments of the highest quality
available in the requested grade of granite. ROA and DGC will also supply the
other with finished monuments made of other granites manufactured by them if
adequate supplies of that granite are available.
2. MINIMUM REQUIRED INVENTORIES OF FINISHED MONUMENTS. ROA agrees to
purchase and maintain in its Barre, Elberton or Canada facilities a minimum
required inventory of finished Dakota Mahogany monuments manufactured by DGC of
a cost basis of $*** F.O.B. Milbank, and DGC agrees to purchase and maintain a
minimum required inventory in its Milbank facilities finished unbranded Barre
Gray monuments manufactured by ROA of a cost basis of $*** F.O.B. Barre. The
said monuments will be of a size, design and quantity determined solely by ROA
with respect to its required inventory of Dakota Mahogany monuments and by DGC
with respect to its inventory of Barre Gray monuments. The initial required
inventories of ROA and DGC will be shipped, billed and paid within the same
month.
3. ADDITIONAL INVENTORIES OF FINISHED MONUMENTS. ROA and DGC agree that
ROA may ship at its expense and store at DGC an
<PAGE> 2
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Mr. Chuck Monson
July 25, 1997
Page 2
additional inventory of finished monuments and that DGC may ship at its expense
and store at ROA in Barre an additional inventory of finished monuments. These
additional inventories shipped for storage shall remain the inventory of the
shipper. In such case, DGC and ROA agree they will store such inventory
segregated from their own inventory at no charge and expense. Such additional
inventory shall be available for sale by the shipper to its customers or for
transfer to the storer on the storer's request to purchase units from the
additional inventory.
4. PRICES OF FINISHED MONUMENTS. The price for finished monuments sold
from ROA to DGC and from DGC to ROA will be ********. DGC and ROA agree that
neither will provide the other with their branded monuments and both ROA and DGC
agree they are not authorized to apply any seal or use any trademark of the
other in regard to the resale of the monuments. The resale price of the
monuments purchased by DGC from ROA or by ROA from DGC when sold to retailers
shall be determined and set in the sole discretion of the reselling party.
5. SALES TO RETAILERS. ROA and DGC agree that DGC may sell Barre Gray
monuments purchased by it from ROA and ROA may sell Dakota Mahogany monuments
purchased by it from DGC to any retail customer located anywhere in North
America. Neither DGC nor ROA will resell monuments purchased from the other
outside North America without the prior written consent of the other.
6. MANUFACTURING ACCOMMODATIONS. DGC and ROA understand and agree that
their respective sales forces may sell finished monuments manufactured by the
other party to this agreement that are not in the required or additional
inventory. DGC and ROA agree that in such case they will use their best efforts
to provide a delivery date to meet the requirements of the sale upon receipt of
the order for that unit.
7. SHIPPING ACCOMMODATIONS. ROA and DGC understand that the DGC sales
force may sell a Barre Gray monument to a customer in closer proximity to Barre
than to Milbank and the ROA sales force may sell a Dakota Mahogany monument to a
customer in closer proximity to Milbank than Barre. Likewise, their respective
sales forces may sell monuments owned by them but stored at the other's location
as additional inventory in accordance with paragraph 3. In such cases, DGC and
ROA agree to accommodate the other by either
<PAGE> 3
Mr. Chuck Monson
July 25, 1997
Page 3
manufacturing the unit and invoicing the other therefor, or removing the unit
from the other's additional inventory and shipping it directly to the retailer
as mutually agreed on a case by case basis to reduce the shipping expense and
the delivery time. A handling charge of $10 will be applied to monuments shipped
from the others additional inventory. Freight will be paid by the retailer.
8. BLOCKS AND SLABS. It is understood and agreed that from time to
time DGC may purchase such number of Barre Gray blocks and slabs from ROA and
ROA may purchase such number of Dakota Mahogany blocks and slabs from DGC as
they deem appropriate. Prices for blocks and slabs shall be *******. ROA and
DGC agree that ROA may manufacture monuments of Dakota Mahogany and DGC may
manufacture monuments of Barre Gray in their own plants during the term of this
agreement.
9. INVOICING AND PAYMENTS. Each party will invoice the other for any
charges during a particular month within ten days of the close of the month. All
payments shall be due 30 days from the invoice date.
10. AGREEMENT REPRESENTATIVES. To assure the agreement is mutually
beneficial to both parties and to create a clear line of communication, ROA
names Peter Friberg and DGC names Bill Ruoff as their representatives and
contacts with responsibility for implementing and maintaining the terms of this
agreement.
Any customer of either DGC or ROA which sells primarily at retail will
not be considered a distributor or wholesaler and a resale between a parent
company and its subsidiary companies will not be considered a wholesale sale or
a sale by a distributor.
11. EFFECTIVE DATE AND TERMINATION. This agreement shall commence August
1, 1997 and may be terminated by either party at any time on 180 days prior
written notice. Upon termination, any required inventory owned by DGC and ROA at
their locations will remain their property. Any additional inventory under
paragraph 3 owned by ROA and stored at DGC or owned by DGC and stored at ROA
will be shipped from the other's property within the 180 day notice period prior
to termination. In the event the owner of the additional inventory fails to ship
it out of the storer's facility prior to termination, it shall become the
property of the storer free and clear of any claim of the owner.
If this letter correctly sets forth our understanding, please sign on the
line indicated and return one copy to me. We look forward to working together to
make this agreement successful for
<PAGE> 4
Mr. Chuck Monson
July 25, 1997
Page 4 both parties.
Sincerely,
ROCK OF AGES CORPORATION
By: /s/ Kurt M. Swenson
---------------------------
Kurt M. Swenson
AGREED:
DAKOTA GRANITE CO., INC.
By: /s/ Chuck Monson
---------------------------
Chuck Monson
<PAGE> 1
Exhibit 10.12
STOCK SUBSCRIPTION AND CONTINUITY OF INTEREST AGREEMENT
This Stock Subscription and Continuity of Interest Agreement is dated as
of June 27, 1997 by and among ROCK OF AGES CORPORATION, a Vermont corporation
(the "Acquiror"), and MISSOURI RED QUARRIES, INC., a Georgia corporation, (the
"Shareholder"), which is the sole shareholder of KSGM, INC., a Georgia
corporation (the "Target").
RECITALS:
1. On the date of this agreement, the Acquiror, the Target and the
Shareholder have entered into an Agreement and Plan of Reorganization (the
"Plan") whereby (i) the Target shall merge into the Acquiror (the "Merger") and
cease to exist as a separate corporation, and (ii) all issued and outstanding
shares of the Target's common stock no par value ("Target Common Stock") shall
be converted into and exchanged for shares of validly issued, fully paid and
nonassessable common stock, no par value, of the Acquiror (the "Acquiror Common
Stock" or the "Shares") as set forth in the Plan.
2. The Acquiror and the Shareholder are willing to enter into the Plan and
consummate the merger only if the Merger will qualify as a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and, in furtherance of that goal, the parties have
incorporated into this agreement certain continuity of interest representations
and covenants.
3. The Acquiror and the Shareholder also intend that the Acquiror's
issuance of the Shares to the Shareholder pursuant to the Merger constitutes a
so-called "private placement" exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and constitutes a
transaction exempt from the registration requirements of the Georgia Securities
Act of 1973 (the "Georgia Act") pursuant to Section 10-5-9(12) of the Georgia
Act and, in furtherance of that goal, the Acquiror has requested that the
Shareholder, and the Shareholder has agreed to, enter into this agreement and to
make certain representations and covenants describing the Shareholder's access
to the Acquiror's financial and other information reasonably necessary to the
Shareholder's ability to make an informed business decision whether to invest in
the Acquiror and describing the Shareholder's subscription for the Acquiror
Stock and willingness to hold the Acquiror Stock for investment and not for
resale.
4. Terms used herein and not defined herein shall have the meanings
ascribed to them in the Plan.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
intending to be legally bound the Shareholder, hereby agrees with the Acquiror
as follows:
<PAGE> 2
1. Investment Representations. The Shareholder hereby represents and
warrants to the Acquiror as follows:
(a) The Shareholder has adequate financial means of providing for
the Shareholder's current business needs and possible business contingencies,
has no need for liquidity of this investment in the Acquiror Common Stock, and
is able to bear the economic risks of this investment to the possible extent of
a total loss of this investment. The Shareholder is an "accredited investor",
within the meaning of Rule 501(a) of Regulation D under the Securities Act.
(b) The Shareholder has been afforded the opportunity by Acquiror to
ask questions and request information in order to acquire detailed knowledge and
information concerning the business affairs and operations of Acquiror and its
direct or indirect subsidiaries, parent and affiliates and their financial
condition and prospects; and, as a result of such opportunity to ask questions
and review information and the Shareholder's business, the Shareholder is in a
position to weigh, and assess such knowledge and information in a meaningful
fashion.
(c) The Shareholder acknowledges that any business and financial
projections of Acquiror that may have been provided by or on behalf of Acquiror
are solely for purposes of describing Acquiror's future business and financial
goals and are not intended to be, nor are they, representations or guaranties of
Acquiror 's future performance.
(d) The Shareholder understands that none of the Acquiror's Common
Stock (including the Shares) have been registered under the Securities Act or
any state securities laws and that the Shares are offered in reliance on
exemptions for private offerings under the Securities Act and exemptions for
merger transactions under such state laws. The Shareholder acknowledges that the
Shareholder is acquiring the Shares without being furnished any offering
literature or memorandum.
(e) The Shareholder is acquiring and purchasing the Shares solely
for investment for his own account and the Shares are not being purchased with a
view to or for the resale, distribution, subdivision, or fractionalization of
the Shares.
(f) The Shareholder acknowledges that Shareholder has received and
examined copies of the Acquiror 's Certificate of Incorporation, Articles and
Bylaws, all as amended to date, as well as minutes of all shareholder and
director meetings relevant to the Merger and the issuance of Shares to the
Shareholder pursuant to the Merger. The Shareholder further acknowledges that
Shareholder has been given full opportunity to receive copies of or examine any
and all other minutes of shareholder and director meetings of the Acquiror.
(g) The Shareholder acknowledges that (A) there are substantial
restrictions on the transferability of the Shares, (B) the Shares will not be,
and investors in the Acquiror
- 2 -
<PAGE> 3
have no rights to require that the Shares be, registered under the Securities
Act or any state securities laws, and (C) there will be no public market for the
Shares and, accordingly, the Shareholder may have to hold the Shares
indefinitely without the possibility of liquidating the Shareholder's investment
in the Acquiror.
2. Representations as to Authority and Enforceability. The Shareholder
hereby represents to the Acquiror as follows: this agreement constitutes the
valid and binding obligation of the Shareholder enforceable in accordance with
its terms. The Shareholder's execution and delivery of this agreement, and
compliance with the provisions of this agreement will not violate or constitute
a breach of Shareholder's Articles of Incorporation or Bylaws or any provision
of law applicable to it and will not conflict with or result in any breach of
any of the terms, conditions, or provisions of, or constitute a default under,
any contractual obligations of Shareholder nor any court or other governmental
order applicable to the Shareholder.
3. Continuity of Interest Representations and Covenants. Shareholder
represents and warrants to, and covenants and agrees with, Acquiror as follows:
(a) Continuity of Interest Representations.
(i) The Shareholder has, and as of the Effective Time will
have, no present plan, intention or arrangement to sell, transfer or
otherwise dispose of that number of the Shares as would reduce
Shareholder's ownership of the Acquiror Common Stock, collectively,
to a number of Shares having a value (as of the Effective Time) of
less than 50% of the value of all of the issued and outstanding
Target Common Stock immediately prior to the Effective Time. For
purposes of this agreement, shares of Target Common Stock exchanged
for cash or other property, surrendered by dissenters, or exchanged
for cash in lieu of fractional shares of Acquiror Common Stock will
be treated as outstanding Target Common Stock at the Effective Time.
Moreover, shares of Target Common Stock and Shares of Acquiror
Common Stock held by the Shareholder and otherwise sold, redeemed,
or disposed of prior or subsequent to the Effective Time will be
considered as outstanding for purposes of this agreement.
(ii) As of the date of this agreement, the Shareholder owns
the number of shares of Target Common Stock set forth opposite
Shareholder's name on Exhibit 1(a).
(b) Covenant Pending Closing. Prior to the Effective Time, the
Shareholder will not sell, transfer, encumber or otherwise dispose of by any
means any Target Common Stock.
- 3 -
<PAGE> 4
(c) Post-merger Restrictions on Transfer. For a period of two years
after the Effective Time (the "Post-merger Continuity Period") the Shareholder
shall not sell, transfer or otherwise dispose of an aggregate number of Shares
having a value, as of the Effective Time, of more than 50% of the value of all
of the issued and Target Common Stock of the Target immediately prior to the
Effective Time. For purposes of this agreement, shares of Target Common Stock
exchanged for cash or other property, surrendered by dissenters, or exchanged
for cash in lieu of fractional shares of Acquiror Common Stock will be treated
as outstanding Target Common Stock at the Effective Time. Moreover, shares of
Target Common Stock and Shares of Acquiror Common Stock held by Shareholder and
otherwise sold, redeemed or disposed of prior or subsequent to the Effective
Time will be considered as outstanding for purposes of this agreement. The term
"transfer" as used anywhere in this agreement means any voluntary disposition of
any legal or equitable interest in any Shares, whether by sale, pledge, gift,
assignment, in trust to or for the benefit of the Shareholder or a third party,
or otherwise.
(d) Pledges of Shares. Nothing in this agreement shall prohibit the
Shareholder from pledging any or all of Shareholder's Shares as collateral to
secure a bona fide indebtedness of the Shareholder to a financial institution,
provided that such institution agrees to be subject to restrictions on the sale,
transfer or disposal of any such Shares which are similar to those set forth in
this agreement, except that no such restrictions shall apply to the financial
institution's ability to seize and dispose of its collateral in the event of
default in accordance with its loan agreement and applicable law.
(e) Permitted Transfers. The Shareholder agrees to deliver written
notice to Acquiror thirty (30) days prior to disposing of any Shares during the
Post-merger Continuity Period, in accordance with and as permitted by Section
3(c) or 3(d), above, stating the number of Shares disposed of and the manner of
disposition.
4. Inspection Rights; Non-Marketability of Shares; Restrictions on
Transfer. The Shareholder acknowledges and agrees that:
(a) Inspection Rights. Prior to the date hereof, all documents,
information, records, and books pertaining to this investment have been, and
will continue to be, made available for inspection by Shareholder, and the
Shareholder's attorney and/or accountant.
(b) Non-Marketability of Shares. No representations or promises have
been made concerning the marketability or value of the Shares. The Shareholder
agrees that because the Shares have not been registered under the Securities Act
or relevant state securities laws, they cannot be resold or transferred unless:
(i) they are subsequently registered under such laws or exemptions from
registration are available; and (ii) Acquiror receives an opinion of counsel
satisfactory to it and its counsel that such transfer complies with Federal and
state securities laws. Neither Acquiror nor any of its officers, directors, or
shareholders have represented to the Shareholder that the Shares will be
registered under the Securities Act or relevant state securities laws at any
time in the future or otherwise qualified
- 4 -
<PAGE> 5
for sale under applicable securities laws. Acquiror does not presently intend to
make available to the public information concerning itself so as to permit
shareholders to use Rule 144 of the Rules and Regulations under the Securities
Act for transfer of the Shares.
(c) Restrictions on Transfer. Shareholder agrees to the following
restrictions on the transfer of the Shares, in addition to the restrictions on
transfer set forth in Section 3(c), above and in any other agreement between
Acquiror and the Shareholder:
(i) No transfer will be permitted: (A) which would violate any
applicable law, statute, or regulation, including, but not limited
to, any Federal or state securities laws; or (B) which would require
registration under any Federal or state securities laws.
With respect to any proposed transfer, Acquiror may, at its option, require an
opinion of counsel acceptable to it to the effect that any proposed transfer is
not prohibited under items (A) or (B), above.
(d) Legends on Certificates. Any stock certificates evidencing the
Shares shall bear the following legends:
The securities represented hereby have not been registered under the
Securities Act of 1933 (the "Act") or any state securities law and may not
be sold or transferred unless (i) a registration statement covering these
securities is effective under the Act or (ii) the transaction is exempt
from registration under the Act and any applicable state securities laws
and, if the corporation requests, an opinion satisfactory to the
corporation to such effect has been rendered to the corporation by counsel
satisfactory to the corporation.
The securities represented hereby are subject to restrictions on transfer
and may not be sold, exchanged, transferred, pledged, hypothecated, or
otherwise disposed of except in accordance with and subject to all the
terms and conditions of a certain Stock Subscription and Continuity of
Interest Agreement dated June 27, 1997, a copy of which the corporation
will furnish to the holder upon request and without charge.
Further restrictive legends may also be inscribed as in the opinion of counsel
are necessary to comply with Federal and state securities laws.
5. Lock-up Agreement. In the event of an underwritten public offering of
Acquiror's securities, the Shareholder (and any permitted transferee thereof),
whether or not any shares of capital stock of Acquiror owed by Shareholder (or
any permitted transferee thereof) are included in such registration, hereby
agrees not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Act, of any equity securities or Acquiror (other
than as part of such underwritten offering), without the consent of the managing
underwriter(s) for such offering (the "Managing Underwriter"), during a period
- 5 -
<PAGE> 6
commencing on the effective date of such registration and ending 180 calendar
days thereafter, or such lesser period as the Board of Directors of Acquiror and
the Managing Underwriter shall reasonably determine is required to effect a
successful offering.
6. Miscellaneous.
(a) Amendment. This agreement may not be amended, in whole or in
part, except by an instrument in writing signed by the Acquiror and the
Shareholder. In the event of the termination of the Plan according to its terms
this agreement shall also terminate and the parties shall have no further
obligations to each other hereunder except for prior breach hereof.
(b) Binding Effect. This agreement shall be binding on and for the
benefit of the parties hereto and their respective successors, and permitted
assigns; provided, that the Shareholder shall not be entitled to assign or
delegate any of the Shareholder's rights or obligations under this agreement
without the prior written consent of Acquiror.
(c) Counterparts. This agreement may be executed in one or more
counterpart copies, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(d) Entire Agreement. Any oral or written statements,
understandings, correspondence, or agreements previously made by any party with
respect to the subject matter of this agreement are superseded by this agreement
(including any Exhibits attached hereto and specifically referenced by this
agreement), which alone fully and completely expresses the parties' respective
obligations. This agreement is entered into by each party after opportunity for
investigation, and each party represents that such party is not relying upon any
statements, understandings, correspondence, or agreements not embodied in this
agreement and made by any other party or on any other party's behalf.
(e) Governing Law. This agreement shall be governed exclusively by
Vermont law.
(f) Notices. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service, fees prepaid,
return receipt or other confirmation of delivery requested or (iv) when
telecopied or sent by facsimile transmission if an additional notice is also
given under (i), (ii)
- 6 -
<PAGE> 7
or (iii) above within three days thereafter. Any such notice or communication
shall be directed to a party at its address set forth below or at such other
address as may be designated by a party in a notice given to all other parties
hereto in accordance with the provisions of this Section.
Acquiror: Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Attn.: Mr. Kurt M. Swenson,
Chairman of the Board and
Chief Executive Officer
Shareholder: See Exhibit 1(a)
(g) Severability. Each term, condition, and provision of this
agreement shall be valid and enforced to the fullest extent permitted by law. If
there is any conflict between any term, condition, or provision of this
agreement and any statute, law, ordinance, order, rule, or regulation, the
latter shall prevail; provided, that any such conflicting term, condition, or
provision shall be curtailed and limited only to the extent necessary to bring
it within the legal requirements and the remainder of this agreement shall not
be affected thereby.
(h) Waiver. No waiver by any party of any breach or default by any
other party of any of such other party's obligations under this agreement shall
be deemed to be a waiver of any other breach or default of the same or any other
nature. No failure by any party on any one or more occasions to exercise any
right or remedy provided in this agreement shall preclude the exercise of such
right or remedy on any other occasion.
(i) Survival of Covenants and Representations. All covenants and
representations of the parties contained in this agreement shall survive the
execution and delivery of this agreement and the closing of the transactions
contemplated hereby.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this agreement all as of the
date first above-written.
Acquiror:
Witness: ROCK OF AGES CORPORATION
- ------------------------------ By: /s/ Kurt M. Swenson
- ------------------------------ --------------------------------
[Print Name] Kurt M. Swenson, Chairman of the Board
President and Chief Executive Officer
Shareholder:
MISSOURI RED QUARRIES, INC.
- ------------------------------ By: /s/ George T. Oglesby, Jr.
- ------------------------------ --------------------------------
[Print Name] George T. Oglesby, Jr., President
- 8 -
<PAGE> 9
EXHIBIT 1-a
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Shareholder Name & Address No. Shares of Target No. Shares of Acquiror
Common Stock Common Stock
- ------------------------------------------------------------------------------------
<S> <C> <C>
Missouri Red Quarries, Inc. 526,882 526,882
P. O. Box 6077
Elberton, Georgia 30635
Facsimile No.: (706) 283-4758
- ------------------------------------------------------------------------------------
</TABLE>
- 9 -
<PAGE> 1
Exhibit 10.13
STOCK SUBSCRIPTION AGREEMENT
This Stock Subscription Agreement is dated as of July 30, 1997 and is by
and among ROCK OF AGES CORPORATION, a Vermont corporation (the "Buyer"), and
National Memorial Corporation, a Kentucky corporation with an address of 1020
North Dixie, Elizabethtown, Kentucky 42701 (the "Seller"), which is one of the
corporations which are members of the KMC Group.
RECITALS:
1. On the date of this agreement, the Buyer, the Seller and the other
members of the KMC Group (the "Sellers") executed a Asset Purchase Agreement
(the "Asset Purchase Agreement") whereby (a) the Buyer has agreed to purchase
from the Sellers, and the Sellers have agreed to sell to the Buyer substantially
all of their Assets, and (b) the Buyer has agreed to issue to Seller, and Seller
has agreed to accept from Buyer, certain shares of Buyer's common stock (the
"Common Stock" or the "Shares") as part of the purchase price to be paid to
Seller for its portion of the Assets being sold to Buyer.
2. The Buyer and Seller intend that the issuance to Seller of the Shares
constitute a so-called "private placement" exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and a transaction exempt from the offer and registration requirements of the
Securities Act of Kentucky, KRS Chapter 292 (the "Kentucky Act"), and,
accordingly, the Buyer has requested that the Seller, and the Seller has agreed
to, enter into this agreement and to make certain representations and covenants
describing the Seller's access to the Buyer's financial and other information
reasonably necessary to the Seller's ability to make an informed business
decision whether to invest in the Buyer and describing the Seller's subscription
for the Common Stock and willingness to hold the Common Stock for investment and
not for resale.
3. Terms used herein and not defined herein shall have the meanings
ascribed to them in the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
and intending to be legally bound, Seller hereby agrees with the Buyer as
follows:
1. Investment Representations of the Seller. The Seller hereby represents
and warrants to the Buyer as follows:
(a) The Seller has adequate financial means of providing for the
Seller's current business needs and possible business contingencies, has no need
for liquidity of this
<PAGE> 2
investment in the Buyer's Common Stock, and is able to bear the economic risks
of this investment to the possible extent of a total loss of this investment.
The Seller is an "accredited investor", within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
(b) The Seller has been afforded the opportunity by Buyer to ask
questions and request information in order to acquire detailed knowledge and
information concerning the business affairs and operations of Buyer and its
direct or indirect subsidiaries, parent and affiliates and their financial
condition and prospects; and, as a result of such opportunity to ask questions
and review information and the Buyer's business, the Seller is in a position to
weigh, and assess such knowledge and information in a meaningful fashion.
(c) The Seller acknowledges that any business and financial
projections of Buyer that may have been provided by or on behalf of Buyer are
solely for purposes of describing Buyer's future business and financial goals
and are not intended to be, nor are they, representations or guaranties of
Buyer's future performance.
(d) The Seller understands that none of the Buyer's Common Stock
(including the Shares) have been registered under the Securities Act or any
state securities laws and that the Shares are offered in reliance on exemptions
for private offerings under the Securities Act and exemptions for sales
transactions under state laws. The Seller acknowledges that the Seller is
acquiring the Shares without being furnished any offering literature or
memorandum.
(e) The Seller is acquiring and purchasing the Shares solely for
investment for its own account and the Shares are not being purchased with a
view to or for the resale, distribution, subdivision, or fractionalization of
the Shares.
(f) The Seller acknowledges that Seller has received and examined
copies of the Buyer's Certificate of Incorporation, Articles and Bylaws, all as
amended to date, as well as minutes of all shareholder and director meetings
relevant to the Asset Purchase Agreement and the issuance of Shares to the
Shareholder pursuant to the Asset Purchase Agreement. The Seller further
acknowledges that Seller has been given full opportunity to receive copies of or
examine any and all other minutes of shareholder and director meetings of the
Buyer.
(g) The Seller acknowledges that (A) there are substantial
restrictions on the transferability of the Shares, (B) the Shares will not be,
and investors in the Buyer have no rights to require that the Shares be,
registered under the Securities Act or any state securities laws, and (C) there
will be no public market for the Shares and, accordingly, the Seller may have to
hold the Shares indefinitely without the possibility of liquidating the Seller's
investment in the Buyer.
- 2 -
<PAGE> 3
2. Representations as the Authority and Enforceability. The Seller hereby
represents to the Buyer as follows: this agreement constitutes the valid and
binding obligation of the Seller enforceable in accordance with its terms. The
Seller's execution and delivery of this agreement, and compliance with the
provisions of this agreement will not violate any provision of law applicable to
it and will not conflict with or result in any breach of any of the terms,
conditions, or provisions of, or constitute a default under, any contractual
obligations of Seller nor any court or other governmental order applicable to
the Seller.
3. Inspection Rights; Non-Marketability of Shares; Restrictions on
Transfer. The Seller acknowledges and agrees that:
(a) Inspection Rights. Prior to the date hereof, all documents,
information, records, and books pertaining to this investment have been made
available for inspection by Seller and the Seller's attorney and/or accountant.
(b) Non-Marketability of Shares. No representations or promises have
been made concerning the marketability or value of the Shares. The Seller agrees
that because the Shares have not been registered under the Securities Act or
relevant state securities laws, they cannot be resold or transferred unless: (i)
they are subsequently registered under such laws or exemptions from registration
are available; and (ii) Buyer receives an opinion of counsel satisfactory to it
and its counsel that such transfer complies with Federal and state securities
laws. Neither Buyer nor any of its officers, directors, or shareholders have
represented to the Seller that the Shares will be registered under the
Securities Act or relevant state securities laws at any time in the future or
otherwise qualified for sale under applicable securities laws. Buyer does not
presently intend to make available to the public information concerning itself
so as to permit shareholders to use Rule 144 of the Rules and Regulations under
the Securities Act for transfer of the its equity securities.
(c) Restrictions on Transfer. Seller agrees to the following
restrictions on the transfer of the Shares, and in any other agreement between
Buyer and the Seller:
No transfer will be permitted: (A) which would violate any applicable law,
statute, or regulation, including, but not limited to, any Federal or
state securities laws; or (B) which would require registration under any
Federal or state securities laws.
With respect to any proposed transfer, Buyer may, at its option, require an
opinion of counsel acceptable to it to the effect that any proposed transfer is
not prohibited under items (A) or (B), above.
(d) Legends on Certificates. Any stock certificates evidencing the
Shares shall bear the following legends:
The securities represented hereby have not been registered under the
Securities Act of 1933 (the "Act") or any state securities law and may not
be sold or transferred unless
- 3 -
<PAGE> 4
(i) a registration statement covering these securities is effective under
the Act or (ii) the transaction is exempt from registration under the Act
and any applicable state securities laws and, if the corporation requests,
an opinion satisfactory to the corporation to such effect has been
rendered to the corporation by counsel satisfactory to the corporation.
The securities represented hereby are subject to restrictions on transfer
and may not be sold, exchanged, transferred, pledged, hypothecated, or
otherwise disposed of except in accordance with and subject to all the
terms and conditions of a certain Asset Purchase Agreement dated July 30,
1997, a copy of which the corporation will furnish to the holder upon
request and without charge.
Further restrictive legends may also be inscribed as in the opinion of counsel
are necessary to comply with Federal and state securities laws.
4. Lock-Up Agreement. In the event of an underwritten public offering of
Buyer's securities, Seller (and any permitted transferee thereof), whether or
not any shares of capital stock of the Buyer owned by the Seller (or any
permitted transferee thereof) are included in such registration, hereby agrees
not to effect any public sale or distribution, including any sale pursuant to
Rule 144 under the Securities Act, of any equity securities of Buyer (other than
as part of such underwritten offering), without the consent of the managing
underwriter(s) for such offering (the "Managing Underwriter"), during a period
commencing on the effective date of such registration and ending 180 calendar
days thereafter, or such lesser period as the Board of Directors of Buyer and
the Managing Underwriter shall determine is required to effect a successful
offering.
5. Miscellaneous.
(a) Amendment. This agreement may not be amended, in whole or in
part, except by an instrument in writing signed by the Buyer and the Seller. In
the event of termination of the Asset Purchase Agreement according to its terms,
this agreement shall also terminate and the parties shall have no further
obligations to each other hereunder except for prior breach hereof.
(b) Binding Effect. This agreement shall be binding on and for the
benefit of the parties hereto and their respective successors, heirs, personal
representatives and permitted assigns; provided, that the Seller shall not be
entitled to assign or delegate any of the Seller's rights or obligations under
this agreement without the prior written consent of Buyer.
(c) Counterparts. This agreement may be executed in one or more
counterpart copies, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
- 4 -
<PAGE> 5
(d) Entire Agreement. Any oral or written statements,
understandings, correspondence, or agreements previously made by any party with
respect to the subject matter of this agreement are superseded by this agreement
(including any Exhibits attached hereto and specifically referenced by this
agreement), which alone fully and completely expresses the parties' respective
obligations. This agreement is entered into by each party after opportunity for
investigation, and each party represents that such party is not relying upon any
statements, understandings, correspondence, or agreements not embodied in this
agreement and made by any other party or on any other party's behalf.
(e) Governing Law. This agreement shall be governed exclusively by
Vermont law.
(f) Notices. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service, fees prepaid,
return receipt or other confirmation of delivery requested or (iv) when
telecopied or sent by facsimile transmission if an additional notice is also
given under (i), (ii) or (iii) above within three days thereafter. Any such
notice or communication shall be directed to a party at its address set forth
below or at such other address as may be designated by a party in a notice given
to all other parties hereto in accordance with the provisions of this Section.
Buyer: Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Attn.: Mr. Kurt M. Swenson,
Chairman of the Board, President and
Chief Executive Officer
Shareholder: See Exhibit 1(a)
(g) Severability. Each term, condition, and provision of this
agreement shall be valid and enforced to the fullest extent permitted by law. If
there is any conflict between any term, condition, or provision of this
agreement and any statute, law, ordinance, order, rule, or regulation, the
latter shall prevail; provided, that any such conflicting term, condition, or
provision shall be curtailed and limited only to the extent necessary to bring
it within the legal requirements and the remainder of this agreement shall not
be affected thereby.
(h) Waiver. No waiver by any party of any breach or default by any
other party of any of such other party's obligations under this agreement shall
be deemed to be a waiver of any other breach or default of the same or any other
nature. No failure by any
- 5 -
<PAGE> 6
party on any one or more occasions to exercise any right or remedy provided in
this agreement shall preclude the exercise of such right or remedy on any other
occasion.
(i) Survival of Covenants and Representations. All covenants and
representations of the parties contained in this agreement shall survive the
execution and delivery of this agreement and the closing of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this agreement all as of the
date first above-written.
Buyer:
Witness: ROCK OF AGES CORPORATION
- -------------------------------- By: /s/ Kurt M. Swenson
- -------------------------------- --------------------------------
[Print Name] Kurt M. Swenson, Chairman of the Board,
President and Chief Executive Officer
SELLER:
NATIONAL MEMORIAL CORPORATION
- -------------------------------- By: /s/ Roy H. Keith, Jr.
- -------------------------------- --------------------------------
[Print Name] Roy H. Keith, Jr., President
- 6 -
<PAGE> 7
EXHIBIT 1-a
--------------------------------------------
Seller Name & Address
--------------------------------------------
National Memorial Corporation
1020 North Dixie
Elizabethtown, KY 42701
--------------------------------------------
- 7 -
<PAGE> 1
Exhibit 10.14
STOCK SUBSCRIPTION AGREEMENT
This Stock Subscription Agreement is dated as of June 27, 1997 and is by
and among ROCK OF AGES QUARRIES, INC., which on June 27, 1997 will, pursuant to
an amendment to its Articles of Incorporation made in connection with the merger
of its wholly owned subsidiary ROCK OF AGES CORPORATION into it, change its name
to ROCK OF AGES CORPORATION, a Vermont corporation (the "Buyer"), and ROBERT
OTIS CHILDS, III, an individual residing in Elberton, Georgia (the
"Shareholder"), who is a shareholder of CHILDS & CHILDS GRANITE CO., INC., C&C
GRANITE COMPANY, INC. both Georgia corporations and of the Joint Venture
Companies (collectively, the "Childs Group").
RECITALS:
1. On the date of this agreement, the Buyer, the Shareholder and other
shareholders of the Childs Group (the "Shareholders") executed a Stock Purchase
Agreement (the "Stock Purchase Agreement") whereby (i) the Buyer has agreed to
purchase from the Shareholder and other shareholders, and the Shareholder and
such other shareholders have agreed to sell to the Buyer, all of their capital
stock in the Childs Group, and (ii) the Buyer has agreed to issue to
Shareholder, and Shareholder has agreed to accept from Buyer, certain shares of
Buyer's common stock (the "Common Stock" or the "Shares") as part of the
purchase price to be paid to Shareholder for his shares in the Childs Group.
2. The Buyer and the Shareholder intend that the issuance to Shareholder
of the Shares constitute a so-called "private placement" exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and a transaction exempt from the registration requirements of
the Georgia Securities Act of 1973 (the "Georgia Act") pursuant to Section
10-5-9(13) of the Georgia Act and, accordingly, the Buyer has requested that the
Shareholder, and the Shareholder has agreed to, enter into this agreement and to
make certain representations and covenants describing the Shareholder's access
to the Buyer's financial and other information reasonably necessary to the
Shareholder's ability to make an informed business decision whether to invest in
the Buyer and describing the Shareholder's subscription for the Common Stock and
willingness to hold the Common Stock for investment and not for resale.
3. Terms used herein and not defined herein shall have the meanings
ascribed to them in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
and intending to be legally bound, the Shareholder hereby agrees with the Buyer
as follows:
<PAGE> 2
1. Investment Representations of the Shareholder. The Shareholder hereby
represents and warrants to the Buyer as follows:
(a) The Shareholder has adequate financial means of providing for
the Shareholder's current business needs and possible business contingencies,
has no need for liquidity of this investment in the Buyer's Common Stock, and is
able to bear the economic risks of this investment to the possible extent of a
total loss of this investment. The Shareholder is an "accredited investor",
within the meaning of Rule 501(a) of Regulation D under the Securities Act, of
the category or categories set forth in clause (5) or clause (6) of such Rule.
(b) The Shareholder has been afforded the opportunity by Buyer to
ask questions and request information in order to acquire detailed knowledge and
information concerning the business affairs and operations of Buyer and its
direct or indirect subsidiaries, parent and affiliates and their financial
condition and prospects; and, as a result of such opportunity to ask questions
and review information and the Shareholder's business, the Shareholder is in a
position to weigh, and assess such knowledge and information in a meaningful
fashion.
(c) The Shareholder acknowledges that any business and financial
projections of Buyer that may have been provided by or on behalf of Buyer are
solely for purposes of describing Buyer's future business and financial goals
and are not intended to be, nor are they, representations or guaranties of
Buyer's future performance.
(d) The Shareholder understands that none of the Buyer's Common
Stock (including the Shares) have been registered under the Securities Act or
any state securities laws and that the Shares are offered in reliance on
exemptions for private offerings under the Securities Act and exemptions for
sales transactions under state laws. The Shareholder acknowledges that the
Shareholder is acquiring the Shares without being furnished any offering
literature or memorandum.
(e) The Shareholder is acquiring and purchasing the Shares solely
for investment for his own account and the Shares are not being purchased with a
view to or for the resale, distribution, subdivision, or fractionalization of
the Shares.
(f) The Shareholder acknowledges that Shareholder has received and
examined copies of the Buyer's Certificate of Incorporation, Articles and
Bylaws, all as amended to date, as well as minutes of all shareholder and
director meetings relevant to the Stock Purchase Agreement and the issuance of
Shares to the Shareholder pursuant to the Stock Purchase Agreement. The
Shareholder further acknowledges that Shareholder has been given full
opportunity to receive copies of or examine any and all other minutes of
shareholder and director meetings of the Buyer.
- 2 -
<PAGE> 3
(g) The Shareholder acknowledges that (A) there are substantial
restrictions on the transferability of the Shares, (B) the Shares will not be,
and investors in the Buyer have no rights to require that the Shares be,
registered under the Securities Act or any state securities laws, and (C) there
will be no public market for the Shares and, accordingly, the Shareholder may
have to hold the Shares indefinitely without the possibility of liquidating the
Shareholder's investment in the Buyer.
2. Representations as the Authority and Enforceability. The Shareholder
hereby represents to the Buyer as follows: this agreement constitutes the valid
and binding obligation of the Shareholder enforceable in accordance with its
terms. The Shareholder's execution and delivery of this agreement, and
compliance with the provisions of this agreement will not violate any provision
of law applicable to him and will not conflict with or result in any breach of
any of the terms, conditions, or provisions of, or constitute a default under,
any contractual obligations of Shareholder nor any court or other governmental
order applicable to the Shareholder.
3. Inspection Rights; Non-Marketability of Shares; Restrictions on
Transfer. The Shareholder acknowledges and agrees that:
(a) Inspection Rights. Prior to the date hereof, all documents,
information, records, and books pertaining to this investment have been, made
available for inspection by Shareholder, and the Shareholder's attorney and/or
accountant.
(b) Non-Marketability of Shares. No representations or promises have
been made concerning the marketability or value of the Shares. The Shareholder
agrees that because the Shares have not been registered under the Securities Act
or relevant state securities laws, they cannot be resold or transferred unless:
(i) they are subsequently registered under such laws or exemptions from
registration are available; and (ii) Buyer receives an opinion of counsel
satisfactory to it and its counsel that such transfer complies with Federal and
state securities laws. Neither Buyer nor any of its officers, directors, or
shareholders have represented to the Shareholder that the Shares will be
registered under the Securities Act or relevant state securities laws at any
time in the future or otherwise qualified for sale under applicable securities
laws. Buyer does not presently intend to make available to the public
information concerning itself so as to permit shareholders to use Rule 144 of
the Rules and Regulations under the Securities Act for transfer of the Shares.
(c) Restrictions on Transfer. Shareholder agrees to the following
restrictions on the transfer of the Shares, and in any other agreement between
Buyer and the Shareholder:
No transfer will be permitted: (A) which would violate any applicable law,
statute, or regulation, including, but not limited to, any Federal or
state securities laws; or (B) which would require registration under any
Federal or state securities laws.
- 3 -
<PAGE> 4
With respect to any proposed transfer, Buyer may, at its option, require an
opinion of counsel acceptable to it to the effect that any proposed transfer is
not prohibited under items (A) or (B), above.
(d) Legends on Certificates. Any stock certificates evidencing the
Shares shall bear the following legends:
The securities represented hereby have not been registered under the
Securities Act of 1933 (the "Act") or any state securities law and may not
be sold or transferred unless (i) a registration statement covering these
securities is effective under the Act or (ii) the transaction is exempt
from registration under the Act and any applicable state securities laws
and, if the corporation requests, an opinion satisfactory to the
corporation to such effect has been rendered to the corporation by counsel
satisfactory to the corporation.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH
ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
The securities represented hereby are subject to restrictions on transfer
and may not be sold, exchanged, transferred, pledged, hypothecated, or
otherwise disposed of except in accordance with and subject to all the
terms and conditions of a certain Stock Subscription Agreement dated June
27, 1997, a copy of which the corporation will furnish to the holder upon
request and without charge.
Further restrictive legends may also be inscribed as in the opinion of counsel
are necessary to comply with Federal and state securities laws.
4. Lock-Up Agreement. In the event of an underwritten public offering of
Buyer's securities, the Shareholder (and any permitted transferee thereof),
whether or not any shares of capital stock of the Buyer owned by the Shareholder
(or any permitted transferee thereof) are included in such registration, hereby
agrees not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any equity securities of Buyer
(other than as part of such underwritten offering), without the consent of the
managing underwriter(s) for such offering (the "Managing Underwriter"), during a
period commencing on the effective date of such registration and ending 180
calendar days thereafter, or such lesser period as the Board of Directors of
Buyer and the Managing Underwriter shall determine is required to effect a
successful offering.
5. Miscellaneous.
- 4 -
<PAGE> 5
(a) Amendment. This agreement may not be amended, in whole or in
part, except by an instrument in writing signed by the Buyer and the
Shareholder. In the event of termination of the Stock Purchase Agreement
according to its terms, this agreement shall also terminate and the parties
shall have no further obligations to each other hereunder except for prior
breach hereof.
(b) Binding Effect. This agreement shall be binding on and for the
benefit of the parties hereto and their respective successors, heirs, personal
representatives and permitted assigns; provided, that the Shareholder shall not
be entitled to assign or delegate any of the Shareholder's rights or obligations
under this agreement without the prior written consent of Buyer.
(c) Counterparts. This agreement may be executed in one or more
counterpart copies, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(d) Entire Agreement. Any oral or written statements,
understandings, correspondence, or agreements previously made by any party with
respect to the subject matter of this agreement are superseded by this agreement
(including any Exhibits attached hereto and specifically referenced by this
agreement), which alone fully and completely expresses the parties' respective
obligations. This agreement is entered into by each party after opportunity for
investigation, and each party represents that such party is not relying upon any
statements, understandings, correspondence, or agreements not embodied in this
agreement and made by any other party or on any other party's behalf.
(e) Governing Law. This agreement shall be governed exclusively by
Vermont law.
(f) Notices. Any notice or other communication required or permitted
under this agreement shall be in writing and shall be deemed to have been duly
given (i) upon hand delivery, or (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service, fees prepaid,
return receipt or other confirmation of delivery requested or (iv) when
telecopied or sent by facsimile transmission if an additional notice is also
given under (i), (ii) or (iii) above within three days thereafter. Any such
notice or communication shall be directed to a party at its address set forth
below or at such other address as may be designated by a party in a notice given
to all other parties hereto in accordance with the provisions of this Section.
Buyer: Rock of Ages Corporation
369 North State Street
Concord, NH 03301
Attn.: Mr. Kurt M. Swenson,
- 5 -
<PAGE> 6
Chairman of the Board and
Chief Executive Officer
Shareholder: See Exhibit 1(a)
(g) Severability. Each term, condition, and provision of this
agreement shall be valid and enforced to the fullest extent permitted by law. If
there is any conflict between any term, condition, or provision of this
agreement and any statute, law, ordinance, order, rule, or regulation, the
latter shall prevail; provided, that any such conflicting term, condition, or
provision shall be curtailed and limited only to the extent necessary to bring
it within the legal requirements and the remainder of this agreement shall not
be affected thereby.
(h) Waiver. No waiver by any party of any breach or default by any
other party of any of such other party's obligations under this agreement shall
be deemed to be a waiver of any other breach or default of the same or any other
nature. No failure by any party on any one or more occasions to exercise any
right or remedy provided in this agreement shall preclude the exercise of such
right or remedy on any other occasion.
(i) Survival of Covenants and Representations. All covenants and
representations of the parties contained in this agreement shall survive the
execution and delivery of this agreement and the closing of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this agreement all as of the
date first above-written.
Buyer:
Witness: ROCK OF AGES QUARRIES, INC.
- ------------------------------ By: /s/ Kurt M. Swenson
- ------------------------------ --------------------------------
[Print Name] Kurt M. Swenson, Chairman of the Board
President and Chief Executive Officer
- ------------------------------ /s/ Robert Otis Childs, III
- ------------------------------ ----------------------------------
[Print Name] Robert Otis Childs, III
- 6 -
<PAGE> 7
EXHIBIT 1-a
--------------------------------------------
Shareholder Name & Address
--------------------------------------------
Robert Otis Childs, III
270 Dogwood
Elberton, Georgia 30635
--------------------------------------------
- 7 -
<PAGE> 1
Exhibit 10.15
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
AGREEMENT entered into this 30th day of June, 1997, between ROCK OF AGES
CORPORATION, a Vermont corporation having a place of business at 369 North Main
Street, Concord, New Hampshire 03301 (hereinafter referred to as the "Company")
and ______________________ (hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Employee is employed by the Company and by reason thereof has
acquired experience and knowledge of considerable value to the Company; and
WHEREAS, the Company and the Employee wish to enter into this Salary
Continuation Agreement ("Agreement"), intended to offer an inducement to the
Employee to remain in the employ of the Company by compensating the Employee
beyond his or her regular salary for services which the Employee will hereafter
render;
NOW, THEREFORE, in consideration of the foregoing, the Company and the
Employee do hereby mutually agree as follows:
1. Salary Continuation Benefits.
(a) Normal Retirement. If the Employee remains continuously employed
by the Company and/or any affiliate thereof on a full-time basis until
termination of active employment on or after the first day of the month
coinciding with or next following his or her sixty-fifth (65th) birthday,
for any reason other than death or reasons constituting grounds for
forfeiture of benefits under Section 3 hereof ("Normal Retirement"), then
beginning in the month of such retirement the Company will pay to the
Employee a monthly benefit equal to six tenths of one percent (.6%) of the
Employee's highest annual base compensation for any calendar year during
the last ten (10) years of employment with the Company and/or any
affiliate thereof, divided by twelve (12) and multiplied by the number of
full calendar years of service completed by the Employee with the Company
and/or any affiliate, predecessor or acquired business thereof since
____________. Such monthly benefit shall be payable in the form of an
annuity for the life of the Employee or, if the Employee is married at the
date benefits commence, in the form of a joint and one hundred percent
(100%) survivor annuity for the lives of the Employee and his or her
spouse; provided that if the spouse is ten (10) or more years younger than
the Employee the annuity payable to the Employee and spouse shall be
actuarially reduced as provided in Exhibit A attached hereto and by this
reference made a part hereof.
<PAGE> 2
(b) Early Retirement. If the Employee attains age fifty-five (55)
and his or her employment with the Company or any affiliate thereof is
thereafter terminated prior to Normal Retirement for any reason other than
death or reasons constituting grounds for forfeiture of benefits under
Section 3 hereof ("Early Retirement"), the Employee may, with the approval
of the Board of Directors of the Company or of the appropriate committee
thereof, begin to receive monthly payments of the benefits accrued to date
under paragraph (a) in accordance with the provisions thereof, without
reduction.
(c) Disability Retirement. If the Employee terminates employment
with the Company or any affiliate thereof prior to attaining age
fifty-five (55) due to disability and no grounds exist for forfeiture of
benefits under Section 3 hereof ("Disability Retirement"), beginning at
age fifty-five (55) the Employee may begin to receive monthly payments of
the benefits accrued at the time of Disability Retirement under paragraph
(a) in accordance with the provisions thereof, without reduction, provided
the Employee is then still disabled. For purposes hereof, disability shall
be defined in the same manner as in the Company's Salaried Employees'
Retirement Plan or, if such plan does not then exist, in such other
retirement plan as may from time to time be maintained by the Company in
which the Employee participates.
(d) Other Termination of Employment. If the Employee terminates
employment with the Company or an affiliate thereof prior to attaining age
fifty-five (55) for any reason other than death or disability, this
Agreement shall be deemed to have terminated pursuant to Section 5 hereof,
and the Employee and his beneficiaries shall be entitled to no rights or
benefits hereunder, other than the right to purchase insurance policies as
provided in said Section 5.
2. Death Benefits.
(a) Benefits. If the Employee dies while employed by the Company or
an affiliate thereof, or following Disability Retirement but prior to
commencement of benefits hereunder, and no grounds exist for forfeiture of
benefits under Section 3 hereof, the Employee's beneficiary or
beneficiaries shall receive monthly payments of the benefits accrued under
Section 1(a) at the time of the Employee's death. If the Employee was
married at the time of his or her death, such monthly benefit shall be
paid to the surviving spouse in the form of a one hundred percent (100%)
survivor annuity for the life of such spouse; provided that if such spouse
is ten (10) or more years younger than the Employee the survivor annuity
payable to such spouse shall be actuarially reduced as prescribed in
Section 1(a) hereof. If the Employee was unmarried at the time of death,
monthly payments shall be made to the beneficiary or beneficiaries
designated in accordance with paragraph (b) of this Section for a period
certain of one hundred eighty (180) months.
- 2 -
<PAGE> 3
(b) Designation of Beneficiary. The Employee may by written notice
to the Company designate one or more beneficiaries (including a trust or
trusts) to receive any non-spousal payments due under paragraph (a) above,
and the proportionate share to be paid to each beneficiary if more than
one is designated. The Employee may also designate contingent
beneficiaries to receive benefits should the Employee outlive the primary
beneficiaries. If the Employee has designated more than one beneficiary,
the benefits will be divided among the beneficiaries in any proportion
designated by the Employee, and equally if no proportions have been
designated. If more than one primary beneficiary has been designated and a
primary beneficiary dies before all benefits are paid, benefits will
thereafter be divided and paid equally among any surviving primary
beneficiaries unless the Employee otherwise designates. If all primary
beneficiaries have died before all benefits are paid, the same will
thereafter be divided and paid equally among any surviving contingent
beneficiaries unless the Employee otherwise designates. If no
beneficiaries are designated or if none of the beneficiaries designated
survives the Employee, then benefits will be paid to the Employee's spouse
(unless divorce or separation proceedings are then in progress), or if
none, to his descendants, or if none, to his parents, or if none, to his
estate.
3. Forfeiture. Notwithstanding any other provision hereof, the Employee
and his beneficiaries shall forfeit all rights in and to any benefits otherwise
payable hereunder if the Employee's employment with the Company or any affiliate
thereof is or could have been terminated by his employer for (1) ENGAGING IN
UNAUTHORIZED BUSINESS ACTIVITIES COMPETITIVE WITH THOSE OF HIS EMPLOYER OR ANY
AFFILIATE THEREOF WHILE ITS EMPLOYEE, (2) DISHONESTY, (3) COMMISSION OF A
MISDEMEANOR OR FELONY, (4) UNAUTHORIZED DISCLOSURE OF CONFIDENTIAL INFORMATION
OR TRADE SECRETS OF HIS EMPLOYER OR ANY AFFILIATE THEREOF, OR (5) THE BREACH BY
THE EMPLOYEE OF ANY EXPRESS OR IMPLIED AGREEMENT OF EMPLOYMENT WITH HIS EMPLOYER
OR ANY AFFILIATE THEREOF. IN THE EVENT THE EMPLOYEE'S EMPLOYMENT IS NOT SO
TERMINATED, BUT SUBSEQUENT TO ANY TERMINATION OF EMPLOYMENT FOR OTHER REASONS
THE EMPLOYEE IS FOUND TO HAVE BEEN ENGAGED IN ANY OF THE ACTIVITIES OR OFFENSES
ENUMERATED ABOVE DURING THE PERIOD OF HIS EMPLOYMENT WITH THE COMPANY OR ANY
AFFILIATE THEREOF, NO BENEFITS SHALL BE PAYABLE HEREUNDER TO THE EMPLOYEE OR HIS
BENEFICIARIES.
4. Insurance. If the Company or any affiliate thereof shall acquire an
insurance policy or any other asset in connection with its liabilities
hereunder, it is expressly understood and agreed that neither the Employee nor
any beneficiary thereof shall have any right with respect to, or claim against,
such policy or other asset, except as expressly provided by the terms of such
policy or in the title to such other asset. Such policy or asset
- 3 -
<PAGE> 4
shall not be deemed to be held under any trust for the benefit of the Employee
or his or her beneficiaries or to be held in any way as collateral security for
the fulfilling of the obligations of the Company or any affiliate thereof
hereunder, except as may be expressly provided by the terms of such policy or
title to such other asset, which shall otherwise be and remain general,
unpledged, unrestricted assets of the owner thereof. Any rights accruing to the
Employee or any other person hereunder are solely those of any unsecured general
creditor of the Company.
5. Termination and Amendment. The Company reserves the right at any time
and from time to time to terminate or amend in whole or in part any or all of
the provisions hereof by resolution of its Board of Directors, and such
termination or amendment shall become effective as of the date specified by the
Board of Directors in said resolution. Upon such termination the Employee shall
have the right to purchase any transferable insurance policy maintained pursuant
to Section 4, which right must be exercised within sixty (60) days after
termination of employment. If the Employee elects to exercise such purchase
right, the purchase price of the policy shall be the interpolated terminal
reserve of such policy as of the date of such termination.
6. Administration. The Company shall be the Administrator and Named
Fiduciary hereunder. The Company may delegate its responsibilities by written
agreement with the person or persons to whom such responsibilities are so
delegated. The Company is hereby designated as the agent for service of legal
process.
7. Claims Procedure. The Employee or his or her beneficiaries hereunder
shall make a claim for benefits and have such claim reviewed under the following
procedure:
(a) The claimant shall make a claim for benefits by filing a written
request with the Administrator upon a form to be furnished by him for such
purpose. Any claimant shall submit to the Administrator a death
certificate or such other documents as may be required by the Company or
its insurers to verify the claim prior to payment. Any failure to comply
with this requirement within a reasonable time may, within the discretion
of the Board of Directors of the Company, terminate such claimant's right
to benefits hereunder.
(b) If a claim is wholly or partially denied, the Administrator
shall furnish the claimant with written notice of the denial within ninety
(90) days of the date the original claim was filed. This notice of denial
shall provide (1) the reason for the denial, (2) specific reference to the
pertinent provisions hereof on which the denial is based, (3) a
description of any additional information needed to perfect the claim and
an explanation of why such information is necessary, and (4) an
explanation of the claim procedure hereunder.
- 4 -
<PAGE> 5
(c) The claimant shall have sixty (60) days from receipt of the
denial notice in which to make written application for review by the
Administrator. The claimant may request that the review be in the nature
of a hearing. The claimant shall have the right (1) to representation, (2)
to review pertinent documents, and (3) to submit comments in writing.
(d) The Administrator shall issue a decision on such review within
sixty (60) days (one hundred twenty (120) days, if a hearing is requested
and held) after receipt of an application for review as provided in
paragraph (c).
8. General Provisions.
(a) The stockholders, Board of Directors and officers of the Company
do not in any way guarantee to Employee or his beneficiaries the payment
to Employee or his beneficiaries of any benefit or amount which may become
due in accordance with the terms hereof.
(b) All payments made by the Company hereunder shall be voluntary.
Nothing contained in this instrument shall be construed to commit the
Company to any liability for any payment now or hereafter.
(c) This agreement shall not be considered a guarantee of employment
for any period of time whatsoever, and does not insure the Employee's
retention as an employee of the Company or of his continued participation
herein.
(d) All section headings herein are intended merely for convenience
and shall in no way be deemed to modify or supplement the actual terms and
provisions set forth.
(e) The benefits provided hereunder shall be in addition to the
Employee's salary as determined by the Board of Directors of the Company,
and shall not affect the right of the Employee to participate in any
current or future retirement or other employee benefit plan sponsored by
the Company or in any supplemental compensation arrangement which
constitutes a part of the Company's regular compensation structure.
(f) Neither the Employee nor any beneficiary thereof shall have any
right to commute, sell, assign, transfer or otherwise convey the right to
receive any payments hereunder, which payments and the right thereto are
expressly declared to be non-assignable and non-transferable; and in the
event of any attempted assignment or transfer the Company shall have no
further liability hereunder.
- 5 -
<PAGE> 6
(g) The terms, provisions and conditions hereof shall be binding
upon and inure to the benefit of the Company and its assigns, successors
and the Employee and his or her beneficiaries, administrators and
executors.
(h) If any provision hereof is held invalid or unenforceable, the
other provisions will not be affected, and this Agreement will be
construed and enforced as if the invalid or unenforceable provision had
not been included.
(i) This Agreement shall be construed, administered and enforced
according to the laws of the United States of America and the State of
Vermont.
(j) Nothing in this section is intended or is to be construed as
requiring the Company to accelerate the payment dates or increase the
installment payment amounts of any benefits payable under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year first written above.
ROCK OF AGES CORPORATION
By:
---------------------------------------
Kurt M. Swenson, Chairman of the Board
President and Chief Executive Officer
-------------------------------------
Employee
- 6 -
<PAGE> 7
EXHIBIT A
TO
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
Factors Applicable to Benefit Payable
Under 100% Joint and Survivor Normal Form
<TABLE>
<CAPTION>
Number of Years By
Which Participant's
Attained Age Attained Age Exceeds
of Participant Beneficiary's Attained
at Retirement Age at Retirement Applicable Factor
- ------------- ----------------- -----------------
<S> <C> <C>
55 - 59 Less than 10 1.00
10 - 19 0.93
20 - 29 0.90
30 or more 0.89
60 - 64 Less than 10 1.00
10 - 19 0.90
20 - 29 0.86
30 or more 0.85
65 or older Less than 10 1.00
10 - 19 0.89
20 - 29 0.84
30 or more 0.83
</TABLE>
Note: To determine the amount of the joint and survivor benefit payable to
the Employee and his or her surviving spouse, multiply the Employee's
accrued benefit, determined in accordance with Section 1(a) of the
Agreement, by the Applicable Factor shown above.
<PAGE> 8
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
Designation of Beneficiary
I hereby designate the following to receive any and all amounts which
may become payable after my death to any beneficiary other than my surviving
spouse under the Rock of Ages Corporation Salary Continuation Agreement,
superseding any prior designations.
<TABLE>
<CAPTION>
Primary Beneficiary Relationship Share (%)
- ------------------- ------------ ---------
<S> <C> <C>
- ------------------------------- ----------------------- ------------
- ------------------------------- ----------------------- ------------
- ------------------------------- ----------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
Contingent Beneficiary Relationship Share (%)
<S> <C> <C>
- ------------------------------- ----------------------- ------------
- ------------------------------- ----------------------- ------------
- ------------------------------- ----------------------- ------------
</TABLE>
Date: , 19 ---------------------------------
---------------------- -- Employee Signature
<PAGE> 1
Exhibit 10.16
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
AGREEMENT entered into this 3rd day of January, 1996, but effective as
of January 1, 1996, between ROCK OF AGES CORPORATION, a Vermont corporation
having its principal place of business at Main Street, Graniteville, Barre,
Vermont 05654 (hereinafter referred to as the "Company") and MARK A. GHERARDI
(hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Employee is employed by the Company and by reason thereof
has acquired experience and knowledge of considerable value to the Company; and
WHEREAS, the Company and the Employee wish to enter into this Salary
Continuation Agreement ("Agreement"), intended to offer an inducement to the
Employee to remain in the employ of the Company by compensating the Employee
beyond his or her regular salary for services which the Employee will hereafter
render;
NOW, THEREFORE, in consideration of the foregoing, the Company and the
Employee do hereby mutually agree as follows:
1. Salary Continuation Benefits.
(a) Normal Retirement. If the Employee remains continuously
employed by the Company and/or any affiliate thereof on a full-time
basis until termination of active employment on or after the first day
of the month coinciding with or next following his or her sixty-fifth
(65th) birthday, for any reason other than death or reasons
constituting grounds for forfeiture of benefits under Section 3 hereof
("Normal Retirement"), then beginning in the month of such retirement
the Company will pay to the Employee a monthly benefit equal to six
tenths of one percent (.6%) of the Employee's highest annual base
compensation for any calendar year during the last ten (10) years of
employment with the Company and/or any affiliate thereof, divided by
twelve (12) and multiplied by the number of full calendar years of
service completed by the Employee with the Company and/or any
affiliate, predecessor or acquired business thereof since January 1,
1996. Such monthly benefit shall be payable in the form of an annuity
for the life of the Employee or, if the Employee is married at the date
benefits commence, in the form of a joint and one hundred percent
(100%) survivor annuity for the lives of the Employee and his or her
spouse; provided that if the spouse is ten (10) or more years
1
<PAGE> 2
younger than the Employee the annuity payable to the Employee and
spouse shall be actuarially reduced as provided in Exhibit A attached
hereto and by this reference made a part hereof.
(b) Early Retirement. If the Employee attains age fifty-five
(55) and his or her employment with the Company or any affiliate
thereof is thereafter terminated prior to Normal Retirement for any
reason other than death or reasons constituting grounds for forfeiture
of benefits under Section 3 hereof ("Early Retirement"), the Employee
may, with the approval of the Board of Directors of the Company or of
the appropriate committee thereof, begin to receive monthly payments of
the benefits accrued to date under paragraph (a) in accordance with the
provisions thereof, without reduction.
(c) Disability Retirement. If the Employee terminates
employment with the Company or any affiliate thereof prior to attaining
age fifty-five (55) due to disability and no grounds exist for
forfeiture of benefits under Section 3 hereof ("Disability
Retirement"), beginning at age fifty-five (55) the Employee may begin
to receive monthly payments of the benefits accrued at the time of
Disability Retirement under paragraph (a) in accordance with the
provisions thereof, without reduction, provided the Employee is then
still disabled. For purposes hereof, disability shall be defined in the
same manner as in the Company's Salaried Employees' Retirement Plan or,
if such plan does not then exist, in such other retirement plan as may
from time to time be maintained by the Company in which the Employee
participates.
(d) Other Termination of Employment. If the Employee
terminates employment with the Company or an affiliate thereof prior to
attaining age fifty-five (55) for any reason other than death or
disability, this Agreement shall be deemed to have terminated pursuant
to Section 5 hereof, and the Employee and his beneficiaries shall be
entitled to no rights or benefits hereunder, other than the right to
purchase insurance policies as provided in said Section 5.
2. Death Benefits.
(a) Benefits. If the Employee dies while employed by the
Company or an affiliate thereof, or following Disability Retirement but
prior to commencement of benefits hereunder, and no grounds exist for
forfeiture of benefits under Section 3 hereof, the Employee's
beneficiary or beneficiaries shall receive monthly payments of the
benefits accrued under Section 1(a) at the time of the Employee's
death. If the Employee was married at the time of his or her death,
such monthly benefit shall be paid to the surviving spouse in the form
of a one hundred percent (100%) survivor annuity for the life of such
spouse; provided that if such spouse is ten (10) or more years younger
2
<PAGE> 3
than the Employee the survivor annuity payable to such spouse shall be
actuarially reduced as prescribed in Section 1(a) hereof. If the
Employee was unmarried at the time of death, monthly payments shall be
made to the beneficiary or beneficiaries designated in accordance with
paragraph (b) of this Section for a period certain of one hundred
eighty (180) months.
(b) Designation of Beneficiary. The Employee may by written
notice to the Company designate one or more beneficiaries (including a
trust or trusts) to receive any non-spousal payments due under
paragraph (a) above, and the proportionate share to be paid to each
beneficiary if more than one is designated. The Employee may also
designate contingent beneficiaries to receive benefits should the
Employee outlive the primary beneficiaries. If the Employee has
designated more than one beneficiary, the benefits will be divided
among the beneficiaries in any proportion designated by the Employee,
and equally if no proportions have been designated. If more than one
primary beneficiary has been designated and a primary beneficiary dies
before all benefits are paid, benefits will thereafter be divided and
paid equally among any surviving primary beneficiaries unless the
Employee otherwise designates. If all primary beneficiaries have died
before all benefits are paid, the same will thereafter be divided and
paid equally among any surviving contingent beneficiaries unless the
Employee otherwise designates. If no beneficiaries are designated or if
none of the beneficiaries designated survives the Employee, then
benefits will be paid to the Employee's spouse (unless divorce or
separation proceedings are then in progress), or if none, to his
descendants, or if none, to his parents, or if none, to his estate.
3. Forfeiture. Notwithstanding any other provision hereof, the Employee
and his beneficiaries shall forfeit all rights in and to any benefits otherwise
payable hereunder if the Employee's employment with the Company or any affiliate
thereof is or could have been terminated by his employer for (1) ENGAGING IN
UNAUTHORIZED BUSINESS ACTIVITIES COMPETITIVE WITH THOSE OF HIS EMPLOYER OR ANY
AFFILIATE THEREOF WHILE ITS EMPLOYEE, (2) DISHONESTY, (3) COMMISSION OF A
MISDEMEANOR OR FELONY, (4) UNAUTHORIZED DISCLOSURE OF CONFIDENTIAL INFORMATION
OR TRADE SECRETS OF HIS EMPLOYER OR ANY AFFILIATE THEREOF, OR (5) THE BREACH BY
THE EMPLOYEE OF ANY EXPRESS OR IMPLIED AGREEMENT OF EMPLOYMENT WITH HIS EMPLOYER
OR ANY AFFILIATE THEREOF. IN THE EVENT THE EMPLOYEE'S EMPLOYMENT IS NOT SO
TERMINATED, BUT SUBSEQUENT TO ANY TERMINATION OF EMPLOYMENT FOR OTHER REASONS
THE EMPLOYEE IS FOUND TO HAVE BEEN ENGAGED IN ANY OF THE ACTIVITIES OR OFFENSES
ENUMERATED ABOVE DURING THE PERIOD OF HIS EMPLOYMENT WITH THE COMPANY OR ANY
AFFILIATE THEREOF, NO BENEFITS SHALL BE PAYABLE HEREUNDER TO THE EMPLOYEE OR HIS
BENEFICIARIES.
4. Insurance. If the Company or any affiliate thereof shall
3
<PAGE> 4
acquire an insurance policy or any other asset in connection with its
liabilities hereunder, it is expressly understood and agreed that neither the
Employee nor any beneficiary thereof shall have any right with respect to, or
claim against, such policy or other asset, except as expressly provided by the
terms of such policy or in the title to such other asset. Such policy or asset
shall not be deemed to be held under any trust for the benefit of the Employee
or his or her beneficiaries or to be held in any way as collateral security for
the fulfilling of the obligations of the Company or any affiliate thereof
hereunder, except as may be expressly provided by the terms of such policy or
title to such other asset, which shall otherwise be and remain general,
unpledged, unrestricted assets of the owner thereof. Any rights accruing to the
Employee or any other person hereunder are solely those of any unsecured general
creditor of the Company.
5. Termination and Amendment. The Company reserves the right at any
time and from time to time to terminate or amend in whole or in part any or all
of the provisions hereof by resolution of its Board of Directors, and such
termination or amendment shall become effective as of the date specified by the
Board of Directors in said resolution. Upon such termination the Employee shall
have the right to purchase any transferable insurance policy maintained pursuant
to Section 4, which right must be exercised within sixty (60) days after
termination of employment. If the Employee elects to exercise such purchase
right, the purchase price of the policy shall be the interpolated terminal
reserve of such policy as of the date of such termination.
6. Administration. The Company shall be the Administrator
and Named Fiduciary hereunder. The Company may delegate its
responsibilities by written agreement with the person or persons to
whom such responsibilities are so delegated. The Company is hereby
designated as the agent for service of legal process.
7. Claims Procedure. The Employee or his or her beneficiaries
hereunder shall make a claim for benefits and have such claim reviewed
under the following procedure:
(a) The claimant shall make a claim for benefits by filing a
written request with the Administrator upon a form to be furnished by
him for such purpose. Any claimant shall submit to the Administrator a
death certificate or such other documents as may be required by the
Company or its insurers to verify the claim prior to payment. Any
failure to comply with this requirement within a reasonable time may,
within the discretion of the Board of Directors of the Company,
terminate such claimant's right to benefits hereunder.
(b) If a claim is wholly or partially denied, the
Administrator shall furnish the claimant with written notice of the
denial within ninety (90) days of the date the original claim
4
<PAGE> 5
was filed. This notice of denial shall provide (1) the reason for the
denial, (2) specific reference to the pertinent provisions hereof on
which the denial is based, (3) a description of any additional
information needed to perfect the claim and an explanation of why such
information is necessary, and (4) an explanation of the claim procedure
hereunder.
(c) The claimant shall have sixty (60) days from receipt of
the denial notice in which to make written application for review by
the Administrator. The claimant may request that the review be in the
nature of a hearing. The claimant shall have the right (1) to
representation, (2) to review pertinent documents, and (3) to submit
comments in writing.
(d) The Administrator shall issue a decision on such review
within sixty (60) days (one hundred twenty (120) days, if a hearing is
requested and held) after receipt of an application for review as
provided in paragraph (c).
8. General Provisions.
(a) The stockholders, Board of Directors and officers of the
Company do not in any way guarantee to Employee or his beneficiaries
the payment to Employee or his beneficiaries of any benefit or amount
which may become due in accordance with the terms hereof.
(b) All payments made by the Company hereunder shall be
voluntary. Nothing contained in this instrument shall be construed to
commit the Company to any liability for any payment now or hereafter.
(c) This agreement shall not be considered a guarantee of
employment for any period of time whatsoever, and does not insure the
Employee's retention as an employee of the Company or of his continued
participation herein.
(d) All section headings herein are intended merely for
convenience and shall in no way be deemed to modify or supplement
the actual terms and provisions set forth.
(e) The benefits provided hereunder shall be in addition to
the Employee's salary as determined by the Board of Directors of the
Company, and shall not affect the right of the Employee to participate
in any current or future retirement or other employee benefit plan
sponsored by the Company or in any supplemental compensation
arrangement which constitutes a part of the Company's regular
compensation structure.
5
<PAGE> 6
(f) Neither the Employee nor any beneficiary thereof shall
have any right to commute, sell, assign, transfer or otherwise convey
the right to receive any payments hereunder, which payments and the
right thereto are expressly declared to be non-assignable and
non-transferable; and in the event of any attempted assignment or
transfer the Company shall have no further liability hereunder.
(g) The terms, provisions and conditions hereof shall be
binding upon and inure to the benefit of the Company and its assigns,
successors and the Employee and his or her beneficiaries,
administrators and executors.
(h) If any provision hereof is held invalid or unenforceable,
the other provisions will not be affected, and this Agreement will be
construed and enforced as if the invalid or unenforceable provision had
not been included.
(i) This Agreement shall be construed, administered and
enforced according to the laws of the United States of America
and the State of New Hampshire.
(j) Nothing in this section is intended or is to be construed
as requiring the Company to accelerate the payment dates or increase
the installment payment amounts of any benefits payable under this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year first written above.
ROCK OF AGES CORPORATION
By: /s/ Kurt M. Swenson
-----------------------------
Kurt M. Swenson, Chairman
and Chief Executive Officer
/s/ Mark A. Gherardi
-----------------------------
Mark A. Gherardi, Employee
6
<PAGE> 7
EXHIBIT A
TO
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
Factors Applicable to Benefit Payable
Under 100% Joint and Survivor Normal Form
<TABLE>
<CAPTION>
Number of Years By
Which Participant's
Attained Age Attained Age Exceeds
of Participant Beneficiary's Attained
at Retirement Age at Retirement Applicable Factor
- ------------- ----------------- -----------------
<S> <C> <C>
55 - 59 Less than 10 1.00
10 - 19 0.93
20 - 29 0.90
30 or more 0.89
60 - 64 Less than 10 1.00
10 - 19 0.90
20 - 29 0.86
30 or more 0.85
65 or older Less than 10 1.00
10 - 19 0.89
20 - 29 0.84
30 or more 0.83
</TABLE>
Note: To determine the amount of the joint and survivor benefit payable
to the Employee and his or her surviving spouse, multiply the
Employee's accrued benefit, determined in accordance with Section
1(a) of the Agreement, by the Applicable Factor shown above.
<PAGE> 8
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
Designation of Beneficiary
I hereby designate the following to receive any and all amounts
which may become payable after my death to any beneficiary other than my
surviving spouse under the Rock of Ages Corporation Salary Continuation
Agreement, superseding any prior designations.
<TABLE>
<CAPTION>
Primary Beneficiary Relationship Share (%)
------------------- ------------ ---------
<S> <C> <C>
------------------------------------------- ----------------------------- ----------------------------
------------------------------------------- ----------------------------- ----------------------------
------------------------------------------- ----------------------------- ----------------------------
Contingent Beneficiary Relationship Share (%)
---------------------- ------------ ---------
------------------------------------------- ----------------------------- ----------------------------
------------------------------------------- ----------------------------- ----------------------------
------------------------------------------- ----------------------------- ----------------------------
</TABLE>
Date: , 19
- ---------------------- ----
Employee Signature
- ------------------------------
<PAGE> 1
Exhibit 10.17
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
AGREEMENT entered into this 3rd day of January, 1996, and effective
January 1, 1996, by and among ROCK OF AGES CORPORATION, a Vermont corporation
having its principal place of business at Main Street, Graniteville, Barre,
Vermont 05654 (hereinafter referred to as the "Company") and ROCK OF AGES
QUARRIES, INC., a Vermont corporation having its principal place of business at
Main Street, Graniteville, Barre, Vermont 05654 (hereinafter referred to as
"ROAQ") and MELVIN FRIBERG residing at 58 Wildersburg Common, Barre, VT 05641
(hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Employee is employed by the Company and by reason thereof
has acquired experience and knowledge of considerable value to the Company; and
WHEREAS, Employee requires additional inducement to agree to the
non-competition and related provisions of the Employment Agreement (the
"Employment Agreement") that he is concurrently entering into with Company, and
such inducement is intended to be provided hereby; and
WHEREAS, the benefits provided herein are offered to Employee in
replacement of the benefits to have been provided to Employee under a certain
Deferred Compensation Agreement, effective as of December 1, 1994, (the "AFCO
Agreement") between Employee and Anderson-Friberg Company, Inc. ("AFCO") and by
ROAQ as successor in interest of AFCO under the AFCO Agreement; and
WHEREAS, the Company and the Employee wish to enter into this Salary
Continuation Agreement ("Agreement"), intended to offer an inducement to the
Employee to remain in the employ of the Company by compensating the Employee
beyond his regular salary for services which the Employee will hereafter render;
NOW, THEREFORE, in consideration of the foregoing, the Company and the
Employee do hereby mutually agree as follows:
1. Benefits.
(a) Salary on Retirement. Upon termination of the Employment
Agreement; for any reason other than death ("Retirement"), then
beginning in the first month after Retirement the Company will pay to
the Employee a yearly benefit of Fifty Thousand and 00/100 Dollars
($50,000) in equal monthly installments. Such monthly benefit shall be
payable in the form of an annuity for a period of twenty (20) years
from the date of the Employee's Retirement. If the Employee dies before
the
- 1 -
<PAGE> 2
end of the twenty (20) year period, the benefit shall continue to be
payable for the balance of the twenty (20) year period to the
Employee's spouse or other beneficiary as discussed in and designated
pursuant to Section 2 (discussing the payment of benefits upon the
Employee's death before Retirement).
(b) Other Benefits on Retirement. Beginning in the month of
his Retirement, the Company will: (i) grant the Employee the use of a
company car of a quality comparable to the car used by the Employee
during his active employment for so long as the Employee retains a
valid Vermont driver's license from a state of the United States and/or
until his death, and (ii) pay the Employee's health insurance premium
until his death for a Medicare supplement policy which will, when
combined with the Employee's Medicare benefits, afford the Employee
health insurance coverage substantially similar to the coverage
afforded the Employee in the last year of his active employment by the
Company.
2. Death Benefits.
(a) Benefits. If the Employee dies while employed by the
Company or an affiliate thereof, the Employee's beneficiary or
beneficiaries shall receive the Fifty Thousand and 00/100 Dollar per
year benefit payable in equal monthly installments for a period of
twenty (20) years from the date of the Employee's death. If the
Employee was married at the time of his death, such monthly benefit
shall be paid to the surviving spouse in the form of a one hundred
percent (100%) survivor annuity for the twenty (20) years. If the
Employee was unmarried at the time of death, monthly payments shall be
made to the beneficiary or beneficiaries designated in accordance with
Section 2(b).
(b) Designation of Beneficiary. The Employee may by written
notice to the Company designate one or more beneficiaries (including a
trust or trusts) to receive any non-spousal payments due under
paragraph (a) above, and the proportionate share to be paid to each
beneficiary if more than one is designated. The Employee may also
designate contingent beneficiaries to receive benefits should the
Employee outlive the primary beneficiaries. If the Employee has
designated more than one beneficiary, the benefits will be divided
among the beneficiaries in any proportion designated by the Employee,
and equally if no proportions have been designated. If more than one
primary beneficiary has been designated and a primary beneficiary dies
before all benefits are paid, benefits will thereafter be divided and
paid equally among any surviving primary beneficiaries unless the
Employee otherwise designates. If all primary beneficiaries have died
before all benefits are paid, the same will thereafter be divided and
paid equally among any surviving contingent beneficiaries unless the
Employee otherwise designates. If no beneficiaries are designated or if
none of the beneficiaries designated survives the Employee, then
benefits will be paid to the Employee's spouse (unless divorce or
separation proceedings are then in progress), or if none, to his
descendants, or if none, to his parents, or if none, to his estate.
3. Insurance. If the Company or any affiliate thereof shall acquire an
insurance policy or any other asset in connection with its liabilities
hereunder, it is expressly understood and agreed that neither the Employee nor
any beneficiary thereof shall have any right with respect to, or claim against,
such policy or other asset, except as expressly provided by the
- 2 -
<PAGE> 3
terms of such policy or in the title to such other asset. Such policy or asset
shall not be deemed to be held under any trust for the benefit of the Employee
or his or her beneficiaries or to be held in any way as collateral security for
the fulfilling of the obligations of the Company or any affiliate thereof
hereunder, except as may be expressly provided by the terms of such policy or
title to such other asset, which shall otherwise be and remain general,
unpledged, unrestricted assets of the owner thereof. Any rights accruing to the
Employee or any other person hereunder are solely those of any unsecured general
creditor of the Company.
4. Interpretation; Termination of AFCO Agreement. The Employee's
Employment Agreement with the Company permits the termination of the Employee's
services at will. For all purposes of this Agreement the Employee will be deemed
to have been employed by the Company for at least one year during which the
Employee will be deemed to have received all compensation and benefits under the
Employment Agreement as provided therein, provided that such assumption shall
not effect a delay in the commencement of benefits under this Agreement. The
Employee, the Company and ROAQ hereby agree that the AFCO Agreement is hereby
terminated and replace hereby.
5. Administration. The Company shall be the Administrator and Named
Fiduciary hereunder. The Company may delegate its responsibilities by written
agreement with the person or persons to whom such responsibilities are so
delegated. The Company is hereby designated as the agent for service of legal
process.
6. Claims Procedure. The Employee or his beneficiaries hereunder shall
make a claim for benefits and have such claim reviewed under the following
procedure:
(a) The claimant shall make a claim for benefits by filing a
written request with the Administrator upon a form to be furnished by
him for such purpose. Any claimant shall submit to the Administrator a
death certificate or such other documents as may be required by the
Company or its insurers to verify the claim prior to payment. Any
failure to comply with this requirement within a reasonable time may,
within the discretion of the Board of Directors of the Company,
terminate such claimant's right to benefits hereunder.
(b) If a claim is wholly or partially denied, the
Administrator shall furnish the claimant with written notice of the
denial within ninety (90) days of the date the original claim was
filed. This notice of denial shall provide (1) the reason for the
denial, (2) specific reference to the pertinent provisions hereof on
which the denial is based, (3) a description of any additional
information needed to perfect the claim and an explanation of why such
information is necessary, and (4) an explanation of the claim procedure
hereunder.
(c) The claimant shall have sixty (60) days from receipt of
the denial notice in which to make written application for review by
the Administrator. The claimant may request that the review be in the
nature of a hearing. The claimant shall have the right (1) to
representation, (2) to review pertinent documents, and (3) to submit
comments in writing.
- 3 -
<PAGE> 4
(d) The Administrator shall issue a decision on such review
within sixty (60) days (one hundred twenty (120) days, if a hearing is
requested and held) after receipt of an application for review as
provided in paragraph (c).
7. General Provisions.
(a) The Board of Directors and officers of the Company, ROAQ
and Swenson do not in any way guarantee to Employee or his
beneficiaries the payment to Employee or his beneficiaries of any
benefit or amount which may become due in accordance with the terms
hereof.
(b) This agreement shall not be considered a guarantee of
employment for any period of time whatsoever, and does not insure the
Employee's retention as an employee of the Company or of his continued
participation herein.
(c) All section headings herein are intended merely for
convenience and shall in no way be deemed to modify or supplement the
actual terms and provisions set forth.
(d) The benefits provided hereunder shall be in addition to
the Employee's salary as determined by the Board of Directors of the
Company, and shall not affect the right of the Employee to participate
in any current or future retirement or other employee benefit plan
sponsored by the Company or in any supplemental compensation
arrangement which constitutes a part of the Company's regular
compensation structure.
(e) Neither the Employee nor any beneficiary thereof shall
have any right to commute, sell, assign, transfer or otherwise convey
the right to receive any payments hereunder, which payments and the
right thereto are expressly declared to be non- assignable and
non-transferable; and in the event of any attempted assignment or
transfer the Company shall have no further liability hereunder.
(f) The terms, provisions and conditions hereof shall be
binding upon and inure to the benefit of the Company and its assigns,
successors and the Employee and his or her beneficiaries,
administrators and executors.
(g) If any provision hereof is held invalid or unenforceable,
the other provisions will not be affected, and this Agreement will be
construed and enforced as if the invalid or unenforceable provision had
not been included.
(h) This Agreement shall be construed, administered and
enforced according to the laws of the United States of America and the
State of Vermont.
(i) Nothing in this section is intended or is to be construed
as requiring the Company to accelerate the payment dates or increase
the installment payment amounts of any benefits payable under this
Agreement.
8. ROAQ as a Party. ROAQ hereby agrees to joint and several liability
with Company for all of Company's agreements, covenants, duties and undertakings
under this
- 4 -
<PAGE> 5
Agreement and Employee agrees that ROAQ has all of Company's rights under this
agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year first written above.
ROCK OF AGES CORPORATION
/s/ Melvin Friberg By: /s/ Kurt M. Swenson
- ------------------------ --------------------------------------
MELVIN FRIBERG, Employee Kurt M. Swenson, Chairman of the Board
and Chief Executive Officer
ROCK OF AGES QUARRIES, INC.
By /s/ Kurt M. Swenson
--------------------------------------
Kurt M. Swenson, Chairman of the Board
and Chief Executive Officer
- 5 -
<PAGE> 6
ROCK OF AGES CORPORATION
SALARY CONTINUATION AGREEMENT
Designation of Beneficiary
I hereby designate the following to receive any and all amounts which
may become payable after my death to any beneficiary other than my surviving
spouse under the Rock of Ages Corporation Salary Continuation Agreement,
superseding any prior designations.
<TABLE>
<CAPTION>
Primary Beneficiary Relationship Share (%)
------------------- ------------ ---------
<S> <C> <C>
---------------------------------- ------------------------- --------------------
---------------------------------- ------------------------- --------------------
---------------------------------- ------------------------- --------------------
Contingent Beneficiary Relationship Share (%)
---------------------- ------------ ---------
---------------------------------- ------------------------- --------------------
---------------------------------- ------------------------- --------------------
---------------------------------- ------------------------- --------------------
</TABLE>
Date: , 19
----------------- ---- ---------------------------------
Employee Signature
<PAGE> 1
EXHIBIT 11
ROCK OF AGES CORPORATION
NET INCOME PER COMMON SHARE
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Shares of common stock outstanding at
beginning of year.......................... 3,500,000 3,500,000 3,500,000
Plus weighted shares of common stock issued
in the period.............................. -- -- 4,366
Plus weighed shares of common stock
options.................................... 529,744 529,744 712,243
--------- --------- ---------
Weighted average shares outstanding at end of
year....................................... $4,029,744 $4,029,744 $4,216,609
Net income for the period.................... $1,815,281 $1,395,498 $1,908,164
Net income per common share.................. .45 .35 .45
</TABLE>
<PAGE> 1
Exhibit 21
<TABLE>
<CAPTION>
Subsidiaries of the Company State of Incorporation
- --------------------------- ----------------------
<S> <C>
Royalty Granite Corporation Georgia
Rock of Ages International, Ltd. U.S. Virgin Islands
Rock of Ages Canada Inc. Canada
Associated Memorials, Inc. Vermont
Kabushiki Kaisha Rock of Ages Asia Japan
Southern Mausoleums, Inc. Georgia
Autumn Rose Quarry, Inc. Georgia
Caprice Blue Quarry, Inc. Georgia
Pennsylvania Granite Corporation Pennsylvania
Carolina Quarries, Inc., a subsidiary Georgia
of Pennsylvania Granite Corporation
</TABLE>
<PAGE> 1
Exhibit 23.2
The Board of Directors
Rock of Ages Corporation:
The audits referred to in our report dated March 24, 1997, except for note 13
which is as of August 12, 1997, included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
------------------------------
KPMG Peat Marwick LLP
Burlington, Vermont
August 13, 1997
<PAGE> 1
Exhibit 23.3
The Board of Directors
Keystone Memorials, Inc.:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
------------------------------
KPMG Peat Marwick LLP
Atlanta, GA
August 13, 1997
<PAGE> 1
Exhibit 23.4
The Board of Directors
Childs & Childs Granite Company, Inc.
and C&C Granite Company, Inc.:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
------------------------------
KPMG Peat Marwick LLP
Atlanta, GA
August 13, 1997
<PAGE> 1
Exhibit 23.5
The Boards of Directors
Keith Monument Companies:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
------------------------------
KPMG Peat Marwick LLP
Louisville, KY
August 13, 1997
<PAGE> 1
Exhibit 23.6
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Southern Mausoleums, Inc.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ Greene and Company, L.L.P.
-------------------------------------
Greene and Company, L.L.P.
Anderson, South Carolina
August 13, 1997
<PAGE> 1
Exhibit 23.7
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Autumn Rose Quarry, Inc.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ Greene and Company, L.L.P.
-------------------------------------
Greene and Company, L.L.P.
Anderson, South Carolina
August 13, 1997
<PAGE> 1
Exhibit 23.8
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Caprice Blue Quarry, Inc.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ Greene and Company, L.L.P.
-------------------------------------
Greene and Company, L.L.P.
Anderson, South Carolina
August 13, 1997
<PAGE> 1
================================================================================
Exhibit 23.9
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Pennsylvania Granite Corporation
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ Greene and Company, L.L.P.
-------------------------------------
Greene and Company, L.L.P.
Anderson, South Carolina
August 13, 1997
<PAGE> 1
EXHIBIT 23.10
August 13, 1997
Board of Directors
Rock of Ages Corporation
772 Graniteville Road
Graniteville, Vermont 05654
Gentlemen:
I hereby consent to being named as a director in the Registration Statement on
Form S-1 pertaining to the proposed initial public offering of shares of
Class A Common Stock of Rock of Ages Corporation.
Very truly yours,
/s/ Frederick E. Webster, Jr.
-----------------------------
Frederick E. Webster
<PAGE> 1
EXHIBIT 23.11
August 13, 1997
Board of Directors
Rock of Ages Corporation
772 Graniteville Road
Graniteville, Vermont 05654
Gentlemen:
I hereby consent to being named as a director in the Registration Statement on
Form S-1 pertaining to the proposed initial public offering of shares of
Class A Common Stock of Rock of Ages Corporation.
Very truly yours,
/s/ John E. Keith
-----------------
John E. Keith
<PAGE> 1
EXHIBIT 23.12
August 13, 1997
Board of Directors
Rock of Ages Corporation
772 Graniteville Road
Graniteville, Vermont 05654
Gentlemen:
I hereby consent to being named as a director in the Registration Statement on
Form S-1 pertaining to the proposed initial public offering of shares of
Class A Common Stock of Rock of Ages Corporation.
Very truly yours,
/s/ James L. Fox
----------------
James L. Fox
<PAGE> 1
Exhibit 23.13
August 13, 1997
We hereby consent to the use of our firm's name in the Form S-1
Registration Statement, and any amendments thereto, of Rock of Ages Corporation,
a Delaware Corporation, with reference to this firm's assesment of the saleable
reserves for the E.L. Smith, Adam-Pirie and Bethel quarries in such Registration
Statement.
CA Rich Consultants, Inc.
By: /s/ Charles Rich
-----------------------------
Name: Charles Rich
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS OF ROCK OF AGES CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM S-1 REGISTRATION STATEMENT.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<EXCHANGE-RATE> 1 1
<CASH> 763 192
<SECURITIES> 0 0
<RECEIVABLES> 8,525 5,375
<ALLOWANCES> 564 575
<INVENTORY> 11,324 13,374
<CURRENT-ASSETS> 24,939 31,494
<PP&E> 37,406 42,204
<DEPRECIATION> 18,810 20,598
<TOTAL-ASSETS> 47,517 57,501
<CURRENT-LIABILITIES> 11,653 18,262
<BONDS> 0 0
0 0
0 0
<COMMON> 35 38
<OTHER-SE> 17,336 20,005
<TOTAL-LIABILITY-AND-EQUITY> 47,517 57,501
<SALES> 44,669 20,767
<TOTAL-REVENUES> 44,669 20,767
<CGS> 31,263 15,562
<TOTAL-COSTS> 31,263 15,562
<OTHER-EXPENSES> 9,131 4,328
<LOSS-PROVISION> 181 75
<INTEREST-EXPENSE> 1,723 866
<INCOME-PRETAX> 2,552 11
<INCOME-TAX> 643 3
<INCOME-CONTINUING> 1,909 8
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,909 8
<EPS-PRIMARY> .45 0
<EPS-DILUTED> 0 0
</TABLE>
