<PAGE>
[LOGO OF SEVEN UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA INC.]
March 7, 1997
To Our Stockholders:
On behalf of the Board of Directors of Seven Up/RC Bottling Company of
Southern California, Inc. (the "Company"), we are pleased to inform you that on
February 28, 1997, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Dr Pepper Bottling Company of Texas and DPB
Acquisition Corp. (the "Purchaser"). Pursuant to the Merger Agreement, the
Purchaser has today commenced a cash tender offer (the "Offer") to purchase all
of the issued and outstanding shares of Common Stock of the Company (the
"Shares") at $12.00 net per Share in cash (the "Offer Consideration").
Pursuant to the terms and conditions of the Merger Agreement, the Offer will
be followed by a merger of the Company and the Purchaser whereby each Share
will be converted into the right to receive the Offer Consideration.
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE OFFER AND MERGER AND HAS
UNANIMOUSLY DETERMINED THAT THE OFFER AND MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY TENDER THEIR SHARES
PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including the
written opinion dated February 28, 1997 of Houlihan, Lokey, Howard and Zukin,
Inc., the Company's financial advisor, to the effect that, as of such date and
based upon and subject to certain matters stated therein, the consideration to
be received by holders of Shares (other than the Purchaser and its affiliates)
pursuant to the terms of the Merger Agreement is fair to such holders from a
financial point of view. The Schedule 14D-9 contains other important
information relating to the Offer, and you are encouraged to read the Schedule
14D-9 carefully.
In addition to the attached Schedule 14D-9, enclosed also is the Offer to
Purchase dated March 7, 1997, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and provide instructions
as to how to tender your Shares. We urge you to read these documents carefully
in making your decisions with respect to tendering your Shares pursuant to the
Offer.
On behalf of the Board of Directors,
/S/ Bart S. Brodkin
Bart S. Brodkin Chairman of the Board,
President and Chief Executive Officer
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
(NAME OF SUBJECT COMPANY)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
----------------
818043-10-1 (COMMON STOCK)
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
RICK FERGUSON
CHIEF FINANCIAL OFFICER
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
3220 EAST 26TH STREET
VERNON, CALIFORNIA 90023
(213) 268-7779
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
----------------
COPY TO:
LANCE C. BALK, ESQ.
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 446-4800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Seven-Up/RC Bottling Company of Southern
California, Inc., a Delaware corporation (the "Company"), and the address of
the principal executive offices of the Company is 3220 East 26th Street,
Vernon, California, 90023. The title of the class of equity securities to
which this statement relates is the voting common stock, par value $0.01 per
share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a cash tender offer by DPB Acquisition Corp., a
Delaware corporation (the "Purchaser") and a direct wholly owned subsidiary of
Dr Pepper Bottling Company of Texas, a Texas corporation ("Parent"), disclosed
in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated
March 7, 1997, to purchase all outstanding Shares at $12.00 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated March 7, 1997 (the "Offer to Purchase") and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
The Offer is being made by the Purchaser pursuant to an Agreement and Plan
of Merger, dated as of February 28, 1997, by and among the Company, the
Purchaser, and Parent (the "Merger Agreement"). The Merger Agreement provides,
among other things, for the commencement of the Offer by Purchaser and further
provides that, subject to the satisfaction or waiver of certain conditions,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger (the "Surviving Corporation"). Certain terms and
conditions of the Merger Agreement are described below in Item 3. A copy of
the Merger Agreement is attached hereto as Exhibit 1 and is incorporated
herein by reference.
Based on the information in the Offer to Purchase, the principal executive
offices of the Purchaser are located at 2304 Century Center Blvd., Irving,
Texas, 75062.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as described below and as of the date hereof, there exists no
material contract, agreement, arrangement, or understanding and no actual or
potential conflict of interest between the Company or its affiliates and (i)
the Company's executive officers, directors, or affiliates, or (ii) the
Purchaser or the Purchaser's executive officers, directors, or affiliates.
(1) Arrangements with Executive Officers, Directors, or Affiliates of the
Company.
Information with respect to certain contracts, agreements, arrangements, or
understandings between the Company and certain of its executive officers,
directors, or affiliates is set forth below.
Employment Agreements. At a meeting held on October 31, 1996 of the
Personnel & Compensation Committee of the Board of Directors (the
"Compensation Committee"), which committee is comprised of Jack Attwood and
Monroe L. Lowenkron, the Compensation Committee recommended that the Board of
Directors review and evaluate the employment agreement between the Company and
Bart S. Brodkin, the Chief Executive Officer of the Company. After a series of
negotiations between the Compensation Committee and Mr. Brodkin, on January
22, 1997, the Company entered into a Second Amended and Restated Management
Agreement with Mr. Brodkin (the "Brodkin Agreement"). The annual compensation
payable by the Company to Mr. Brodkin under the Brodkin Agreement is $400,000.
The Brodkin Agreement expires on December 31, 1999, subject to automatic one-
year renewals unless terminated upon written notice by either party at least
90 days prior to the end of the year or earlier upon Mr. Brodkin's death,
Disability, resignation, retirement, or removal for Cause (as such capitalized
terms are defined in the Brodkin Agreement). In addition, the Brodkin
Agreement provides for severance benefits to be paid in a lump sum by the
Company to Mr. Brodkin upon a Change of Control (as defined in the Brodkin
Agreement).
1
<PAGE>
The Brodkin Agreement was amended by a First Amendment to Management
Agreement, dated as of February 28, 1997 (the "First Amendment"). The First
Amendment shall only become effective immediately prior to the purchase of
Shares by the Purchaser in the Offer and shall be of no further force or
effect if the Merger Agreement is terminated. The execution and delivery of
the First Amendment was a condition to the execution and delivery of the
Merger Agreement by Parent. The First Amendment, will, among other things,
significantly amend certain of the provisions regarding severance payments to,
and continued fringe benefits for, Mr. Brodkin following the termination of
his employment. In this regard, the special provisions requiring the Company
to pay to Mr. Brodkin an amount equal to three times his base salary and bonus
and to maintain certain benefits for him for 36 months if his employment is
terminated under certain circumstances following a Change of Control (as
defined in the Brodkin Agreement) will be eliminated. In addition, under the
First Amendment, the circumstances constituting Good Reason (as defined in the
Brodkin Agreement) under which Mr. Brodkin may resign and obtain severance
benefits will be significantly narrowed and certain procedural requirements
for the benefit of Mr. Brodkin that would have been applicable if he had been
terminated under certain circumstances constituting Cause (as defined in the
Brodkin Agreement) will be terminated. The First Amendment will also eliminate
Mr. Brodkin's right to receive certain severance payments in the event that he
resigns other than for Good Reason (as defined in the Brodkin Agreement).
Pursuant to the First Amendment, the automatic extension under the Brodkin
Agreement is limited to one additional year, such extension still being
subject to neither party giving contrary notice. The First Amendment will not
alter the base salary provided under the Brodkin Agreement or Mr. Brodkin's
rights to participate in the Company's annual bonus program.
The foregoing is a summary of the Brodkin Agreement and the First Amendment.
Such summary is qualified in its entirety by reference to the text of the
Brodkin Agreement and the First Amendment, copies of which are filed as
Exhibit 2 hereto and are incorporated herein by reference.
On February 10, 1997, the Company entered into Management Agreements with
each of Rick Ferguson and Roy Breneman (the "Ferguson Agreement" and the
"Breneman Agreement," respectively). Each of the Ferguson Agreement and the
Breneman Agreement provides for severance benefits to be paid by the Company
in a lump sum to Messrs. Ferguson and Breneman, respectively, upon a Change of
Control (as defined in each of the Ferguson Agreement and the Breneman
Agreement). The Ferguson Agreement was amended by a Termination Agreement,
dated as of February 28, 1997 (the "Ferguson Contract Termination Agreement").
The execution and delivery of the Ferguson Contract Termination Agreement was
a condition to the execution and delivery of the Merger Agreement by Parent.
The Ferguson Contract Termination Agreement shall only become effective
immediately prior to the purchase of Shares by the Purchaser in the Offer and
shall be of no further force or effect if the Merger Agreement is terminated.
In the event that the provisions of the Ferguson Contract Termination
Agreement become effective, the Ferguson Agreement will be terminated and will
cease to be of any further force and effect. The foregoing is a summary of the
Ferguson Agreement, as amended by the Ferguson Contract Termination Agreement,
and the Breneman Agreement. Such summary is qualified in its entirety by
reference to the text of the Ferguson Agreement, as amended by the Ferguson
Contract Termination Agreement, and the Breneman Agreement, copies of which
are filed as Exhibits 3 and 4 hereto, respectively, and are each incorporated
herein by reference.
Stock Option Plans. Pursuant to the terms and conditions of the First
Amended Joint Plan of Reorganization of the Company and Beverage Group
Acquisition Corporation, dated as of June 19, 1996, and as approved on August
15, 1996 by the United States Bankruptcy Court, District of Delaware (the
"Joint Plan"), the Company granted, on February 3, 1997, options to purchase
Shares, at an exercise price of $7.30 per Share, to its executive officers
(collectively, the "Management Options") as follows: Rick Ferguson, options to
purchase 32,000 Shares; Joe Chalmers, options to purchase 22,000 Shares; Lou
Janicich, options to purchase 22,000 Shares; Roy Breneman, options to purchase
22,000 Shares; Tom Theriault, options to purchase 22,000 Shares; Derrick
Snider, options to purchase 13,800 Shares; Tom Holborow, options to purchase
13,800 Shares; Jose Mejia, options to purchase 5,500 Shares; Steve Walb,
options to purchase 5,500 Shares; and Bart Brodkin, options to purchase
160,549 Shares.
Upon the exercise of the stock purchase warrant held by WB Bottling
Corporation and pursuant to anti-dilution provisions contained in such stock
purchase warrant, the holders of Management Options shall receive additional
options pursuant to anti-dilution provisions contained in the Management
Options. Such additional
2
<PAGE>
options shall be granted as follows: Rick Ferguson, options to purchase 1,800
Shares; Joe Chalmers, options to purchase 1,250 Shares; Lou Janicich, options
to purchase 1,250 Shares; Roy Breneman, options to purchase 1,250 Shares; Tom
Theriault, options to purchase 1,250 Shares; Derrick Snider, options to
purchase 775 Shares; Tom Holborow, options to purchase 775 Shares; Jose Mejia,
options to purchase 300 Shares; Steve Walb, options to purchase 300 Shares;
and Bart Brodkin, options to purchase 8,980 Shares. The foregoing is a summary
of the Management Options. Such summary is qualified in its entirety by
reference to the text of each Management Option, the form of which is filed as
Exhibit 5 hereto and is incorporated herein by reference.
At a meeting of the Compensation Committee held on October 31, 1996, the
Compensation Committee resolved to recommend to the Board of Directors that a
stock option plan be approved for certain managers and directors of the
Company. On January 30, 1997, the Compensation Committee made their
recommendation to the Board of Directors and the Board of Directors
authorized, approved, and adopted the terms and conditions of the 1996-1997
Stock Option Plan (the "Stock Option Plan"). Pursuant to the terms and
conditions of the Stock Option Plan, on February 4, 1997, the Company granted
options to purchase Shares, at an exercise price of $8.00 per Share, to its
executive officers and directors (collectively, the "Employee/Director
Options" and, together with the Management Options, the "Options") as follows:
Rick Ferguson, options to purchase 13,900 Shares; Joe Chalmers, options to
purchase 10,250 Shares; Lou Janicich, options to purchase 10,250 Shares; Roy
Breneman, options to purchase 6,850 Shares; Tom Theriault, options to purchase
10,250 Shares; Derrick Snider, options to purchase 8,300 Shares; Tom Holborow,
options to purchase 8,300 Shares; Jose Mejia, options to purchase 2,150
Shares; Steve Walb, options to purchase 2,150 Shares; Bart Brodkin, options to
purchase 225,622 Shares; Jack Attwood, options to purchase 21,000 Shares;
Monroe Lowenkron, options to purchase 21,000 Shares; William Langley, options
to purchase 21,000 Shares; and Daniel Villanueva, options to purchase 21,000
Shares. The foregoing is a summary of the Stock Option Plan and the
Employee/Director Options. Such summary is qualified in its entirety by
reference to the text of the Stock Option Plan, a copy of which is filed as
Exhibit 6 hereto and is incorporated herein by reference, and the
Employee/Director Options, the form of which is filed as Exhibit 7 hereto and
is incorporated herein by reference.
Director Compensation. Non-employee directors of the Company are paid an
annual retainer of $20,000 plus an additional fee of $1,000 for each meeting
of the Board of Directors attended and are reimbursed for expenses incurred in
attending meetings of the Board of Directors.
Other Directorships. Mr. Lowenkron, a director of the Company, serves on the
Board of Directors of Triarc Companies, the parent company of Royal Crown Cola
Co.
Director Liability and Indemnification. Under the Delaware General
Corporation Law ("DGCL"), a corporation has the power to indemnify any
director or officer against expenses, judgments, fines, and settlements
incurred in a proceeding, other than an action by or in the right of the
corporation, if the person acted in good faith and in a manner that the person
reasonably believed to be in the best interests of the corporation or not
opposed to the best interests of the corporation, and, in the case of a
criminal proceeding, had no reason to believe the conduct of the person was
unlawful. In the case of an action by or in the right of the corporation, the
corporation has the power to indemnify any officer or director against
expenses incurred in defending or settling the action 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; provided, however, that no
indemnification may be made when a person is adjudged liable to the
corporation, unless a court determines such person is entitled to indemnity
for expenses, and then such indemnification may be made only to the extent
such court shall determine. The DGCL requires that to the extent an officer or
director of a corporation is successful on the merits or otherwise in defense
of any third-party or derivative proceeding, or in defense of any claim,
issue, or matter therein, the corporation must indemnify the officer or
director against expenses incurred in connection therewith.
Under the DGCL, a corporation may adopt a provision in its certificate of
incorporation that eliminates or limits the personal liability of a director
to the corporation or its stockholders for monetary damages for breach
3
<PAGE>
of fiduciary duty as a director; provided, however, that such provision may
not eliminate or limit director monetary liability for: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of laws; (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (iv) transactions in which the director
received an improper personal benefit. The Company's Certificate of
Incorporation includes such a provision.
The Company's By-Laws provide that the Company will, to the fullest extent
permitted by the DGCL, indemnify all persons whom it has the power to
indemnify against all of the costs, expenses, and liabilities incurred by them
by reason of having been officers or directors of the Company, or any
subsidiary of the Company or any other corporation for which such persons
acted as officer or director at the request of the Company.
The Merger Agreement also contains covenants that will require the Surviving
Corporation to maintain the Company's current director and officer liability
coverage (or replacement insurance with similar coverage) for a period of two
years after the Effective Time. See "The Merger Agreement--Indemnification"
and "The Merger Agreement--Directors' and Officers' Insurance."
(2) Arrangements with the Purchaser or its Affiliates.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement. Such summary is
qualified in its entirety by reference to the text of the Merger Agreement, a
copy of which is filed as Exhibit 1 hereto and is incorporated herein by
reference.
The Offer. The Merger Agreement provides for the commencement of the Offer,
in connection with which the Purchaser has expressly reserved the right to
amend or modify the terms of the Offer and to waive certain conditions of the
Offer; however, without the prior written consent of the Company, Purchaser
has agreed not to (i) decrease the Offer Price or the form of consideration
therefor or decrease the number of Shares sought pursuant to the Offer, (ii)
change, in any material respect, the conditions to the Offer, (iii) impose
additional material conditions to the Offer, (iv) waive the condition that
there shall be validly tendered and not withdrawn prior to the time the Offer
expires a number of Shares which constitutes at least 65% of the Shares
outstanding on a fully-diluted basis on the date of purchase ("on a fully-
diluted basis" having the following meaning, as of any date: the number of
Shares outstanding, together with Shares which the Company may be required to
issue pursuant to options, warrants, or other obligations outstanding on that
date), (v) extend the expiration date of the Offer (except the Purchaser may
extend the expiration date of the Offer (a) as required by law or (b) for such
periods as Purchaser may reasonably deem necessary (but not to a date later
than the 45th calendar day after the date of commencement) in the event that
any condition to the Offer is not satisfied), or (vi) amend any term of the
Offer in any manner materially adverse to holders of Shares; provided,
however, that, except as set forth above, Purchaser may waive any other
condition to the Offer in its sole discretion; and provided further, that the
Offer may be extended in connection with an increase in the consideration to
be paid pursuant to the Offer so as to comply with applicable rules and
regulations of the Securities and Exchange Commission (the "Commission").
Board Representation. The Merger Agreement provides that promptly upon the
purchase by Parent or any of its subsidiaries of such number of Shares which
represents at least 65% of the outstanding Shares on a fully-diluted basis and
from time to time thereafter, Parent shall be entitled to designate such
number of directors, rounded up to the next whole number (but in no event more
than one less than the total number of directors on the Board of the Company)
as will give Parent, subject to compliance with Section 14(f) of the
Securities Exchange Act of 1934 (the "Exchange Act"), representation on the
Board equal to the product of (x) the number of directors on the Board (giving
effect to any increase in the number of directors pursuant to the Merger
Agreement) and (y) the percentage that such number of Shares so purchased
bears to the aggregate number of
4
<PAGE>
Shares outstanding (such number being the "Board Percentage"). The Company has
agreed, upon request of Parent, to promptly satisfy the Board Percentage by
increasing the size of the Board or using its best efforts to secure the
resignations of such number of directors as is necessary to enable Parent's
designees to be elected to the Board and to cause Parent's designees promptly
to be so elected; provided, that no such action shall be taken which would
result in there being, prior to the consummation of the Merger, less than two
directors of the Company that are not affiliated with Parent. Following the
election or appointment of Parent's designees pursuant to the Merger Agreement
and prior to the Effective Time of the Merger, any amendment or termination of
the Merger Agreement, extension for the performance or waiver of the
obligations or other acts of Parent or Purchaser or waiver of the Company's
rights thereunder shall require the concurrence of a majority of the directors
of the Company then in office who are Continuing Directors. The term
"Continuing Directors" means (i) each member of the Board on the date of the
Merger Agreement who voted to approve the Merger Agreement and (ii) any
successor to any Continuing Director that was recommended to succeed such
Continuing Director by a majority of the Continuing Directors then on the
Board.
Consideration to be Paid in the Merger. The Merger Agreement provides that
upon the terms (but subject to the conditions) set forth in the Merger
Agreement, Purchaser will be merged with and into the Company. In the Merger,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders of any of the Shares, the Purchaser, or the Company, each
Share issued and outstanding immediately prior to the Effective Time
(excluding Shares owned directly or indirectly by (i) the Company or by
Parent, Purchaser, or any other subsidiary of Parent, and (ii) stockholders of
the Company who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal
for such Shares under Delaware law (such Shares to be referred to as
"Dissenting Shares")) shall be converted into the right to receive $12.00 net
per Share in cash, without any interest thereon, less any required withholding
taxes. Each share of the capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
Preparation of the Information Statement; Merger Without a Company
Stockholders Meeting. In the event that Parent or any Subsidiary of Parent
shall acquire at least 65% of the outstanding Shares (on a fully diluted
basis) in the Offer or otherwise, the Parent, Purchaser, and the Company have
agreed, at the request of the Purchaser, to take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after
the expiration of the Offer, in accordance with Section 251 of the DGCL. Such
action shall include the prompt preparation and distribution of an information
statement (if required by applicable law) relating to the written consent of
Stockholders approving the Merger (such information statement as amended or
supplemented from time to time referred to herein as the "Information
Statement"). The Company has agreed to use all commercially reasonable efforts
to cause the Information Statement to be mailed to the Company's Stockholders
at the earliest practicable date. Notwithstanding the foregoing, the Merger
Agreement provides that in the event that Parent or any subsidiary of Parent
acquires at least 90% of the outstanding Shares in the Offer, the Merger may
be effected without a meeting of the Stockholders in accordance with Section
253 of the DGCL.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties hereto. These include
representations and warranties by the Company with respect to corporate
existence and power, capital structure, corporate authorization,
noncontravention, consents and approvals, Commission filings, information
supplied, compliance with applicable laws, litigation, taxes, pension and
benefit plans and ERISA, absence of certain changes or events, absence of
undisclosed material liabilities, opinion of financial advisor, vote required,
labor matters, intangible property, environmental matters, real property,
board recommendation, material contracts, related party transactions,
indebtedness, liens, and other matters.
Parent and Purchaser have also made certain representations and warranties
with respect to corporate existence and power, corporate authorization,
consent and approvals, noncontravention, information supplied, board
recommendation, financing, absence of certain agreements, and other matters.
5
<PAGE>
Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement to the Effective Time, except
as otherwise provided in the Merger Agreement or consented to by Parent, the
Company will conduct its business in the usual, regular, and ordinary course
of business in substantially the same manner as conducted prior to the date of
the Merger Agreement and shall use all reasonable efforts to preserve intact
its business organization, keep available the services of its current officers
and employees and preserve relationships with third parties with whom it has
business dealings to the end that its goodwill and ongoing business shall not
be impaired in any material respect at the Effective Time. The Company has
further agreed that it shall not: (i) declare or pay any dividends on or make
any other distributions in respect of any of its capital stock; (ii) split,
combine, or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire any shares of its capital stock, except as required by the terms of
any employee benefit plan as in effect on the date of the Merger Agreement;
(iv) grant any options, warrants, or rights to purchase Shares; (v) amend the
terms of or reprice any option or amend the terms of Stock Option Plan; or
(vi) issue, deliver or sell, or authorize propose to issue, deliver or sell,
any shares of its capital stock, any Company voting debt or any securities
convertible into, or any rights, warrants, or options to acquire, any such
shares, Company voting debt, or convertible securities, other than (a)
issuances of Shares upon the exercise of options that are outstanding on the
date of the Merger Agreement; or (b) the issuance of Shares upon the exercise
of warrants that are outstanding on the date of the Merger Agreement; (vii)
make or propose to make any changes in its Certificate of Incorporation or By-
laws; (viii) merge or consolidated with, or acquire any equity interest in,
any corporation, partnership, association, or other business organization, or
enter into an agreement with respect thereto; (ix) acquire or agree to acquire
any assets of any corporation, partnership, association, or other business
organization or division thereof, except for the purchase of inventory and
supplies in the ordinary course of business; (x) create or otherwise permit to
exist any subsidiary of the Company; (xi) sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operation or
capital lease), encumber, or otherwise dispose of, any of its assets except
for dispositions in the ordinary course of business consistent with past
practice which are not material, individually or in the aggregate, to the
Company; (xii) authorize, recommend, propose, or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the Company;
(xiii) take or agree to take any action that is reasonably likely to result in
any of the Company's representations or warranties contained in the Merger
Agreement being untrue in any material respects or any of the Company's
covenants contained in the Merger Agreement not being satisfied in all
material respects; (xiv) increase in any manner the compensation of directors,
officers, or key employees, pay or agree to pay any pension, retirement
allowance or other employee benefit not required or contemplated to be paid
prior to the effective time of the Merger by any of the existing benefit plans
or employee arrangements of the Company as in effect on the date of the Merger
Agreement to any such director, officer or key employee, enter into any new,
or materially amend any existing, employment, severance, or termination
agreement with any such a director, officer, or key employee or, except as may
be required by law, become obligation under any new employee benefit plan or
employee arrangement, which was not in existence on the date of the Merger
Agreement, or amend any such plan or arrangement in existence on the date of
the Merger Agreement if such amendment would have the effect of materially
enhancing any benefits thereunder; (xv) assume or incur (which shall not be
deemed to include entering into credit agreements, lines of credit or similar
arrangements until borrowings are made under such arrangements) indebtedness
for borrowed money or act as guarantor for any such indebtedness, issue or
sell any debt securities or warrants or rights to acquire debt securities or
guarantee any debt securities of others, or enter into any lease (whether such
lease is an operating or a capital lease) or create any mortgages, liens, or
security interests or other encumbrances on Company property or enter into any
"keep well" or other agreement or arrangement to maintain the financial
condition of another person except for indebtedness incurred by the Company
from time to time for working capital purposes in the ordinary course of
business under the Credit Agreement; (xvi) enter into, modify, rescind,
terminate, waive, release or otherwise amend in any material respect any of
the terms or provisions of any material contract; (xvii) take any action,
other than in the ordinary course of business consistent with past practice or
as required by the Commission or by law, with respect to accounting policies,
procedures, and practices; or (xvii) incur any capital expenditures other than
those set forth on a schedule to the Merger Agreement.
6
<PAGE>
Other Agreements. The Company, Parent, and Purchaser have agreed to use
their respective commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary,
proper, or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by the Merger Agreement subject
to approval of the Company's stockholders, including cooperating fully with
the other party, including by provision of information and making of all
necessary filings in connection with, among other things, approvals under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"). Parent and the Company have also made
certain agreements regarding publicity, access to information, and
confidentiality.
No Solicitation. From and after the date of the Merger Agreement until the
termination thereof, neither the Company, nor any of its officers, directors,
employees, representatives, agents, or affiliates (including without
limitation, any investment banker, attorney, or accountant retained by the
Company) (such officers, directors, employees, representatives, agents,
affiliates, investment bankers, attorneys, and accountants being collectively
referred to as "Representatives), will, directly or indirectly, initiate,
solicit, or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, and the Company shall not authorize or permit any of its
Representatives to take any such action, and the Company shall notify Parent
orally (within one business day) and in writing (as promptly as practicable)
of all of the relevant details relating to, and all material aspects of, all
inquiries and proposals which it or any of its Representatives may receive
relating to any of such matters and, if such inquiry or proposal is in
writing, the Company shall deliver to Parent a copy of such inquiry or
proposal as promptly as practicable; provided, however, that the Board is not
prohibited from (i) furnishing information to, or entering into discussions
with, any person or entity that makes an unsolicited written bona fide
Acquisition Proposal (provided that such person or entity has the necessary
funds or commitments to provide the funds to effect such Acquisition Proposal)
if, and only to the extent that, (A) the Board, after consultation with and
based upon the advice of independent legal counsel (who may be the Company's
regularly engaged independent legal counsel), determines in good faith that
such action is necessary for the Board to comply with its fiduciary duties to
Stockholders under applicable law, (B) prior to taking such action, the
Company (x) provides reasonable prior notice to Parent to the effect that it
is taking such action and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form, and (C) the Company
shall promptly and continuously advise Parent as to all of the relevant
details relating to, and all material aspects of, any such discussions or
negotiations; or (ii) failing to make or withdrawing or modifying its
recommendation to the Stockholders to approve the Merger Agreement and the
transactions contemplated thereby, including the Merger, and to accept the
Offer and tender their Shares pursuant thereto, if there exists an Acquisition
Proposal and the Board, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary
for the Board to comply with its fiduciary duties to Stockholders under
applicable law; or (iii) making a "stop-look-and-listen" communication with
respect to the Offer or the Merger Agreement of the nature contemplated in,
and otherwise in compliance with, Rule 14d-9 under the Exchange Act as a
result of an Acquisition Proposal meeting the requirements of clause (i)
above. The term "Acquisition Proposal" means any of the following transactions
(other than the transactions among the Company, Parent, and Purchaser
contemplated in the Merger Agreement) involving the Company: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 25% or more of the assets of the Company,
computed on the basis of book value, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith; or
(iv) any public announcement or a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Fees and Expenses. Except as provided below, the Merger Agreement provides
that all costs and expenses in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party
7
<PAGE>
incurring such expense, except as otherwise provided in the Merger Agreement
and except with respect to claims for damages incurred as a result of the
breach of the Merger Agreement. In addition, the Company has agreed to pay
Parent a fee in immediately available funds equal to $2,500,000 upon the
termination of the Merger Agreement in accordance with the terms thereof if
any of the following events occurs (each, a "Trigger Event"): (i) the Board
shall have (A) withdrawn or adversely modified in any material respect or
taken a public position materially inconsistent with its approval or
recommendation of the Offer, the Merger or the Merger Agreement, (B) made a
"stop-look-and-listen" communication as provided in the Merger Agreement less
than five business days prior to the 45th calendar day after the date of the
commencement of the Offer, or (C) failed to reaffirm its approval or
recommendation of the Offer, the Merger, or the Merger Agreement in the event
an Acquisition Proposal has been made to the Company prior to the consummation
of the Offer; or (ii) an Acquisition Proposal has been recommended or accepted
by the Company or the Company shall have entered into an agreement (other than
a confidentiality agreement as contemplated by the Merger Agreement) with
respect to an Acquisition Proposal. In the event (i) the Merger Agreement
shall be terminated in accordance with its terms, (ii) on or after August 15,
1996 and at or prior to such termination, any person or group of persons shall
have made an Acquisition Proposal (each such person or member of a group of
such persons being referred to as a "Designated Person"), and (iii) either (A)
a transaction contemplated by the term "Acquisition Proposal" shall be
consummated, on or before the one year anniversary of the termination of the
Merger Agreement, with any Designated Person or any affiliate of any
Designated Person or (B) the Company shall enter into an agreement, on or
before the one year anniversary of the termination of the Merger Agreement,
with respect to an Acquisition Proposal with any Designated Person or any
affiliate of any Designated Person and a transaction contemplated by the term
"Acquisition Proposal" shall thereafter be consummated with such Designated
Person or affiliate thereof, then the Company shall pay to Parent a fee in
immediately available funds equal to $2,500,000 (less any amount paid in
connection with the termination of the Merger Agreement upon the occurrence of
a Trigger Event), such fee to be paid contemporaneously with the consummation
of such contemplated transaction. Any amounts payable to Parent pursuant to
the foregoing that are not paid when due shall bear interest at the rate of 9%
per annum from the date due through and including the date paid. Unless Parent
is materially in breach of the Merger Agreement as of the final expiration of
the Offer (after giving effect to any extensions thereof), the Company shall
pay to Parent upon demand an amount, not to exceed $750,000 to reimburse
Parent and Purchaser for their Expenses (defined herein), payable in same-day
funds, if the minimum tender condition is not met or the Requisite Consents
(as defined in the Merger Agreement) are not obtained or in full force and
effect as of the final expiration of the Offer (after giving effect to any
extensions thereof). As used herein, the term Expenses shall mean all
documented, reasonable out-of-pocket fees and expenses incurred or paid by or
on behalf of Parent or the Purchaser to third parties in connection with the
Merger, the Offer, or the consummation of any of the transactions contemplated
by the Merger Agreement, including, without limitation, all printing costs and
reasonable fees and expenses of counsel, investment banking firms,
accountants, experts, and consultants.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the satisfaction
prior to the Closing Date (as defined in the Merger Agreement) of the
following conditions: (i) the Merger Agreement and the Merger shall have been
approved and adopted by the affirmative vote or written consent of the holders
of a majority of the outstanding Shares entitled to vote thereon if such vote
is required by applicable law; provided that Parent and Purchaser shall vote
all Shares purchased pursuant to the Offer in favor of the Merger; (ii) the
waiting period (and any extension thereof) applicable to the merger under the
HSR Act shall have been terminated or shall have expired, and no restrictive
order or other requirements shall have been placed on the Company, Parent,
Purchaser, or the Surviving Corporation in connection therewith; (iii) no
temporary restraining order, preliminary or permanent injunction, or other
order issued by any court of competent jurisdiction or other legal restraint
or prohibited preventing the consummation of the Merger shall be in effect;
provided however, that prior to invoking the condition, each party shall use
all commercially reasonable efforts to have any such decree, ruling,
injunction or order vacated; (iv) no statute, rule, order, decree or
regulation shall have been enacted or promulgated by any government or
governmental agency or authority which prohibits the consummation of the
Merger; and (v) Purchaser shall have accepted for payment and paid for the
Shares tendered in the Offer such that, after such acceptance and payment,
Parent and its affiliates shall own, at consummation of the Offer, 65% of the
outstanding Shares of the Company
8
<PAGE>
on a fully diluted basis; provided that this condition shall be deemed to have
been satisfied if Purchaser fails to accept for payment and pay for Shares
pursuant to the Offer in violation of the terms and conditions of the Offer.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent, by (a) mutual written consent of the
Company and Parent or by mutual action of their respective Board of Directors;
(b) either the Company or Parent, (i) prior to consummation of the Offer if
there has been a breach of any representation, warranty, covenant or agreement
on the part of the other set forth in the Merger Agreement, which breach has
not been cured within three business days following receipt by the breaching
party of notice of such breach, or (ii) if any permanent injunction or other
order of a court or other competent authority preventing the consummation of
the Merger shall have become final and non-appealable; (c) either the Company
or Parent, so long as such party has not breached its obligations under the
Merger Agreement, if the Merger shall not have been consummated on or before
the 45th calendar day following the consummation of the Offer; provided, that
such right to terminate the Merger Agreement under this clause shall not be
available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date; (d) Parent, in the event that a
Trigger Event has occurred prior to the consummation of the Offer (see "Fees
and Expenses" above); (e) Parent, in the event an Acquisition Proposal has
been made to the Company prior to the consummation of the Offer and the
Company shall after request from the Parent, fail to publicly reaffirm its
approval or recommendation of the Offer, the Merger, and the Merger Agreement
on or before the fifth business day following the date on which Parent shall
request such reaffirmation; (f) Parent, if the Offer terminates, is withdrawn,
abandoned, or expires by reason of the failure to satisfy any of the
conditions described in Section 14 of the Offer to Purchase; (g) the Company,
if the Offer shall have expired or have been withdrawn, abandoned, or
terminated without any Shares being purchased by Purchaser thereunder on or
prior to the 45th calendar day after the date of commencement of the Offer;
(h) by the Company, if the Board of Directors of the Company shall fail to
make or withdraw or modify its recommendation that the Stockholders approve
the Merger Agreement and the Merger and accept the Offer and tender their
Shares pursuant thereto if there exists an Acquisition Proposal and the Board
of Directors of the Company, after consultation with and based upon the advice
of independent legal counsel who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary
for the Board of Directors of the Company to comply with its fiduciary duties
to holders of Shares under applicable law. In the event of termination of the
Merger Agreement by either Company or Parent as provided therein, the Merger
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Purchaser, or the Company, or their
respective affiliates, officers, directors, or shareholders, except to the
extent that such termination results from the material breach by a party to
the Merger Agreement of any of its representations or warranties, or any of
its covenants or agreements (subject to certain limitations) or as otherwise
provided in the Merger Agreement.
Indemnification. The Merger Agreement provides that the Company shall, and
from and after the Effective Time, the Surviving Corporation shall, indemnify,
defend, and hold harmless each person who was at the date of the Merger
Agreement, or had been at any time prior to the date of the Merger Agreement
or who becomes prior to the Effective Time, an officer or director of the
Company (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees and expenses), liabilities or
judgments or amounts paid in settlement with the approval of the indemnifying
party (which approval shall not be unreasonably withheld) of or in connection
with any threatened or actual claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director or officer of the Company whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, or pertaining
to the Merger Agreement or the transactions contemplated thereby in each case
to the full extent a corporation is permitted under the DGCL to indemnify its
own directors or officers, as the case may be, and the Company and the
Surviving Corporation, as the case may be, shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified
Party to the full extent permitted by law. All rights to indemnification,
9
<PAGE>
including provisions relating to advances of expenses incurred in defense of
any action or suit, existing in favor of the Indemnified Parties with respect
to matters occurring through the Effective Time, shall survive the Merger and
shall continue in full force and effect for a period of not less than five
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
Directors' and Officers' Insurance. For a period of two years after the
Effective Time, the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by the Company (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in any material respect to the
Indemnified Parties) with respect to matters arising before the Effective
Time, provided that the Surviving Corporation shall not be required to pay an
annual premium for such insurance in excess of 150% of the last annual premium
paid by the Company prior to the date of the Merger Agreement, but in such
case shall purchase as much coverage as possible for such amount.
Amendment. Subject to applicable law, the Merger Agreement may be amended,
modified, or supplemented only by written agreement of Parent, Purchaser, and
the Company at any time prior to the Effective Time with respect to any of the
terms contained therein; provided, however, that after the Merger Agreement is
approved by the Stockholders, no such amendment or modification shall (i)
reduce the amount or change the form of consideration to be delivered to the
holders of the Shares, (ii) cause the date by which the Merger is required to
be effected, or (iii) change the amounts payable in respect of the options or
warrants set forth in the Merger Agreement.
Timing. The Merger Agreement provides that the closing of the Merger shall
occur on the second business day after satisfaction of the conditions set
forth in the Merger Agreement (or as soon as practicable thereafter following
satisfaction or waiver of such conditions). The Merger shall become effective
upon such filing or at such time thereafter as may be provided in the
certificate of merger to be filed with the Secretary of State of the State of
Delaware, as provided in the DGCL, on the date of the closing of the Merger or
as soon as practicable thereafter.
The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Parent has agreed to
cause the Merger to be consummated on the terms set forth above, there can be
no assurance as to the timing of the Merger.
OTHER AGREEMENTS
Management Agreements. As a condition to the execution and delivery of the
Merger Agreement, Parent required the Company and Mr. Brodkin to enter into
the First Amendment and the Company and Mr. Ferguson to enter into the
Ferguson Contract Termination Agreement. See the discussion under Item 3
above.
Confidentiality Agreements. On February 26, 1997, the Parent and the Company
entered into a Confidentiality Agreement (the "Confidentiality Agreement")
pursuant to which the Company agreed to supply certain information to the
Parent and the Parent agreed to treat such information as confidential and to
use such information solely in connection with the evaluation of a possible
transaction with the Company. The Parent agreed that until February 26, 1999,
it would not, among other things, taken any action that would cause or
facilitate the acquisition by any person, including the Parent or its
affiliates, of any securities or assets of, or a merger or business
combination with, the Company. The foregoing is a summary of the
Confidentiality Agreement. Such summary is qualified in its entirety by
reference to the text of the Confidentiality Agreement, a copy of which is
filed as Exhibit 8 hereto, and is incorporated herein by reference.
10
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has unanimously approved the Merger Agreement and the
transactions contemplated thereby and recommends that the stockholders of the
Company tender their Shares pursuant to the Offer.
(B) BACKGROUND; REASONS FOR THE RECOMMENDATION.
Set forth below is a description of the background of the Offer, including a
brief description of the material contacts between Jim L. Turner, the
President and Chief Executive Officer of Parent, and the officers and
directors of the Company regarding the transactions described herein.
Since the consummation of the Joint Plan and the emergence of the Company
from bankruptcy, the Company's senior management have been actively studying
the changing and competitive bottling environment, and analyzing how the
Company's current and future products and services might best compete in the
changing marketplace.
This analysis has caused the Company to consider exploring strategic
opportunities to combine with other bottling operations and to consider
conducting talks with other companies regarding such potential transactions.
Mr. Lowenkron, a director of the Company, and Mr. Turner have known each
other personally and professionally for many years. Mr. Lowenkron was employed
by a number of well-known soft drink franchise companies, including A&W
Brands, Inc. ("A&W Brands"). Mr. Lowenkron was the Chief Executive Officer and
a director of A&W Brands and its predecessors from 1980 through 1993. A&W
Brands produces and sells a number of soft drink concentrates (including
concentrates for A&W and Squirt brand products) to soft drink bottlers,
including Parent. Mr. Lowenkron and Mr. Turner also served together on the
board of directors of G. Heileman Brewing Company, Inc. On innumerable
occasions during the course of their relationship, Mr. Turner and Mr.
Lowenkron have discussed the soft drink industry generally and Parent's
business specifically. With respect to Parent's business, these discussions
included Mr. Turner's goals and strategies for Parent, as well as the
potential for expanding Parent's business base through appropriate
acquisitions.
In connection with the Company's strategic objectives (as described above),
on December 18, 1996, Mr. Lowenkron telephoned Mr. Turner. Mr. Lowenkron and
Mr. Turner discussed, in general terms, the objectives of the Company and
Parent, the potential opportunities and benefits that might arise as a result
of a combination of the two companies, and whether Mr. Turner would be
interested in further exploring a possible business combination involving
Parent and the Company. Mr. Lowenkron stated that he would have Ed Whiting of
Whitman, Heffernan, Rhein & Co., then the Company's financial advisors, call
Mr. Turner to follow-up on their discussion.
On December 20, 1996, Mr. Brodkin, the President and Chief Executive Officer
of the Company, telephoned Mr. Turner to follow-up on Mr. Turner's
conversation with Mr. Lowenkron. Mr. Turner advised Mr. Brodkin that he would
be interested in exploring a business combination, but that he would need to
visit the Company to obtain additional information before he could proceed any
further.
On December 23, 1996, Mr. Whiting telephoned Mr. Turner to discuss Parent's
interest in a potential business combination with the Company. Mr. Turner
indicated to Mr. Whiting that he would be interested in visiting the Company
and obtaining additional information in order to evaluate such a transaction.
On January 3, 1997, Mr. Brodkin telephoned Mr. Turner. According to Mr.
Brodkin, Mr. Whiting had suggested that Mr. Brodkin call Mr. Turner to set up
a meeting to provide Mr. Turner with additional information in order for
Parent to evaluate a potential business combination with the Company. The
meeting took place on January 16, 1997. Attendees were Mr. Turner, Mr.
Whiting, Mr. Brodkin, and Rick Ferguson, the Chief Financial Officer of the
Company. Mr. Brodkin and Mr. Ferguson presented certain historical financial
data concerning the Company and responded to questions raised by Mr. Turner.
Mr. Turner indicated that Parent would have an interest in pursuing an
acquisition of the Company. According to Mr. Turner, Mr. Whiting stated that
he believed that the three major stockholders of the Company would likely
require a price in the range of $11 to $12 per
11
<PAGE>
share in such a transaction. On January 17 and 18, 1997, Messrs. Turner,
Brodkin, and Ferguson discussed by telephone certain information regarding the
Company and Messrs. Brodkin and Ferguson responded to certain follow-up
questions raised by Mr. Turner.
On January 18, 1997, Mr. Turner telephoned Mr. Lowenkron, who, Mr. Turner
had been advised, had been appointed by the Company's Board of Directors to
head a special committee comprised of Mr. Lowenkron and Mr. William Langley
(the "Strategic Committee") to review any offers to acquire the Company. Mr.
Turner and Mr. Lowenkron agreed that Mr. Turner would meet with the Strategic
Committee on February 6, 1997 to present a proposal for acquiring the Company.
On January 27, 1997, the Company and Parent executed a confidentiality
agreement.
On February 6, 1997, Mr. Turner and certain of Parent's legal and financial
advisors met with Mr. Lowenkron, Mr. Langley (who, Mr. Turner was then
advised, was the other member of the Strategic Committee), and the Company's
outside counsel. Mr. Turner and Parent's financial advisors presented the
material terms of Parent's proposal for acquiring the Company. The proposal
contemplated a tender offer followed by a back-end merger, with the
stockholders of the Company receiving $12.00 per Share in the transactions.
The Strategic Committee then informed Mr. Turner and Parent's advisors that
they would discuss Parent's proposal with the entire Board of Directors of the
Company, which discussion was held on February 6, 1997.
On February 7, 1997, Mr. Brodkin telephoned Mr. Turner and informed him that
the Company's Board of Directors was willing to continue to explore the
possibility of entering into a mutually acceptable transaction with Parent.
Mr. Brodkin informed Mr. Turner that the Board of Directors had instructed the
Company's representatives to proceed with the negotiation of definitive
documents. Over the next three weeks, representatives of Parent conducted a
"due diligence" investigation of the Company and representatives of the
Company and Parent negotiated the Merger Agreement and the details of the
transactions contemplated thereby.
On February 13, 1997 and February 19, 1997, the Board of Directors was
briefed by Messrs. Brodkin and Ferguson as to the status of the "due
diligence" investigation of the Company being conducted by representatives of
Parent as well as the status of the negotiations regarding the Merger
Agreement.
On February 26, 1997, Texas Commerce Bank National Association and Chase
Securities Inc. delivered to Parent a Commitment Letter (the "Bank Commitment
Letter") and a copy was provided to the Company's Board of Directors as well
as to the Company's representatives. Effective February 26, 1997, the Company
and Parent entered into a new confidentiality agreement that superseded their
prior confidentiality agreement.
Negotiations among the Company, the Parent, and their respective
representatives continued through February 28, 1997 with respect to various
matters, including the economic terms of the Merger, and the legal and
financial advisors of the Company and the Parent completed their due diligence
review of the Company. On February 28, 1997, the parties reached agreement on
the final terms of the Merger Agreement and the related transactions
contemplated thereunder.
The Board of Directors of the Company held a meeting on February 28, 1997 to
discuss the proposed Offer and Merger, the Merger Agreement, and the related
transactions contemplated thereunder. After reviewing the transaction with the
Company's legal and financial advisors and hearing the presentation of
Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan Lokey"), the Company's
financial advisor, the Board of Directors discussed the proposed Offer and
Merger and all transactions contemplated thereby. The Board of Directors
unanimously approved the Offer, the Merger, and the Merger Agreement,
recommended that the stockholders of the Company tender their Shares pursuant
to the Offer, and executed and delivered the Merger Agreement in the late
afternoon on February 28, 1997.
On March 7, 1997, Parent commenced the Offer.
12
<PAGE>
A copy of the joint press release of the Company and the Purchaser
announcing the execution of the Merger Agreement is attached hereto as Exhibit
9 and is incorporated herein by reference. A copy of a letter to stockholders
of the Company, which accompanies this Schedule 14D-9, is attached hereto as
Exhibit 10 and is incorporated herein by reference.
In reaching its conclusion and recommendation described above, the Board of
Directors considered the following factors:
1. the terms of the Merger Agreement;
2. the opinion of Houlihan Lokey to the effect that, as of the date of
its opinion and based upon and subject to certain matters stated therein,
the consideration to be received by the holders of Shares (other than the
Purchaser and its affiliates) pursuant to the Offer and the Merger, taken
together, was fair to such holders from a financial point of view. The full
text of Houlihan Lokey's written opinion, which sets forth the assumptions
made, matters considered, and limitations on the review undertaken by
Houlihan Lokey, is attached hereto as Exhibit 11 and is incorporated herein
by reference. HOLDERs OF SHARES ARE URGED TO READ THE OPINION OF HOULIHAN
LOKEY CAREFULLY IN ITS ENTIRETY;
3. the fact that the $12.00 per Share to be paid pursuant to the Offer
represents a premium over the valuation of the Shares upon the consummation
of the Joint Plan and the emergence of the Company from bankruptcy in
August 1996 and subsequent trading prices of the Shares;
4. the familiarity of the Board of Directors with the financial
condition, results of operations, business, prospects, and strategic
objectives of the Company and the conditions of the bottling industry;
5. the Parent's and the Purchaser's financial condition, results of
operations, cash flows, competitive position, and prospects;
6. the high regard of management of the Company for the integrity and
operating ability of the Parent and the recommendation of management
(considered in light of the matters described or referred to under Item 3--
"Identity and Background" above);
7. the fact that the Merger Agreement, which prohibits the Company, its
subsidiaries, or its affiliates from initiating, soliciting, or encouraging
any potential Acquisition Proposal, does permit the Company (conditioned
upon the execution of confidentiality agreements) to furnish non-public
information to, allow access by and participate in discussions and
negotiations with any third party that has submitted a bona fide and
unsolicited Acquisition Proposal to the Company, provided that (i) such
third party has the necessary funds or commitments to provide the funds to
effect such Acquisition Proposal, (ii) the Board of Directors, upon advice
of counsel, determines that failure to so act would constitute a breach of
its fiduciary duties, and (iii) the Board of Directors determines that
failure to so act would constitute a breach of its fiduciary duties;
8. the provisions of the Merger Agreement that require the Company to pay
the Purchaser a termination fee of $2,500,000 and reimburse the Purchaser
for its out-of-pocket expenses (subject to a maximum amount of $750,000)
under certain circumstances as described above under "Merger Agreement--
Fees and Expenses";
9. the structure of the transaction, including the fact that the Offer
will permit stockholders to receive cash for their Shares and the terms and
conditions of the Bank Commitment Letter; and
10. the regulatory approvals required to consummate the Merger, and the
prospects for receiving all such approvals.
13
<PAGE>
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position and recommendations as being based on the
totality of the information presented to and considered by them.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
Houlihan Lokey has been retained by the Board of Directors to act as a
financial advisor to the Company with respect to the Offer and the Merger.
Pursuant to an engagement letter with Houlihan Lokey, the Company has agreed
to pay Houlihan Lokey a fee of $200,000 for its services, $100,000 of which
was payable upon the execution of the engagement letter and the remainder of
which was payable upon delivery by Houlihan Lokey to the Company of its
written opinion as to the consideration to be received by holders of Shares
pursuant to the Offer and the Merger. No portion of that fee was contingent
upon the consummation of the Offer or the Merger or the conclusions reached in
the opinion. The Company has also agreed to reimburse Houlihan Lokey for its
reasonable out-of-pocket expenses (up to $10,000 limit), and to indemnify
Houlihan Lokey and certain related parties against certain liabilities,
including liabilities under the federal securities laws. Houlihan Lokey has
provided certain financial advisory and investment banking services to the
Company in the past, for which services Houlihan Lokey has received customary
compensation.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain, or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in Item 3(b) (the provisions of which are hereby
incorporated by reference), no transactions in the Shares have been effected
during the past 60 days by the Company or, to the best of the Company's
knowledge, by any executive officer, director, affiliate, or subsidiary of the
Company.
(b) To the best of the Company's knowledge, each executive officer and
director of the Company who holds Options intends, at the Effective Time, to
cancel and settle such Options in consideration for an amount equal to the
difference between $12.00 per Share underlying such Option and the per Share
exercise price of such Option in accordance with the terms and conditions of
Section 3.5 of the Merger Agreement, a copy of which is attached hereto as
Exhibit 1 and is incorporated herein by reference. Except for the foregoing,
to the best of the Company's knowledge, none of the executive officers,
directors, and affiliates of the Company currently intends to tender, pursuant
to the Offer, any Shares to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth above or in Items 3(b) and 4(b) (the provisions of
which are hereby incorporated herein by reference), the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale,
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described above or in Items 3(b) or 4 above (the provisions of
which are hereby incorporated herein by reference), there are no transactions,
Board of Directors' resolutions, agreements in principle, or signed contracts
in response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
14
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete,
and correct.
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
By: /s/ Bart S. Brodkin
---------------------------------
Bart S. Brodkin
Chairman and Chief Executive Officer
Dated: March 7, 1997
<PAGE>
EXHIBIT 1
AGREEMENT AND
PLAN OF MERGER
AMONG
DR PEPPER BOTTLING COMPANY OF TEXAS,
DPB ACQUISITION CORP.,
AND
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Offer. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Offer Documents. . . . . . . . . . . . . . . . . . . 2
1.3 Company Actions . . . . . . . . . . . . . . . . . . . 3
1.4 Directors . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . 6
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Effective Time of the Merger . . . . . . . . . . . . 6
2.4 Effects of the Merger . . . . . . . . . . . . . . . . 6
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . . . . . . . 7
3.1 Effect on Capital Stock . . . . . . . . . . . . . . . 7
3.2 Conversion of Securities. . . . . . . . . . . . . . . 7
3.3 Payment for Shares . . . . . . . . . . . . . . . . . 8
3.4 Stock Transfer Books . . . . . . . . . . . . . . . . 10
3.5 Stock Options . . . . . . . . . . . . . . . . . . . . 10
3.6 Dissenting Shares . . . . . . . . . . . . . . . . . . 11
3.7 Warrants . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 12
4.1 Representations and Warranties of the Company . . . . 12
4.2 Representations and Warranties of Parent and Sub . . 29
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . . 32
5.1 Covenants of the Company . . . . . . . . . . . . . . 32
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Preparation of the Information Statement; Merger
Without a Company Stockholders Meeting . . . . . . . 37
6.2 Access to Information . . . . . . . . . . . . . . . . 37
6.3 Settlements . . . . . . . . . . . . . . . . . . . . . 38
6.4 Fees and Expenses . . . . . . . . . . . . . . . . . . 38
6.5 Brokers or Finders . . . . . . . . . . . . . . . . . 39
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
6.6 Indemnification; Directors' and Officers' Insurance . 40
6.7 Commercially Reasonable Efforts . . . . . . . . . . . 42
6.8 Conduct of Business of Sub . . . . . . . . . . . . . 42
6.9 Publicity . . . . . . . . . . . . . . . . . . . . . . 42
6.10 Withholding Rights . . . . . . . . . . . . . . . . . 42
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 43
7.1 Conditions to Each Party's Obligation to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . 44
8.1 Termination . . . . . . . . . . . . . . . . . . . . . 44
8.2 Effect of Termination . . . . . . . . . . . . . . . . 45
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . 45
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . 45
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 46
9.1 Nonsurvival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . 46
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 46
9.3 Interpretation . . . . . . . . . . . . . . . . . . . 47
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . 47
9.5 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership . . . . . . . . . . . . . . . . . 47
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . 47
9.7 Assignment . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
ii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM: SECTION:
- ---- -------
<S> <C>
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(e)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Bankruptcy Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(i)(i)(A)
Board Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4(a)
Brodkin Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2(f)
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(p)(i)(B)
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(b)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(h)(vi)
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Intangible Property . . . . . . . . . . . . . . . . . . . . . . . 4.1(o)
Company Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(g)
Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(g)
Company Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(f)
Company SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(d)
Company Stockholder Approval . . . . . . . . . . . . . . . . . . . 4.1(c)(iii)
Company Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(b)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 6.2
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Continuing Director . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4(b)
Designated Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(c)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Employee Arrangements . . . . . . . . . . . . . . . . . . . . . . . 4.1(i)(i)(B)
Employee/Director Stock Option . . . . . . . . . . . . . . . . . . . . . . 3.5
Employee/Director Stock Options . . . . . . . . . . . . . . . . . . . . . . 3.5
Environmental Costs and Liabilities . . . . . . . . . . . . . . . . 4.1(p)(i)(A)
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(p)(i)(B)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(e)
Ferguson Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2(f)
Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Financing Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2(e)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(d)
Gains and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 4.1(c)(iii)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)(iii)
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . 4.1(p)(i)(c)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)(iii)
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(u)
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
TERM: SECTION:
- ---- -------
<S> <C>
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6
Information Statement . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)(iii)
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
IRSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(p)(i)(B)
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)(ii)
Management Option/Management Options . . . . . . . . . . . . . . . . . . . 3.5
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(s)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a)(i)
Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Offer Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
On a fully diluted basis . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
Option Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Option/Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(p)(i)(B)
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
Payment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . 4.1(q)(ii)
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(p)(i)(D)
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(p)(i)(E)
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(e)
Requisite Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(o)
Schedule 14D-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Schedule 14D-9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(d)
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a)(i)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(h)(vi)
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(h)(vi)
Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(b)
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)(ii)
WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(n)(iv)
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 28, 1997
(the "Agreement"), is made and entered into by and among Dr Pepper Bottling
Company of Texas, a Texas corporation ("Parent"), DPB Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Parent ("Sub"), and Seven-
Up/RC Bottling Company of Southern California, Inc., a Delaware corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have unanimously approved the acquisition of the Company by Parent,
by means of the merger (the "Merger") of Sub with and into the Company, upon
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, to effectuate the acquisition, Parent and the Company
each desire that Sub commence a cash tender offer to purchase all of the
outstanding shares of common stock, par value $0.01 per share, of the Company
("Shares" or "Company Common Stock") upon the terms and subject to the
conditions set forth in this Agreement and the Offer Documents (as defined in
Section 1.2), and the Board of Directors of the Company has unanimously
approved such tender offer and agreed to recommend to its stockholders that
they accept the tender offer and tender their Company Common Stock pursuant
thereto; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
tender offer and the Merger and also to prescribe various conditions to the
consummation thereof;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer. (a) Provided that none of the events set
forth in Exhibit A hereto shall have occurred and be continuing, as promptly as
practicable (but in any event not later than five business days after the
public announcement of the execution and delivery of this Agreement), Sub shall
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), an offer to purchase (the "Offer") all
outstanding shares of the Company Common Stock at a price of $12.00 per share,
net to the seller in
<PAGE>
cash (the "Offer Consideration"). The obligation of Parent and Sub to commence
the Offer, consummate the Offer, accept for payment and to pay for shares of
Company Common Stock validly tendered in the Offer and not withdrawn shall be
subject only to those conditions set forth in Exhibit A hereto.
(b) Parent and Sub expressly reserve the right to amend or
modify the terms of the Offer, except that, without the prior written consent
of the Company, Sub shall not (and Parent shall not cause Sub to) (i) decrease
the Offer Consideration or the form of consideration therefor or decrease the
number of Shares sought pursuant to the Offer, (ii) change, in any material
respect, the conditions to the Offer, (iii) impose additional material
conditions to the Offer, (iv) waive the condition that there shall be validly
tendered and not withdrawn prior to the time the Offer expires a number of
shares of Company Common Stock which constitutes at least 65% of the Shares
outstanding on a fully-diluted basis on the date of purchase ("on a fully-
diluted basis" having the following meaning, as of any date: the number of
shares of Company Common Stock outstanding, together with Shares which the
Company may be required to issue pursuant to options, warrants or other
obligations outstanding at that date), (v) extend the expiration date of the
Offer (except that Sub may extend the expiration date of the Offer (a) as
required by law or (b) for such periods as Sub may reasonably deem necessary
(but not to a date later than the 45th calendar day after the date of
commencement) in the event that any condition to the Offer is not satisfied),
or (vi) amend any term of the Offer in any manner materially adverse to holders
of shares of Company Common Stock; provided, however, that, except as set forth
above, Sub may waive any other condition to the Offer in its sole discretion;
and provided further, that the Offer may be extended in connection with an
increase in the consideration to be paid pursuant to the Offer so as to comply
with applicable rules and regulations of the United States Securities and
Exchange Commission (the "SEC"). Assuming the prior satisfaction or waiver of
the conditions to the Offer, Sub shall accept for payment, and pay for, in
accordance with the terms of the Offer, all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the expiration date thereof.
1.2 Offer Documents. As soon as practicable on the date of
commencement of the Offer, Parent and Sub shall file or cause to be filed with
the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with
respect to the Offer which shall contain the offer to purchase, related letter
of transmittal and other ancillary Offer documents and instruments pursuant to
which the Offer will be made (collectively with any supplements or amendments
thereto, the "Offer Documents"). The
2
<PAGE>
Offer Documents (i) shall contain (or shall be amended in a timely manner to
contain) all information which is required to be included therein in accordance
with the Exchange Act and the rules and regulations thereunder and any other
applicable law, and (ii) shall conform in all material respects with the
requirements of the Exchange Act and any other applicable law. Notwithstanding
the foregoing, no agreement or representation hereby is made or shall be made
by Parent or Sub with respect to information supplied by the Company expressly
for inclusion in, or with respect to Company information derived from the
Company's public SEC filings that is included or incorporated by reference in,
the Offer Documents. Parent, Sub and the Company each agree promptly to
correct any information provided by them for use in the Offer Documents if and
to the extent that it shall have become false or misleading in any material
respect and Sub further agrees to take all lawful action necessary to cause the
Offer Documents as so corrected to be filed promptly with the SEC and to be
disseminated to holders of Company Common Stock, in each case as and to the
extent required by applicable law. In conducting the Offer, Parent and Sub
shall comply in all material respects with the provisions of the Exchange Act
and any other applicable law. The Company and its counsel shall be given
reasonable opportunity to review and comment on the Offer Documents and any
amendments or supplements thereto prior to the filing thereof with the SEC. To
the extent practicable, the Company and its counsel shall also be given
reasonable opportunity to review and comment on correspondence with the SEC
concerning the Offer Documents prior to the delivery thereof to the SEC.
1.3 Company Actions. The Company hereby consents to the Offer
and the Merger and represents that (a) its Board of Directors (at a meeting
duly called and held) has unanimously (i) determined that each of this
Agreement, the Offer and the Merger are fair to and in the best interests of
the stockholders of the Company and (ii) resolved to recommend acceptance of
the Offer, approval and adoption of this Agreement and approval of the Merger
by the holders of Company Common Stock, (b) the Company is not subject to
Section 203 of the Delaware General Corporation Law, as amended (the "DGCL"),
and (c) Houlihan, Lokey, Howard & Zukin, Inc. (the "Financial Advisor") has
delivered to the Board of Directors of the Company its written opinion that the
Offer Consideration to be received by the holders of Company Common Stock in
the Offer is fair, from a financial point of view, to such holders. The Board
of Directors of the Company may not withdraw, modify or amend its approval or
recommendation of the Offer, this Agreement or the Merger except in accordance
with Section 5.1(e)(ii) or Section 5.1(e)(iii). The Company hereby consents to
the inclusion in the Offer Documents of the
3
<PAGE>
recommendation referred to in this Section 1.3. The Company hereby agrees to
file with the SEC, simultaneously with the filing by Parent and Sub of the
Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto, the "Schedule 14D-9")
containing such recommendations of the Board of Directors of the Company in
favor of the Offer and the Merger and otherwise complying with Rule 14d-9 under
the Exchange Act. The Schedule 14D-9 shall comply in all material respects
with the Exchange Act and any other applicable law and shall contain (or shall
be amended in a timely manner to contain) all information that is required to
be included therein in accordance with the Exchange Act and the rules and
regulations promulgated thereunder and any other applicable law. The Company,
Parent and Sub each agree promptly to correct any information provided by them
for use in the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect and the Company further agrees to
take all lawful action necessary to cause the Schedule 14D-9 as so corrected to
be promptly filed with the SEC and disseminated to the holders of Company
Common Stock, in each case as and to the extent required by applicable law.
Parent, Sub and their counsel shall be given an opportunity to review and
comment on the Schedule 14D-9 and any amendments thereto prior to the filing
thereof with the SEC. To the extent practicable, Parent, Sub and their counsel
shall also be given reasonable opportunity to review and comment on
correspondence with the SEC concerning the Schedule 14D-9 prior to the delivery
thereof to the SEC. In connection with the Offer, the Company shall promptly
furnish, or cause its transfer agent to furnish, Parent with mailing labels,
security position listings and all available listings or computer files
containing the names and addresses of the record holders of the Company Common
Stock as of the latest practicable date and shall furnish, or cause its
transfer agent to furnish, Parent with such information and assistance
(including updated lists of stockholders, mailing labels and lists of security
positions) as Parent or its agents may reasonably request in communicating the
Offer to the record and beneficial holders of Company Common Stock. Subject to
the requirements of applicable law, and except for such actions as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer and the Merger, Parent and Sub and each of their
affiliates, associates, partners, employees, agents and advisors shall hold in
confidence the information contained in such labels and lists, shall use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated for any reason, shall deliver promptly to the Company
all copies of such information then in their possession.
4
<PAGE>
1.4 Directors. (a) Upon the purchase pursuant to the Offer
by Parent or any of its subsidiaries of such number of shares of Company Common
Stock which represents at least 65% of the outstanding shares of Company Common
Stock (on a fully diluted basis), and from time to time thereafter, Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number (but in no event more than one less than the total number of
directors on the Board of Directors of the Company) as will give Parent,
subject to compliance with Section 14(f) of the Exchange Act, representation on
the Board of Directors of the Company equal to the product of (x) the number of
directors on the Board of Directors of the Company (giving effect to any
increase in the number of directors pursuant to this Section 1.4) and (y) the
percentage that such number of Shares so purchased bears to the aggregate
number of Shares outstanding (such number being, the "Board Percentage"), and
the Company shall, upon request by Parent, promptly satisfy the Board
Percentage by (i) increasing the size of the Board of Directors of the Company
or (ii) using its best efforts to secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors of the Company and shall cause Parent's designees promptly
to be so elected, provided that no such action shall be taken which would
result in there being, prior to the consummation of the Merger, less than two
directors of the Company that are not affiliated with Parent. At the request
of Parent, the Company shall take, at the Company's expense, all lawful action
necessary to effect any such election, including, without limitation, mailing
to its stockholders the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, unless such information has
previously been provided to the Company's stockholders in the Schedule 14D-9.
Parent will supply to the Company in writing and be solely responsible for any
information with respect to itself and its nominees, directors and affiliates
required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
(b) Following the election or appointment of Parent's
designees pursuant to this Section 1.4 and prior to the Effective Time of the
Merger, any amendment or termination of this Agreement, extension for the
performance or waiver of the obligations or other acts of Parent or Sub or
waiver of the Company's rights thereunder shall require the concurrence of a
majority of directors of the Company then in office who are Continuing
Directors. The term "Continuing Director" shall mean (i) each member of the
board of directors on the date hereof who voted to approve this Agreement and
(ii) any successor to any Continuing Director that was recommended to succeed
such
5
<PAGE>
Continuing Director by a majority of the Continuing Directors then on the board
of directors.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, Sub shall be
merged with and into the Company at the Effective Time. At the Effective Time,
the separate corporate existence of Sub shall cease, and the Company shall
continue as the surviving corporation and a direct wholly owned subsidiary of
Parent (Sub and the Company are sometimes hereinafter referred to as
"Constituent Corporations" and, as the context requires, the Company is
sometimes hereinafter referred to as the "Surviving Corporation"), and shall
continue under the name "Seven-Up/RC Bottling Company of Southern California,
Inc.".
2.2 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") shall take
place at 10:00 a.m., Dallas, Texas time, on the second business day after
satisfaction and/or waiver of all of the conditions set forth in Article VII
(the "Closing Date"), at the offices of Weil, Gotshal & Manges LLP, 100
Crescent Court, Suite 1300, Dallas, Texas 75201, unless another date, time or
place is agreed to in writing by the parties hereto.
2.3 Effective Time of the Merger. Subject to the provisions
of this Agreement, the parties hereto shall cause the Merger to be consummated
by filing a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, as provided in the DGCL, as soon
as practicable on or after the Closing Date. The Merger shall become effective
upon such filing or at such time thereafter as is provided in the Certificate
of Merger (the "Effective Time").
2.4 Effects of the Merger. (a) The Merger shall have the
effects as set forth in the applicable provisions of the DGCL.
(b) The directors of Sub and the officers of the Company
immediately prior to the Effective Time shall, from and after the Effective
Time, be the initial directors and officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified, or until
their earlier
6
<PAGE>
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
(d) The Bylaws of the Company as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by applicable law, the Certificate of
Incorporation or the Bylaws.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or the holder of any capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $0.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock and all other shares of capital stock of the
Company that are owned by the Company and all shares of Company Common Stock
and other shares of capital stock of the Company owned by Parent or Sub shall
be canceled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor.
3.2 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any of the shares thereof:
(a)(i) Subject to the other provisions of this Section 3.2, each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding shares owned, directly or indirectly, by the Company
or by Parent, Sub or any other Subsidiary (as defined below) of Parent and
Dissenting Shares (as defined in Section 3.6)) shall be converted into the
right to receive the Offer Consideration, payable to the holder thereof,
without any interest thereon (the
7
<PAGE>
"Merger Consideration"), upon surrender and exchange of the Certificates (as
defined in Section 3.3). As used in this Agreement, the word "Subsidiary",
with respect to any party, means any corporation, partnership, joint venture or
other organization, whether incorporated or unincorporated, of which: (i) such
party or any other Subsidiary of such party is a general partner; (ii) voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation, partnership, joint venture
or other organization is held by such party or by any one or more of its
Subsidiaries, or by such party and any one or more of its Subsidiaries; or
(iii) at least 25% of the equity, other securities or other interests is,
directly or indirectly, owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and any one or more of its Subsidiaries.
(ii) All such shares of Company Common Stock,
when converted as provided in Section 3.2(a)(i), no longer shall be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each Certificate previously evidencing such Shares shall thereafter represent
only the right to receive the Merger Consideration. The holders of
Certificates previously evidencing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to the Company
Common Stock except as otherwise provided herein or by law and, upon the
surrender of Certificates in accordance with the provisions of Section 3.3,
shall only represent the right to receive for their Shares, the Merger
Consideration, without any interest thereon.
3.3 Payment for Shares. (a) Paying Agent. Prior to the
Effective Time, Sub shall appoint Texas Commerce Bank National Association (or
another United States bank or trust company reasonably acceptable to the
Company) to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration, and Sub shall deposit or shall cause to be deposited with
the Paying Agent in a separate fund established for the benefit of the holders
of shares of Company Common Stock, for payment in accordance with this Article
III, through the Paying Agent (the "Payment Fund"), immediately available funds
in amounts necessary to make the payments pursuant to Section 3.2(a)(i) and
this Section 3.3 to holders (other than the Company or Parent, Sub or any other
Subsidiary of Parent, or holders of Dissenting Shares). The Paying Agent
shall, pursuant to irrevocable instructions, pay the Merger Consideration out
of the Payment Fund.
8
<PAGE>
The Paying Agent shall invest portions of the Payment Fund as
Parent directs in obligations of or guaranteed by the United States of America,
in commercial paper obligations receiving the highest investment grade rating
from both Moody's Investors Services, Inc. and Standard & Poor's Corporation,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1,000,000,000
(collectively, "Permitted Investments"); provided, however, that the maturities
of Permitted Investments shall be such as to permit the Paying Agent to make
prompt payment to former holders of Company Common Stock entitled thereto as
contemplated by this Section. The Surviving Corporation shall cause the
Payment Fund to be promptly replenished to the extent of any losses incurred as
a result of Permitted Investments. All earnings on Permitted Investments shall
be paid to the Surviving Corporation. If for any reason (including losses) the
Payment Fund is inadequate to pay the amounts to which holders of shares of
Company Common Stock shall be entitled under this Section 3.3, the Surviving
Corporation shall in any event be liable for payment thereof. The Payment Fund
shall not be used for any purpose except as expressly provided in this
Agreement.
(b) Payment Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall instruct the Paying
Agent to mail to each holder of record (other than the Company or Parent, Sub
or any other Subsidiary of Parent) of a Certificate or Certificates which,
immediately prior to the Effective Time, evidenced outstanding shares of
Company Common Stock (the "Certificates"), (i) a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent, and shall be in such form and have such other
provisions as the Surviving Corporation reasonably may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment therefor. Upon surrender of a Certificate for cancellation to the
Paying Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in respect thereof cash
in an amount equal to the product of (x) the number of shares of Company Common
Stock represented by such Certificate and (y) the Merger Consideration, and the
Certificate so surrendered shall forthwith be canceled. Absolutely no interest
shall be paid or accrued on the Merger Consideration payable upon the surrender
of any Certificate. If payment is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall be
9
<PAGE>
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
surrendered Certificate or established to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.3(b), each
Certificate (other than Certificates representing Shares owned by Parent or Sub
or held in the treasury of the Company) shall represent for all purposes only
the right to receive the Merger Consideration.
(c) Termination of Payment Fund; Interest. Any portion of the
Payment Fund which remains undistributed to the holders of Company Common Stock
for 180 days after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Company Common Stock who have not
theretofore complied with this Article III and the instructions set forth in
the letter of transmittal mailed to such holder after the Effective Time shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration to which they are entitled. All interest accrued in respect of
the Payment Fund shall inure to the benefit of and be paid to the Surviving
Corporation.
(d) No Liability. Neither Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any cash from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
3.4 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any certificates
presented to the Paying Agent or Parent for any reason shall be converted into
the Merger Consideration.
3.5 Stock Options. Each stock option issued under the 1996-
1997 Stock Option Plan of the Company (the "Stock Option Plan") is referred to
herein as an "Employee/Director Stock Option" and all such options are referred
to herein, collectively, as the "Employee/Director Stock Options". Each stock
option issued pursuant to the First Amended Joint Plan of Reorganization of the
Company and Beverage Group Acquisition Corporation, dated as of June 19, 1996,
and as approved by the United States Bankruptcy Court, District of Delaware
(the "Bankruptcy Plan") is referred to herein as a "Management Option"
10
<PAGE>
and all such options are referred to herein, collectively, as the "Management
Options". The Employee/Director Stock Options and the Management Options are
referred to herein, collectively, as the "Options" and, individually, as an
"Option". At the Effective Time, each holder of a then outstanding Option
shall, in cancellation and settlement thereof, receive for each Share subject
to such Option an amount (subject to any applicable withholding tax) in cash
equal to the difference between the Offer Consideration and the per Share
exercise price of such Option to the extent such difference is a positive
number (such amount being hereinafter referred to as, the "Option
Consideration"); provided, however, that with respect to any person subject to
Section 16(a) of the Exchange Act, any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act. Upon receipt of the Option
Consideration, the Option shall be canceled. The surrender of an Option to the
Company in exchange for the Option Consideration shall be deemed a release of
any and all rights the holder had or may have had in respect of such Option.
Prior to the expiration of the Offer, the Company shall obtain all necessary
consents or releases from holders of Options under the Stock Option Plan and
take all such other lawful action as may be necessary to give effect to the
transactions contemplated by this Section 3.5. The Stock Option Plan shall
terminate as of the Effective Time, and the provisions in any other plan,
program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company shall be canceled as of
the Effective Time. Prior to the expiration of the Offer, the Company shall
take all action necessary to (i) ensure that, following the Effective Time, no
participant in the Stock Option Plan or any other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of
the Company, the Surviving Corporation or any Subsidiary thereof and (ii)
terminate all such plans, programs and arrangements.
3.6 Dissenting Shares. Notwithstanding any other provisions
of this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal
for such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead shall be entitled
to receive payment of the appraised value of such shares of Company Common
Stock held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall
11
<PAGE>
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such shares of Company Common Stock under such Section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender in the manner
provided in Section 3.3, of the Certificate or Certificates that, immediately
prior to the Effective Time, evidenced such shares of Company Common Stock.
3.7 Warrants. At the Effective Time, each holder of a then
outstanding warrant to purchase Shares, whether or not then exercisable, issued
pursuant to the Bankruptcy Plan (collectively, the "Warrants"), shall
automatically become exercisable (upon payment of the aggregate exercise price
therefor) only for the Offer Consideration (without any interest thereon and
less any required withholding taxes) that would be payable to such
warrantholder had such warrantholder exercised its Warrant in full immediately
prior to the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted, and is duly qualified or licensed to do business as a foreign
corporation and in good standing to conduct business in each jurisdiction in
which the business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification or license necessary, other than in
such jurisdictions where the failure so to qualify or become so licensed would
not (i) have a Material Adverse Effect (as defined below) with respect to the
Company or (ii) impair in any material respect the ability of the Company to
consummate the transactions contemplated by this Agreement. The Company has
heretofore made available to Parent complete and correct copies of its
Certificate of Incorporation and Bylaws. The Company has no Subsidiaries. As
used in this Agreement: a "Material Adverse Effect" shall mean, with respect
to any party, the result of one or more events, changes or effects which,
individually or in the aggregate, would have a material adverse effect on the
business, operations, results of operations, assets, condition (financial
12
<PAGE>
or otherwise) or prospects of such party and its Subsidiaries, taken as a
whole.
(b) Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of 6,000,000 Shares. At the close of
business on February 27, 1997: (i) 5,000,000 Shares were issued and
outstanding; (ii) 382,022 Shares were reserved for issuance pursuant to
outstanding Employee/Director Stock Options; (iii) 337,079 Shares were reserved
for issuance pursuant to outstanding Management Options; (iv) 280,899 Shares
were reserved for issuance pursuant to outstanding Warrants; (v) except for the
issuance of Shares pursuant to the exercise of outstanding Options and
Warrants, there are no employment, executive termination or similar agreements
providing for the issuance of Shares; (vi) no Shares were held by the Company;
and (vii) no bonds, debentures, notes or other instruments or evidence of
indebtedness having the right to vote (or convertible into, or exercisable or
exchangeable for, securities having the right to vote) on any matters on which
the Company stockholders may vote ("Company Voting Debt") were issued or
outstanding. All outstanding Shares are validly issued, fully paid and
nonassessable and are not subject to preemptive or other similar rights.
Except as set forth in this Section 4.1(b), there are outstanding: (i) no
shares of capital stock, Company Voting Debt or other voting securities of the
Company; (ii) no securities of the Company convertible into, or exchangeable or
exercisable for, shares of capital stock, Company Voting Debt or other voting
securities of the Company; and (iii) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which the Company
is a party or by which it is bound, in any case obligating the Company to
issue, deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, additional shares of capital
stock or any Company Voting Debt or other voting securities of the Company, or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. Except as set forth on Schedule 4.1(b),
since September 30, 1996, the Company has not (i) granted any options, warrants
or rights to purchase shares of Company Common Stock or (ii) amended or
repriced any Option or the Stock Option Plan. Set forth on Schedule 4.1(b) is
a list of all outstanding options, warrants and rights to purchase shares of
Company Common Stock and the exercise prices relating thereto. There are not
as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting of
any shares of the capital stock of the Company which will limit in any way the
solicitation of proxies by or on behalf of the Company from, or
13
<PAGE>
the casting of votes by, the stockholders of the Company with respect to the
Merger.
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to the Company Stockholder
Approval (as defined in Section 4.1(c)(iii)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject, if
required with respect to consummation of the Merger, to the Company Stockholder
Approval. This Agreement has been duly executed and delivered by the Company
and, subject, if required with respect to consummation of the Merger, to the
Company Stockholder Approval, and assuming that this Agreement constitutes the
valid and binding agreement of Parent and Sub, constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms and
conditions except that the enforcement hereof may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(ii) Except as set forth on Schedule 4.1(c)(ii), the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company will not conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration (including pursuant to any put right) of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets or property, or right of first refusal
with respect to any asset or property (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss, creation or right of
first refusal, a "Violation"), pursuant to, (A) any provision of the
Certificate of Incorporation or Bylaws of the Company or (B) except as to which
requisite waivers or consents have been obtained and assuming the consents,
approvals, authorizations or permits and filings or notifications referred to
in paragraph (iii) of this Section 4.1(c) are duly and timely obtained or made
and, if required, the Company Stockholder Approval has been obtained, result in
any Violation of (1) any loan or credit agreement, note, mortgage, deed of
trust, indenture, lease, Benefit Plan (as defined in Section 4.1(i)), Company
Permit (as
14
<PAGE>
defined in Section 4.1(f)), or any other agreement, obligation, instrument,
concession, franchise, or license, except for any Violations that, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on the Company or (2) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
properties or assets (collectively, "Laws"). The Company is not subject to
Section 203 of the DGCL.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to the Company in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for: (A) the filing of a pre-merger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
expiration or termination of the applicable waiting period thereunder; (B) the
filing with the SEC of (x) an information statement (if required by applicable
law) in definitive form relating to the written consent of holders of Company
Common Stock approving the Merger (such information statement as amended or
supplemented from time to time being hereinafter referred to as the
"Information Statement"), (y) the Schedule 14D-9 in connection with the Offer,
and (z) such reports under and such other compliance with the Exchange Act and
the rules and regulations thereunder as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware; (D)
such filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws; (E) such filings in connection with
any state or local tax which is attributable to the beneficial ownership of the
Company's real property, if any (collectively, the "Gains and Transfer Taxes");
(F) such other filings and consents as may be required under any environmental,
health or safety law or regulation pertaining to any notification, disclosure
or required approval necessitated by the Merger or the transactions
contemplated by this Agreement; (G) the approval of this Agreement and the
Merger by the holders of a majority of the outstanding Shares ("Company
Stockholder Approval"); and (H) those requirements that become applicable to
the Company as a result of the specific regulatory status of Parent or Sub.
(d) SEC Documents. The Company has made available to Parent a
true and complete copy of each report, schedule,
15
<PAGE>
registration statement and definitive proxy statement filed by the Company with
the SEC since January 1, 1994 and prior to the date of this Agreement (the
"Company SEC Documents"), which are all the documents (other than preliminary
material) that the Company was required to file with the SEC since such date.
As of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Documents, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, which will not be material, either individually
or in the aggregate) the consolidated financial position of the Company as of
their respective dates and the consolidated results of operations and the
consolidated cash flows of the Company for the periods presented therein. The
Shares are not listed for trading on a "national securities exchange" (as
defined under the Exchange Act) or authorized for quotation on the NASDAQ
inter-dealer quotation system.
(e) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in
(i) any of the Offer Documents will, at the time the Offer Documents are first
published, sent or given to holders of Company Common Stock, and at any time
they are amended or supplemented, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (ii) the Information Statement will,
on the date it is first mailed to the holders of the Company Common Stock or at
the time of the Merger, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made,
16
<PAGE>
not misleading. If, at any time prior to the expiration of the Offer or the
Effective Time, any event with respect to the Company, or with respect to other
information supplied by the Company for inclusion in the Offer Documents or the
Information Statement, shall occur which is required to be described in an
amendment of, or a supplement to, any of such documents, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the stockholders of the Company.
The information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Information Statement will comply as to form,
in all material respects, with the provisions of the Exchange Act and the rules
and regulations thereunder. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to the information supplied or to be
supplied by Parent or Sub for inclusion in the Offer Documents or the
Information Statement.
(f) Compliance with Applicable Laws. Except as set forth in
Schedule 4.1(f), the Company holds all permits, licenses, variances,
exemptions, orders, franchises and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Company
Permits"), except where the failure to hold any such Company Permits could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company. The Company is in compliance with the terms of
the Company Permits (a list of which is set forth on Schedule 4.1(f)), except
where the failure to be in compliance could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Documents or as set forth on
Schedule 4.1(f), the business of the Company is not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity.
Except as set forth in Schedule 4.1(f), as of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to the Company
is pending or, to the knowledge of the Company, threatened.
(g) Litigation. Except as disclosed in the Company SEC
Documents or as set forth on Schedule 4.1(g), there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company ("Company Litigation"), nor is there any material
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company ("Company Order"). In addition,
except as set forth on Schedule 4.1(g), the aggregate amount of all claims and
judgments pending, or to the knowledge of the Company, threatened pursuant to
all Company Litigation and
17
<PAGE>
Company Orders, excluding individual, unrelated claims or judgments of less
than $2,500 each, does not exceed 100,000.
(h) Taxes. Except as set forth on Schedule 4.1(h) hereto:
(i) All material Tax Returns required to be filed by or
with respect to the Company have been duly and timely filed, and all
such Tax Returns are true, correct and complete in all material
respects. The Company has duly and timely paid (or there has been paid
on its behalf) all material Taxes that are due from or with respect to
it. With respect to any period for which Taxes are not yet due with
respect to the Company, the Company has made due and sufficient current
accruals for such Taxes in accordance with GAAP in the most recent
financial statements contained in the Company SEC Documents. The
Company has made (or there has been made on its behalf) all required
estimated Tax payments sufficient to avoid any material underpayment
penalties. The Company has withheld and paid all material Taxes
required by all applicable laws to be withheld or paid in connection
with any amounts paid or owing to any employee, creditor or independent
contractor.
(ii) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to
any claim for, or the period for the collection or assessment of,
material Taxes due from or with respect to the Company for any taxable
period. No audit or other proceeding by any court, governmental or
regulatory authority, or similar person is pending or, to the knowledge
of the Company, threatened in regard to any Taxes due from or with
respect to the Company or any Tax Return filed by or with respect to the
Company, other than normal and routine audits by non-federal
governmental authorities. The Company has not received notice that any
material assessment of Taxes is proposed against the Company or any of
its assets.
(iii) No election under Section 338 of the Code has been
made or filed by or with respect to the Company. No consent to the
application of Section 341(f)(2) of the Code (or any predecessor
provision) has been made or filed by or with respect to the Company or
any of its assets. The Company has not agreed to make any adjustment
pursuant to Section 481(a) of the Code (or any predecessor provision) by
reason of any change in any accounting method, and there is no
application pending with any taxing authority requesting permission for
any changes in any accounting method of the Company. None of the assets
of the Company is or will be
18
<PAGE>
required to be treated as being owned by any person (other than the
Company) pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986.
(iv) The Company is not a party to, bound by, or has any
obligation under, any Tax sharing agreement, Tax allocation agreement or
similar contract.
(v) There is no contract, agreement, plan or
arrangement covering any person that, individually or collectively,
could give rise to the payment of any amount that would not be
deductible by the Company by reason of Section 280G of the Code.
(vi) The term "Code" shall mean the Internal Revenue
Code of 1986, as amended. The term "Taxes" shall mean all taxes,
charges, fees, levies, or other similar assessments or liabilities,
including without limitation (a) income, gross receipts, ad valorem,
premium, excise, real property, personal property, sales, use, transfer,
withholding, employment, payroll, and franchise taxes imposed by the
United States of America, or by any state, local, or foreign government,
or any subdivision, agency, or other similar person of the United States
or any such government; and (b) any interest, fines, penalties,
assessments, or additions to taxes resulting from, attributable to, or
incurred in connection with any Tax or any contest, dispute, or refund
thereof. The term "Tax Returns" shall mean any report, return, or
statement required to be supplied to a taxing authority in connection
with Taxes.
(i) Pension And Benefit Plans; ERISA.
(i) Schedule 4.1(i)(i) sets forth a complete and
correct list of:
(A) all "employee benefit plans", as defined in
Sections 3(3) and 4(b)(4) of ERISA, under which Company
has any obligation or liability, contingent or otherwise
("Benefit Plans"); and
19
<PAGE>
(B) all employment or consulting agreements, and all
bonus or other incentive compensation, deferred
compensation, salary continuation during any absence from
active employment for disability or other reasons,
severance, sick days, stock award, stock option, stock
purchase, tuition assistance, club membership, employee
discount, employee loan, or vacation pay agreements,
policies or arrangements which Company maintains or has
any obligation or liability (contingent or otherwise) with
respect to any current officer, director or employee of
the Company and which individually has a cost to the
Company in excess of $10,000 per year (the "Employee
Arrangements").
(ii) With respect to each Benefit Plan and Employee
Arrangement, a complete and correct copy of each of the following
documents (if applicable) has been provided to Purchaser: (i) the most
recent plan and related trust documents, and all amendments thereto;
(ii) the most recent summary plan description, and all related summaries
of material modifications thereto; (iii) the most recent Form 5500
(including schedules and attachments); (iv) the most recent IRS
determination letter; (v) the most recent actuarial reports (including
for purposes of Financial Accounting Standards Board report no. 87, 106
and 112).
(iii) The Benefit Plans and their related trusts intended
to qualify under Sections 401(a) and 501(a) of the Code, respectively,
have received favorable determination letters from the Internal Revenue
Service and the Company is not aware of any event or circumstance that
could result in the failure of such Benefit Plans to be so qualified.
(iv) All contributions or other payments required to
have been made by Company to or under any Benefit Plan or Employee
Arrangement by applicable law or the terms of such Benefit Plan or
Employee Arrangement (or any agreement relating thereto) have been
timely and properly made.
(v) The Benefit Plans and Employee Arrangements have
been maintained and administered in all material respects in accordance
with their terms and applicable laws.
(vi) Except as disclosed in Schedule 4.1(i)(vi), there
are no pending or, to the best knowledge of the Company, threatened
actions, claims or proceedings against or relating to any Benefit Plan
or Employee Arrangement
20
<PAGE>
other than routine benefit claims by persons entitled to benefits
thereunder.
(vii) Except as disclosed in Schedule 4.1(i)(vii),
Company do not maintain or have an obligation to contribute to retiree
life or retiree health plans which provide for continuing benefits or
coverage for current or former officers, directors or employees of the
Company except (i) as may be required under Part 6 of Title I of ERISA)
and at the sole expense of the participant or the participant's
beneficiary or (ii) a medical expense reimbursement account plan
pursuant to Section 125 of the Code.
(viii) Except as disclosed in Schedule 4.1(i)(viii), none
of the assets of any Benefit Plan is stock of the Company or any of its
affiliates, or property leased to or jointly owned by the Company or any
of its affiliates.
(ix) Except as disclosed in Schedule 4.1(i)(ix) or in
connection with equity compensation, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will (A) result in any payment becoming due to any employee
(current, former or retired) of Company, (B) increase any benefits under
any Benefit Plan or Employee Arrangement or (C) result in the
acceleration of the time of payment of, vesting of or other rights with
respect to any such benefits.
(x) To the knowledge of the Company, the Company has no
liability (contingent or otherwise) under Section 4069 of ERISA by
reason of a transfer of an underfunded pension plan.
(j) Absence of Certain Changes or Events. Except as set forth
on Schedule 4.1(j) or as contemplated by this Agreement, since September 30,
1996, the business of the Company has been carried on only in the ordinary and
usual course and no event or events has or have occurred that (either
individually or in the aggregate) has had, or could reasonably be expected to
have, a Material Adverse Effect on the Company.
(k) No Undisclosed Material Liabilities. Except as
specifically and individually set forth on Schedule 4.1(k) or the other
schedules hereto (specific reference to which shall be made on Schedule
4.1(k)), there are no liabilities of the Company of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
that are material to the Company other than: (i) liabilities reflected on the
Company's
21
<PAGE>
unaudited financial statements (together with the related notes thereto) filed
with the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996; and (ii) liabilities under this Agreement.
(l) Opinion of Financial Advisor. The Company has received
the opinion of the Financial Advisor dated February 28, 1997, to the effect
that, as of the date thereof, the Offer Consideration to be received by the
holders of Company Common Stock in the Offer and the Merger Consideration to be
received by the holders of Company Common Stock in the Merger is fair from a
financial point of view to such holders, a signed, true and complete copy of
which opinion shall be delivered to Parent, and such opinion has not been
withdrawn or modified. True and complete copies of all agreements and
understandings between the Company or any of its affiliates and the Financial
Advisor relating to the transactions contemplated by this Agreement are
attached hereto as Schedule 4.1(l).
(m) Vote Required. In the event that Section 253 of the DGCL
is inapplicable and unavailable to effectuate the Merger, the affirmative vote
of the holders of a majority of the outstanding shares of Company Common Stock
is the only vote of the holders of any class or series of the Company's capital
stock necessary (under applicable law or otherwise) to approve the Merger and
this Agreement and the transactions contemplated hereby. Neither the
Certificate of Incorporation of the Company, the By-laws of the Company, or any
agreement or other instrument to which the Company is a party or is bound
prohibits the stockholders of the Company from acting by written consent as
permitted under Section 228 of the DGCL.
(n) Labor Matters.
(i) Except as set forth in Schedule 4.1(n) hereto, (a)
the Company is not a party to any labor or collective bargaining
agreement, and no employees of Company are represented by any labor
organization; (b) within the preceding three years, there have been no
representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the knowledge of the Company,
threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority; and
(c) within the preceding three years, to the knowledge of Company, there
have been no organizing activities involving Company with respect to any
group of employees of Company.
22
<PAGE>
(ii) There are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other material
labor disputes pending or threatened in writing against or involving
Company. There are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of Company, threatened in
writing by or on behalf of any employee or group of employees of
Company.
(iii) Except as set forth in Schedule 4.1(n) hereto,
there are no complaints, charges or claims against Company pending or,
to the knowledge of Company, threatened to be brought or filed with any
governmental authority, arbitrator or court based on, arising out of, in
connection with, or otherwise relating to the employment or termination
of employment of any individual by Company.
(iv) The Company is in material compliance with all
laws, regulations and orders relating to the employment of labor,
including all such laws, regulations and orders relating to wages,
hours, Worker Adjustment Retraining and Notification Act of 1988, as
amended ("WARN Act"), collective bargaining, discrimination, civil
rights, safety and health, workers' compensation and the collection and
payment of withholding and/or social security taxes and any similar tax.
(v) Since July 31, 1996, there has been no "mass
layoff" or "plant closing" (as defined by the WARN Act) with respect to
the Company.
(o) Intangible Property. The Company owns or has a right to
use each trademark, trade name, patent, service mark, brand mark, brand name,
computer program, database, and copyright owned or used in connection with the
operation of the business of the Company, including any registrations thereof
and pending applications therefor, and each license or other contract relating
thereto (collectively, the "Company Intangible Property"), free and clear of
any and all liens, claims or encumbrances, except where the failure to own or
have a right to use such property could not reasonably be expected to have a
Material Adverse Effect on the Company. Schedule 4.1(o) hereto sets forth a
complete list of the Company Intangible Property. Except to the extent that
such could not reasonably be expected to have a Material Adverse Effect on the
Company, the use of the Company Intangible Property by the Company does not
conflict with, infringe upon, violate or interfere with or constitute an
appropriation of any right, title, interest or goodwill, including, without
limitation, any intellectual property right,
23
<PAGE>
trademark, trade name, patent, service mark, brand mark, brand name, computer
program, database, copyright or any pending application therefor of any other
person.
(p) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Costs and Liabilities" means any and
all losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including,
without limitation, fees, disbursements and expenses of legal
counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and the costs to clean up,
remove, treat, or in any other way address any Hazardous
Materials) arising from or under any Environmental Law.
(B) "Environmental Law" means any applicable law
regulating or prohibiting Releases of Hazardous Materials into
any part of the natural environment, or pertaining to the
protection of natural resources, the environment and public and
employee health and safety from Hazardous Materials including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section
9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water
Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (33
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. Section 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. Section
651 et seq.) ("OSHA") and the regulations promulgated pursuant
thereto, and any such applicable state or local statutes,
including, without limitation, the Industrial Site Recovery Act
("IRSA"), and the regulations promulgated pursuant thereto, as
such laws have been and may be amended or supplemented through
the Closing Date;
(C) "Hazardous Material" means any substance, material
or waste which is regulated by any public or governmental
authority in the jurisdictions in which the applicable party or
its Subsidiaries conducts business, or the United States,
including, without limitation, any material or substance which is
defined
24
<PAGE>
as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law and shall also include, without limitation, petroleum,
petroleum products, asbestos, polychlorinated biphenyls and radioactive
materials;
(D) "Release" means any release, spill, effluent,
emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching, or migration into the
environment; and
(E) "Remedial Action" means all actions, including,
without limitation, any capital expenditures, required by a
governmental entity or required under any Environmental Law, or
voluntarily undertaken to (I) clean up, remove, treat, or in any
other way ameliorate or address any Hazardous Materials or other
substance in the environment; (II) prevent the Release or threat
of Release, or minimize the further Release of any Hazardous
Material so it does not endanger or threaten to endanger the
public health or welfare or the environment; (III) perform pre-
remedial studies and investigations or post-remedial monitoring
and care pertaining or relating to a Release; or (IV) bring the
applicable party into compliance with any Environmental Law.
(ii) Except as set forth on Schedule 4.1(p) hereto:
(A) The operations of the Company have been and, as of
the Closing Date, will be, in compliance in all material respects
with all Environmental Laws;
(B) The Company has obtained and will, as of the
Closing Date, maintain all permits required under applicable
Environmental Laws for the continued operations of their
respective businesses, except such permits the lack of which
would not materially impair the ability of the Company to
continue operations;
(C) The Company is not subject to any outstanding
written orders from, or written agreements with, any Governmental
Entity or other person respecting (A) Environmental Laws, (B)
Remedial Action or (C) any Release or threatened Release of a
Hazardous Material;
25
<PAGE>
(D) The Company has not received any written
communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law, which
violation or liability is outstanding, except where the violation
or liability could not reasonably be expected to result in the
Company incurring Environmental Costs and Liabilities in excess
of $100,000 individually or $250,000 in the aggregate;
(E) The Company has no contingent liability in
connection with the Release of any Hazardous Material into the
environment (whether on-site or off-site) which would be
reasonably likely to result in the Company incurring
Environmental Costs and Liabilities in excess of $250,000
individually and the aggregate amount of Environmental Costs and
Liabilities for all such Releases could not reasonably be
expected to have a Material Adverse Effect on the Company;
(F) The operations of the Company do not involve the
transportation, treatment, storage or disposal of hazardous waste
for purposes of the permitting requirements set forth under 40
C.F.R. Parts 260-270 (in effect as of the date of this Agreement)
or any state equivalent;
(G) There is not now, nor to the knowledge of the
Company has there been in the past, on or in any property of the
Company any of the following: (A) any underground storage tanks;
(B) surface impoundments; or (C) any polychlorinated biphenyls;
to the knowledge of the Company, there is not now any asbestos-
containing materials on or in any property of the Company; and
(H) No judicial or administrative proceedings or
governmental investigations are pending or, to the knowledge of
the Company, threatened against the Company alleging the
violation of or seeking to impose liability pursuant to any
Environmental Law.
(iii) This Section 4.1(p) sets forth the sole
representations and warranties of the Company with respect to
Environmental Laws.
26
<PAGE>
(q) Real Property.
(i) Schedule 4.1(q)(i) sets forth all of the real
property owned in fee by the Company. The Company has good and
marketable title to each parcel of real property owned by it free and
clear of all mortgages, pledges, liens, encumbrances and security
interests, except (1) those reflected or reserved against in the balance
sheet of the Company dated as of September 30, 1996, (2) taxes and
general and special assessments not in default and payable without
penalty and interest, (3) mechanics and similar statutory liens arising
or incurred in the ordinary course of business for amounts that are not
delinquent, (4) any zoning, building, and land use regulation imposed by
any Governmental Entity, and (5) any covenant, restriction, or easement
expressly set forth in the title documents governing such real property
filed with the appropriate Governmental Entity.
(ii) Each lease, sublease or other agreement
(collectively, the "Real Property Leases") under which the Company uses
or occupies or has the right to use or occupy, now or in the future, any
real property is valid, binding and in full force and effect, all rent
and other sums and charges payable by the Company as a tenant thereunder
are current, no termination event or condition or uncured default of a
material nature on the part of the Company or, to the Company's
knowledge, the landlord, exists under any Real Property Lease. The
Company has a good and valid leasehold interest in each parcel of real
property leased by it free and clear of all mortgages, pledges, liens,
encumbrances and security interests, except those reflected or reserved
against in the balance sheet of the Company dated as of September 30,
1996.
(r) Board Recommendation. The Board of Directors of the
Company, at a meeting duly called and held, has by the vote of those directors
present (who constituted 100% of the directors then in office) (i) determined
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, are fair to and in the best interests of the stockholders
of the Company and has approved the same, and (ii) resolved to recommend that
the holders of the shares of Company Common Stock approve this Agreement and
the transactions contemplated herein, including the Merger, and accept the
Offer and tender their shares of Company Common Stock pursuant thereto.
27
<PAGE>
(s) Material Contracts. The Company has provided or made
available to Parent (i) true and complete copies of (A) all franchise and
license agreements concerning the production, packaging, marketing, selling, or
distribution of soft drink products or waters to which the Company is a party
or by which it is bound, and (B) all other written contracts, agreements,
commitments, arrangements, leases (including with respect to personal
property), policies and other instruments to which it is a party or by which it
is bound which other contracts (1) require payments to be made in excess of
$50,000 per year for goods and/or services, or (2) do not by their terms expire
and are not subject to termination within 60 days from the date of the
execution and delivery thereof (collectively, "Material Contracts"), and (ii) a
written description of each Material Contract that has not been reduced to
writing. Each of the Material Contracts is listed on Schedule 4.1(s). The
Company is not, nor has it received any notice nor has any knowledge that any
other party is, in default in any respect under any such Material Contract,
except for those defaults which could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect with
respect to the Company; and there has not occurred any event or events that
with the lapse of time or the giving of notice or both would constitute such a
material default.
(t) Related Party Transactions. Except as disclosed in the
Company SEC Documents or as set forth in Schedule 4.1(t) hereto, no director,
officer, "affiliate" or "associate" (as such terms are defined in Rule 12b-2
under the Exchange Act) of the Company (i) has borrowed any monies from or has
outstanding any indebtedness or other similar obligations to the Company; (ii)
owns any direct or indirect interest of any kind in, or is a director, officer,
employee, partner, affiliate or associate of, or consultant or lender to, or
borrower from, or has the right to participate in the management, operations or
profits of, any person or entity which is (1) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company, (2) engaged in
a business related to the business of the Company, or (3) participating in any
transaction to which the Company is a party, or (iii) is otherwise a party to
any contract, arrangement or understanding with the Company.
(u) Indebtedness. Except as set forth on Schedule 4.1(u)
hereto or in the Company's unaudited financial statements (together with the
related notes thereto) filed with the Company's Quarterly Statement on Form 10-
Q for the quarter ended September 30, 1996 (as filed with the SEC), the Company
has no outstanding indebtedness for borrowed money or representing the deferred
purchase price of property or services or similar
28
<PAGE>
liabilities or obligations, including any guarantee in respect thereof
("Indebtedness"), nor is a party to any agreement, arrangement or understanding
providing for the creation, incurrence or assumption thereof.
(v) Liens. Except as set forth on Schedule 4.1(v) hereto or
as disclosed in the Company SEC Documents, the Company has not granted,
created, or suffered to exist with respect to any of its assets, any mortgage,
pledge, charge, hypothecation, collateral assignment, lien (statutory or
otherwise), encumbrance or security agreement of any kind or nature whatsoever.
4.2 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation or organization, has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified or licensed
to do business as a foreign corporation and in good standing to conduct
business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification or
license necessary, other than in such jurisdictions where the failure so to
qualify or become so licensed would not have a Material Adverse Effect with
respect to Parent. Parent and Sub have heretofore made available to the
Company complete and correct copies of their respective Certificates of
Incorporation and Bylaws.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Parent and Sub. This Agreement has been duly executed and delivered
by each of Parent and Sub and assuming this Agreement constitutes the
valid and binding agreement of the Company, constitutes a valid and
binding obligation of Parent and Sub enforceable in accordance with its
terms and conditions except that the enforcement hereof may be limited
by (a) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect
relating to
29
<PAGE>
creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
(ii) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by each of
Parent and Sub will not result in any Violation pursuant to any
provision of the respective Articles or Certificates of Incorporation or
Bylaws of Parent or Sub or, except as to which requisite waivers or
consents have been obtained and assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in
paragraph (iii) of this Section 4.2(b) are duly and timely obtained or
made, the execution and delivery of the amendment to the credit
agreement of Parent as provided in the Financing Commitment (as defined
in Section 4.2(e)) and, if required, the Company Stockholder Approval
has been obtained, result in any Violation of any loan or credit
agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent
or Sub or their respective properties or assets, which would have a
Material Adverse Effect with respect to Parent.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any
Governmental Entity, is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by each of
Parent and Sub or the consummation by each of Parent or Sub of the
transactions contemplated hereby, except for: (A) filings under the HSR
Act; (B) the filing with the SEC of (x) the Schedule 14D-1 in connection
with the commencement and consummation of the Offer and (y) such reports
under and such other compliance with the Exchange Act and the rules and
regulations thereunder, as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware; (D) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws; (E) such
filings in connection with any Gains and Transfer Taxes; (G) such other
such filings and consents as may be required under any environmental,
health or safety law or regulation pertaining to any notification,
disclosure or required approval necessitated by the Merger or the
transactions contemplated by this Agreement; and (H) those requirements
30
<PAGE>
that become applicable to Parent or Sub as a result of the specific
regulatory status of the Company.
(c) Information Supplied. None of the information supplied or
to be supplied by Parent or Sub for inclusion or incorporation by reference in
(i) the Schedule 14D-9 will, at the time the Schedule 14D-9 is filed with the
SEC, and at any time it is amended or supplemented, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) the
Information Statement will, at the date it is first mailed to the Company's
stockholders or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If, at any time prior
to the Effective Time, any event with respect to Parent or Sub, or with respect
to information supplied by Parent or Sub for inclusion in the Schedule 14D-9 or
the Information Statement, shall occur which is required to be described in an
amendment of, or a supplement to, any of such documents, such event shall be so
described to the Company. Notwithstanding the foregoing, neither Parent nor
Sub makes any representation or warranty with respect to the information
supplied or to be supplied by the Company for inclusion in the Schedule 14D-9
or the Information Statement.
(d) Board Recommendation. The Board of Directors of the
Parent, at a meeting duly called and held, has by the vote of those directors
present determined that each of the Offer and the Merger is fair to and in the
best interests of Parent and has approved the same.
(e) Financing. Parent and Sub have delivered to the Company a
true and complete copy of a letter of commitment obtained by Parent and Sub
from Texas Commerce Bank National Association to provide additional debt
financing pursuant to an amendment to Parent's existing credit agreement for
the transactions contemplated hereby (the "Financing Commitment"). An executed
copy of the Financing Commitment is attached hereto as Exhibit 4.2(e).
Assuming that the financing contemplated by the Financing Commitment is
consummated in accordance with the terms thereof, the funds to be borrowed
thereunder by Parent will provide sufficient funds to pay the Merger
Consideration. As of the date of this Agreement, Parent is not aware of any
facts or circumstances that (i) contradict or are in conflict with the terms
and conditions set forth in the Financing Commitment or (ii) create a
reasonable basis for Parent to believe that it will
31
<PAGE>
not be able to obtain financing in accordance with the terms of the Financing
Commitment.
(f) No Separate Agreements. Except for (i) the First
Amendment to Management Agreement, dated as of the date of this Agreement (the
"Brodkin Amendment"), amending that certain Second Amended and Restated
Management Agreement, dated as of January 22, 1997, between the Company and
Bart S. Brodkin, and (ii) that certain Termination Agreement, dated as of the
date of this Agreement (the "Ferguson Agreement"), between the Company and Rick
Ferguson, as of the date of this Agreement, neither Parent nor Sub has entered
into any agreement with any director or officer of the Company providing for
the employment of any such officer or director following the consummation of
the Merger or the purchase by Parent or Sub of any Shares, Options or Warrants
held by any such officer or director.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date
of this Agreement and continuing until the Effective Time, the Company agrees
as to the Company that (except as expressly contemplated or permitted by this
Agreement, or to the extent that Parent shall otherwise consent in writing):
(a) Ordinary Course. The Company shall carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and shall use all reasonable efforts to preserve
intact its present business organization, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business shall not be impaired in any material respect at
the Effective Time.
(b) Dividends; Changes in Stock. The Company shall not: (i)
declare or pay any dividends on or make other distributions in respect of any
of its capital stock; (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(iii) repurchase or otherwise acquire any shares of its capital stock, except
as required by the terms of any employee benefit plan as in effect on the date
hereof.
(c) Issuance of Securities. The Company shall not (i) grant
any options, warrants or rights, to purchase shares of Company Common Stock,
(ii) amend the terms of or reprice any
32
<PAGE>
Option or amend the terms of the Stock Option Plan, or (iii) issue, deliver or
sell, or authorize or propose to issue, deliver or sell, any shares of its
capital stock of any class or series, any Company Voting Debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Company Voting Debt or convertible securities, other than: (A) the
issuance of Shares upon the exercise of Options that are outstanding on the
date hereof or (B) the issuance of Shares upon the exercise of Warrants that
are outstanding on the date hereof.
(d) Governing Documents. The Company shall not amend or
propose to amend its Certificate of Incorporation or Bylaws.
(e) No Solicitation. From and after the date hereof until the
termination of this Agreement, neither the Company nor any of its officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by the
Company) (such officers, directors, employees, representatives, agents,
affiliates, investment bankers, attorneys and accountants being referred to
herein, collectively, as "Representatives"), will, directly or indirectly,
initiate, solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, and the Company shall not authorize or permit any of its
Representatives to take any such action, and the Company shall notify Parent
orally (within one business day) and in writing (as promptly as practicable) of
all of the relevant details relating to, and all material aspects of, all
inquiries and proposals which it or any of its Representatives may receive
relating to any of such matters and, if such inquiry or proposal is in writing,
the Company shall deliver to Parent a copy of such inquiry or proposal as
promptly as practicable; provided, however, that nothing contained in this
Section 5.1(e) shall prohibit the Board of Directors of the Company from:
(i) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited written, bona fide Acquisition Proposal (provided that such
person or entity has the necessary funds or commitments to provide the
funds to effect such Acquisition Proposal) if, and only to the extent
that, (A) the Board of Directors of the Company, after consultation with
and based upon the advice of independent
33
<PAGE>
legal counsel (who may be the Company's regularly engaged independent
legal counsel), determines in good faith that such action is necessary
for the Board of Directors of the Company to comply with its fiduciary
duties to stockholders under applicable law, (B) prior to taking such
action, the Company (x) provides reasonable prior notice to Parent to
the effect that it is taking such action and (y) receives from such
person or entity an executed confidentiality agreement in reasonably
customary form, and (C) the Company shall promptly and continuously
advise Parent as to all of the relevant details relating to, and all
material aspects, of any such discussions or negotiations;
(ii) failing to make or withdrawing or modifying its
recommendation referred to in Section 4.1(r) if there exists an
Acquisition Proposal and the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel
(who may be the Company's regularly engaged independent counsel),
determines in good faith that such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to holders
of Shares under applicable law; or
(iii) making a "stop-look-and-listen" communication with
respect to the Offer or this Agreement of the nature contemplated in,
and otherwise in compliance with, Rule 14d-9 under the Exchange Act as a
result of an Acquisition Proposal meeting the requirements of clause (i)
above.
For purposes of this Agreement, "Acquisition Proposal" shall mean any of the
following (other than the transactions among the Company, Parent and Sub
contemplated hereunder) involving the Company: (i) any merger, consolidation,
share exchange, recapitalization, business combination, or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 25% or more of the assets of the Company, computed on the
basis of book value, in a single transaction or series of transactions; (iii)
any tender offer or exchange offer for 10% or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any public announcement of
a proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
34
<PAGE>
(f) No Acquisitions; No Subsidiaries. The Company shall not
merge or consolidate with, or acquire any equity interest in, any corporation,
partnership, association or other business organization, or enter into an
agreement with respect thereto. The Company shall not acquire or agree to
acquire any assets of any corporation, partnership, association or other
business organization or division thereof, except for the purchase of inventory
and supplies in the ordinary course of business. The Company shall not create
or otherwise permit to exist any Subsidiary of the Company.
(g) No Dispositions. Other than dispositions in the ordinary
course of business consistent with past practice which are not material,
individually or in the aggregate, to such party, the Company shall not sell,
lease, encumber or otherwise dispose of, or agree to sell, lease (whether such
lease is an operating or capital lease), encumber or otherwise dispose of, any
of its assets.
(h) Governmental Filings. The Company shall promptly provide
Parent (or its counsel) with copies of all filings made by the Company with the
SEC or any other state or federal Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(i) No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Agreement, the Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation or dissolution of the Company.
(j) Other Actions. Except as contemplated or permitted by
this Agreement, the Company will not take or agree or commit to take any action
that is reasonably likely to result in any of the Company's representations or
warranties hereunder being untrue in any material respect or in any of the
Company's covenants hereunder or any of the conditions to the Merger not being
satisfied in all material respects.
(k) Certain Employee Matters. The Company shall not: (i)
grant any increases in the compensation of any of its directors, officers or
key employees; (ii) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated to be paid prior to the
Effective Time by any of the existing Benefit Plans or Employee Arrangements as
in effect on the date hereof to any such director, officer or key employee,
whether past or present; (iii) enter into any new, or materially amend any
existing, employment or severance or termination agreement with any such
director, officer or key
35
<PAGE>
employee; or (iv) except as may be required to comply with applicable law,
become obligated under any new Benefit Plan or Employee Arrangement, which was
not in existence on the date hereof, or amend any such plan or arrangement in
existence on the date hereof if such amendment would have the effect of
materially enhancing any benefits thereunder.
(l) Indebtedness; Agreements.
(i) Except for indebtedness incurred by the Company
from time to time for working capital purposes in the ordinary course of
business under that certain Credit Agreement, dated as of August 2,
1996, by and among the Company, the Lenders party thereto, and General
Electric Capital Corporation, the Company shall not assume or incur
(which shall not be deemed to include entering into credit agreements,
lines of credit or similar arrangements until borrowings are made under
such arrangements) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of the Company or guarantee any
debt securities of others or enter into any lease (whether such lease is
an operating or capital lease) or create any mortgages, liens, security
interests or other encumbrances on the property of the Company in
connection with any indebtedness thereof, or enter into any "keep well"
or other agreement or arrangement to maintain the financial condition of
another person.
(ii) The Company shall not enter into, modify, rescind,
terminate, waive, release or otherwise amend in any material respect any
of the terms or provisions of any Material Contract.
(m) Accounting. The Company shall not take any action, other
than in the ordinary course of business, consistent with past practice or as
required by the SEC or by law, with respect to accounting policies, procedures
and practices.
(n) Capital Expenditures. The Company shall not incur any
capital expenditures other than the capital expenditures set forth on Schedule
5.1(n), all of which shall be made in accordance with the schedule therefor
included in such Schedule 5.1(n).
(o) Requisite Consents. The Company shall use all
commercially reasonable efforts to (i) obtain consents (the "Requisite
Consents") from the Persons listed on Schedule 5.1(o) hereto to the
consummation of the Offer, the Merger and the
36
<PAGE>
transactions contemplated thereby and hereby and (ii) ensure that such
Requisite Consents are in full force and effect as of the expiration of the
Offer and as of the Closing Date.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of the Information Statement; Merger Without a
Company Stockholders Meeting. (a) In the event that Parent or any Subsidiary
of Parent shall acquire at least 65% of the outstanding shares of Company
Common Stock (on a fully diluted basis) in the Offer or otherwise, the parties
hereto agree, at the request of Sub, to take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after
the expiration of the Offer, in accordance with Section 251 of the DGCL. Such
action shall include the prompt preparation and distribution of the Information
Statement to the holders of Company Common Stock. The Company shall use all
commercially reasonable efforts to cause the Information Statement to be mailed
to the Company's stockholders at the earliest practicable date.
(b) Notwithstanding the foregoing clause (a), in the event
that Parent or any Subsidiary of Parent shall acquire at least 90% of the
outstanding shares of Company Common Stock in the Offer, the parties hereto
agree, at the request of Sub, to take all necessary and appropriate action to
cause the Merger to become effective, as soon as practicable after the
expiration of the Offer, without a meeting of stockholders of the Company, in
accordance with Section 253 of the DGCL.
(c) Sub shall promptly submit this Agreement and the
transactions contemplated hereby for approval and adoption by its stockholders
by written consent of such stockholders.
6.2 Access to Information. Upon reasonable notice, each of
the Company or Parent, as the case may be, shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other party (including, in the case of Parent and
Sub, potential financing sources and their employees, accountants, counsel and
other representatives), access, during normal business hours during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, such party shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other party, (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to
37
<PAGE>
SEC requirements and (b) all other information concerning its business,
properties and personnel as such other party may reasonably request. The
Confidentiality Agreement, dated as of February 26, 1997, between Parent and
the Company (the "Confidentiality Agreement") shall apply with respect to
information furnished thereunder or hereunder and any other activities
contemplated thereby.
6.3 Settlements. The Company shall not effect any settlements
of any legal proceedings arising out of or related to the execution, delivery
or performance of this Agreement or the consummation of any of the transactions
contemplated hereby or thereby without the prior written consent of Parent.
6.4 Fees and Expenses. (a) Except as otherwise provided in
this Section 6.4 and except with respect to claims for damages incurred as a
result of the breach of this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense.
(b) The Company agrees to pay Parent a fee in immediately
available funds equal to $2,500,000 (less any amounts paid to Parent pursuant
to Section 6.4(d)) upon the termination of this Agreement under Section 8.1, if
any of the events set forth in either clause (i) or clause (ii) below occurs
(each, a "Trigger Event"):
(i) the Board of Directors of the Company shall have (A)
withdrawn or adversely modified in any material respect, or taken a
public position materially inconsistent with, its approval or
recommendation of the Offer, the Merger or this Agreement, (B) made a
"stop-look-and-listen" communication as provided under Section
5.1(e)(iii) less than five business days prior to the 45th calendar day
after the date of the commencement of the Offer, or (C) failed to
reaffirm its approval or recommendation of the Offer, the Merger and
this Agreement under the circumstances set forth in Section 8.1(e); or
(ii) an Acquisition Proposal has been recommended or accepted
by the Company or the Company shall have entered into an agreement
(other than a confidentiality agreement as contemplated by Section
5.1(e)) with respect to an Acquisition Proposal.
(c) In the event (i) this Agreement shall be terminated in
accordance with its terms, (ii) on or after August 15, 1996 and at or prior to
such termination, any person or group
38
<PAGE>
of persons shall have made an Acquisition Proposal (each such person or member
of a group of such persons being referred to herein as a "Designated Person"),
and (iii) either (A) a transaction contemplated by the term "Acquisition
Proposal" shall be consummated, on or before the one year anniversary of the
termination of this Agreement, with any Designated Person or any affiliate of
any Designated Person or (B) the Company shall enter into an agreement, on or
before the one year anniversary of the termination of this Agreement, with
respect to an Acquisition Proposal with any Designated Person or any affiliate
of any Designated Person and a transaction contemplated by the term
"Acquisition Proposal" shall thereafter be consummated with such Designated
Person or affiliate thereof, then the Company shall pay to Parent a fee in
immediately available funds equal to $2,500,000. Such fee shall be paid
contemporaneously with the consummation of such contemplated transaction.
Notwithstanding the foregoing, such fee shall be reduced by any amounts paid to
Parent pursuant to Section 6.4(b) or (d).
(d) Unless Parent is materially in breach of this Agreement as
of the final expiration of the Offer (after giving effect to any extensions
thereof), the Company shall pay to Parent upon demand an amount, not to exceed
$750,000, to reimburse Parent and Sub for their Expenses (as such term is
defined in Section 6.4(e)), payable in same-day funds, if the condition set
forth in clause (i) or clause (iv)(I) of Exhibit A hereto is not met as of the
final expiration of the Offer (after giving effect to any extensions thereof).
(e) For purposes of this Section 6.4, the term "Expenses"
shall mean all documented, reasonable out-of-pocket fees and expenses incurred
or paid by or on behalf of Parent or Sub to third parties in connection with
the Merger, the Offer or the consummation of any of the transactions
contemplated by this Agreement, including, without limitation, all printing
costs and reasonable fees and expenses of counsel, investment banking firms,
accountants, experts and consultants.
(f) Any amounts due under this Section 6.4 that are not paid
when due shall bear interest at the rate of 9% per annum from the date due
through and including the date paid.
6.5 Brokers or Finders. (a) The Company represents, as to
itself and its affiliates, that no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker's or
finders fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except the Financial Advisor,
whose fees and expenses will be paid by the Company in
39
<PAGE>
accordance with the Company's agreements with such firm (copies of which have
been delivered by the Company to Parent prior to the date of this Agreement).
(b) Parent represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finders fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except for Chase Securities Inc., whose fees
and expenses will be paid by Parent in accordance with the Parent's agreements
with such firm.
6.6 Indemnification; Directors' and Officers' Insurance. (a)
The Company shall, and from and after the Effective Time, the Surviving
Corporation shall, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of the Company (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
attorneys' fees and expenses), liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any threatened or
actual claim, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was a director or officer of the Company whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, in each case to the full extent a
corporation is permitted under the DGCL to indemnify its own directors or
officers as the case may be (and the Company and the Surviving Corporation, as
the case may be, will pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent
permitted by law). Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them and the Company
(or them and the Surviving Corporation after the Effective Time) and the
Company (or after the Effective Time, the Surviving Corporation) shall pay all
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; and (ii) the Company (or after the Effective
Time, the Surviving Corporation) will use all
40
<PAGE>
reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its prior written consent which consent
shall not unreasonably be withheld. Any Indemnified Party wishing to claim
indemnification under this Section 6.6, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company (or after
the Effective Time, the Surviving Corporation) (but the failure so to notify
shall not relieve a party from any liability which it may have under this
Section 6.6 except to the extent such failure prejudices such party), and shall
deliver to the Company (or after the Effective Time, the Surviving Corporation)
the undertaking contemplated by Section 145(e) of the DGCL. The Indemnified
Parties as a group may retain only one law firm to represent them with respect
to each such matter unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two
or more Indemnified Parties. The Company and Sub agree that the foregoing
rights to indemnification, including provisions relating to advances of
expenses incurred in defense of any action or suit, existing in favor of the
Indemnified Parties with respect to matters occurring through the Effective
Time, shall survive the Merger and shall continue in full force and effect for
a period of not less than five years from the Effective Time; provided,
however, that all rights to indemnification in respect of any Indemnified
Liabilities asserted or made within such period shall continue until the
disposition of such Indemnified Liabilities. Furthermore, the provisions with
respect to indemnification set forth in the certificate of incorporation of the
Surviving Corporation shall not be amended for a period of five years following
the Effective Time if such amendment would materially and adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time.
(b) For a period of two years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that Parent may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous in any material respect to the Indemnified Parties) with respect
to matters arising before the Effective Time, provided that Parent shall not be
required to pay an annual premium for such insurance in excess of 150% of the
last annual premium paid by the Company prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount. The last
annual premium paid by the Company was $125,000.
41
<PAGE>
(c) The provisions of this Section 6.6 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his heirs
and his personal representatives and shall be binding on all successors and
assigns of the Company and the Surviving Corporation.
6.7 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable, under
applicable laws and regulations or otherwise, to consummate and make effective
the transactions contemplated by this Agreement, subject, as applicable, to the
Company Stockholder Approval, including (i) cooperating fully with the other
party, including by provision of information and making of all necessary
filings in connection with, among other things, approvals under the HSR Act,
(ii) using commercially reasonable efforts to obtain the Requisite Consents,
and (iii) using commercially reasonable efforts to obtain the debt financing
referenced in the Financing Commitment.
6.8 Conduct of Business of Sub. During the period of time
from the date of this Agreement to the Effective Time, Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
6.9 Publicity. The parties will consult with each other and
will mutually agree upon any press release or public announcement pertaining to
the Offer and the Merger and shall not issue any such press release or make any
such public announcement prior to such consultation and agreement, except as
may be required by applicable law, in which case the party proposing to issue
such press release or make such public announcement shall use reasonable
efforts to consult in good faith with the other party before issuing any such
press release or making any such public announcement.
6.10 Withholding Rights. Sub and the Surviving Corporation, as
applicable, shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as Sub or the Surviving Corporation, as applicable,
is required to deduct and withhold with respect to the making of such payment
under the Code or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Sub or the Surviving Corporation, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
42
<PAGE>
which such deduction and withholding was made by Sub or the Surviving
Corporation, as applicable.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote or written consent of
the holders of a majority of the outstanding Shares entitled to vote thereon if
such vote is required by applicable law; provided that the Parent and Sub shall
vote all Shares purchased pursuant to the Offer in favor of the Merger.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired, and no restrictive order or other requirements shall have been
placed on the Company, Parent, Sub or the Surviving Corporation in connection
therewith.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect;
provided, however, that prior to invoking this condition, each party shall use
all commercially reasonable efforts to have any such decree, ruling, injunction
or order vacated.
(d) Statutes. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any government or governmental agency
or authority which prohibits the consummation of the Merger.
(e) Payment for Shares. Sub shall have accepted for payment
and paid for the shares of Company Common Stock tendered in the Offer such
that, after such acceptance and payment, Parent and its affiliates shall own,
at consummation of the Offer, 65% of the outstanding shares of the Company
Common Stock on a fully diluted basis; provided that this condition shall be
deemed to have been satisfied if Sub fails to accept for payment and pay for
Shares pursuant to the Offer in violation of the terms and conditions of the
Offer.
43
<PAGE>
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent:
(a) by mutual written consent of the Company and Parent, or by
mutual action of their respective Boards of Directors;
(b) by either the Company or Parent (i) prior to the
consummation of the Offer if there has been a breach of any representation,
warranty, covenant or agreement on the part of the other set forth in this
Agreement which breach has not been cured within three business days following
receipt by the breaching party of notice of such breach, or (ii) if any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the Offer or the Merger shall have become final
and non-appealable;
(c) by either the Company or Parent, so long as such party has
not breached its obligations hereunder, if the Merger shall not have been
consummated on or before the 45th calendar day following the consummation of
the Offer; provided, that the right to terminate this Agreement under this
Section 8.1(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date;
(d) by Parent in the event that a Trigger Event has occurred
under Section 6.4(b) prior to the consummation of the Offer;
(e) by Parent in the event an Acquisition Proposal has been
made to the Company prior to the consummation of the Offer and the Company
shall fail to publicly reaffirm its approval or recommendation of the Offer,
the Merger and this Agreement on or before the fifth business day following the
date on which Parent shall request such reaffirmation;
(f) by Parent, if the Offer terminates, is withdrawn,
abandoned or expires by reason of the failure to satisfy any condition set
forth in Exhibit A hereto;
44
<PAGE>
(g) by the Company, if the Offer shall have expired or have
been withdrawn, abandoned or terminated without any shares of Company Common
Stock being purchased by Sub thereunder on or prior to the 45th calendar day
after the date of commencement of the Offer pursuant to Section 1.2 hereof; or
(h) by the Company, if the Board of Directors of the Company
shall take any of the actions permitted by Section 5.1(e)(ii) of this
Agreement.
8.2 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
affiliates, officers, directors or shareholders except (i) with respect to this
Section 8.2, the second sentence of Section 6.2, and Section 6.4, and (ii) to
the extent that such termination results from the material breach by a party
hereto of any of its representations or warranties, or of any of its covenants
or agreements.
8.3 Amendment. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by written agreement of Parent, Sub
and the Company at any time prior to the Effective Date with respect to any of
the terms contained herein; provided, however, that, after this Agreement is
approved by the Company's stockholders, no such amendment or modification shall
(i) reduce the amount or change the form of consideration to be delivered to
the holders of Shares, (ii) change the date by which the Merger is required to
be effected, or (iii) change the amounts payable in respect of the Options or
Warrants as set forth in Section 3.5 and Section 3.7 hereof, respectively.
8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed: (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
45
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Article III, and Section 6.6
hereof. The Confidentiality Agreement shall survive the execution and delivery
of this Agreement, and the provisions of the Confidentiality Agreement shall
apply to all information and material delivered by any party hereunder.
9.2 Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received when so delivered
personally, telegraphed or telecopied or, if mailed, five business days after
the date of mailing to the following address or telecopy number, or to such
other address or addresses as such person may subsequently designate by notice
given hereunder:
(a) if to Parent or Sub, to:
Dr Pepper Bottling Company of Texas, Inc.
2304 Century Center Blvd.
Irving, Texas 75062
Attn: Jim L. Turner
Telephone: (214) 721-8111
Telecopy: (214) 721-8141
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attn: R. Scott Cohen
Telephone: (214) 746-7738
Telecopy: (214) 746-7777
(b) if to the Company, to:
Seven-Up/RC Bottling Company
of Southern California, Inc.
3220 East 26th Street
Vernon, California 90023
Attn: Rick Ferguson
46
<PAGE>
Telephone: (213) 268-7779
Telecopy: (213) 262-9566
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attn: Kirk A. Radke
Telephone: (212) 446-4800
Telecopy: (212) 446-4900
9.3 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 table of contents, glossary of defined terms
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the word "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (together with the Confidentiality Agreement and any
other documents and instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and,
except as provided in Section 6.6, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
9.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by
47
<PAGE>
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties, except that Sub may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any newly-formed direct wholly-owned Subsidiary of Parent,
provided that such assignment shall not relieve either Sub or Parent from any
of its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
PARENT:
------
DR PEPPER BOTTLING COMPANY OF TEXAS
By: /s/ JIM L. TURNER
----------------------------------
Name: Jim L. Turner
--------------------------------
Title: President
-------------------------------
SUB:
---
DPB ACQUISITION CORP.
By: /s/ JIM L. TURNER
----------------------------------
Name: Jim L. Turner
--------------------------------
Title: President
-------------------------------
COMPANY:
-------
SEVEN-UP/RC BOTTLING COMPANY OF
SOUTHERN CALIFORNIA, INC.
By: /s/ BART S. BRODKIN
----------------------------------
Name: Bart S. Brodkin
--------------------------------
Title: President
-------------------------------
49
<PAGE>
EXHIBIT A
The capitalized terms used in this Exhibit A shall have the
respective meanings given to such terms in the Agreement and Plan of Merger,
dated as of February 28, 1997 (the "Merger Agreement"), by and among Dr Pepper
Bottling Company of Texas, a Texas corporation ("Parent"), DPB Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of Parent ("Sub"),
and Seven-Up/RC Bottling Company of Southern California, Inc., a Delaware
corporation (the "Company"), to which this Exhibit A is attached.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares promptly
after expiration or termination of the Offer), to pay for any Shares tendered,
and may postpone the acceptance for payment or, subject to the restriction
referred to above, payment for any Shares tendered, and may amend (but only to
the extent permitted under Section 1.1(b) of the Merger Agreement) or terminate
the Offer (whether or not any Shares have theretofore been purchased or paid
for), if (i) there have not been validly tendered and not withdrawn prior to
the time the Offer shall otherwise expire a number of Shares which constitutes
65% of the Shares outstanding on a fully-diluted basis on the date of purchase
("on a fully-diluted basis" having the following meaning, as of any date: the
number of Shares outstanding, together with Shares the Company may be required
to issue pursuant to options, warrants, or other obligations outstanding at
that date); (ii) any applicable waiting periods under the HSR Act shall not
have expired or been terminated prior to the expiration of the Offer; (iii) the
debt financing sources for Parent and Sub shall not have provided the
applicable debt financing to Parent and Sub pursuant to the Financing
Commitment; or (iv) at any time on or after the date of the Merger Agreement
and before acceptance for payment of, or payment for, such Shares any of the
following events shall occur:
(A) there shall be pending, as of the expiration of the Offer
or at any time thereafter, any litigation that seeks to (1) challenge
the acquisition by Parent, Sub or any of their respective affiliates or
Subsidiaries of Shares pursuant to the Offer or restrain, prohibit or
delay the making or consummation of the Offer or the Merger, (2) make
the purchase of or payment for some or all of the Shares pursuant to the
Offer or the Merger illegal, (3) impose
A-1
<PAGE>
limitations on the ability of Parent, Sub or any of their respective
affiliates or Subsidiaries effectively to acquire or hold, or to require
Parent, Sub, the Company or any of their respective affiliates or
Subsidiaries to dispose of or hold separate, any material portion of
their assets or business, (4) impose limitations on the ability of
Parent, Sub, the Company or any of their respective affiliates or
Subsidiaries to continue to conduct, own or operate, as heretofore
conducted, owned or operated, all or any material portion of their
businesses or assets; (5) impose or result in material limitations on
the ability of Parent, Sub or any of their respective affiliates or
Subsidiaries to exercise full rights of ownership of the Shares
purchased by them, including, without limitation, the right to vote the
Shares purchased by them on all matters properly presented to the
stockholders of the Company; or (6) prohibit or restrict in a material
manner the financing of the Offer;
(B) there shall have been promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the Merger, any Law, or
there shall have been issued any decree, order or injunction, that
results in any of the consequences referred to in subsection (A) above;
(C) any event or events shall have occurred that, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect on the Company;
(D) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States for a period in excess of five hours, (2) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States, (3) any material adverse change in United States
currency exchange rates or a suspension of, or a limitation on, the
markets therefor, (4) the commencement of a war, armed hostilities or
other international or national calamity, directly or indirectly
involving the United States, (5) any limitations (whether or not
mandatory) imposed by any governmental authority on the nature or
extension of credit or further extension of credit by banks or other
lending institutions, or (6) in the case of any of the foregoing, a
material acceleration or worsening thereof;
A-2
<PAGE>
(E) the representations and warranties of the Company contained
in the Merger Agreement (without giving effect to any "Material Adverse
Effect", "materiality" or similar qualifications contained therein)
shall not be true and correct in all respects as of the expiration of
the Offer or at any time thereafter as though made as of such time
except (1) for changes specifically permitted by the Merger Agreement,
(2) that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date,
and (3) for breaches or inaccuracies which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company;
(F) the obligations of the Company contained in the Merger
Agreement (without giving effect to any "Material Adverse Effect",
"materiality" or similar qualifications contained therein) to be
performed at or prior to the consummation of the Offer shall not have
been performed or complied with in all material respects by the Company
prior to the consummation of the Offer;
(G) the Merger Agreement shall have been terminated in
accordance with its terms;
(H) prior to the purchase of Shares pursuant to the Offer, an
Acquisition Proposal for the Company exists and the Board shall have
withdrawn or materially modified or changed (including by amendment of
the Schedule 14D-9) in a manner adverse to Sub its recommendation of the
Offer, the Merger Agreement or the Merger;
(I) as of the expiration of the Offer or at any time
thereafter, the Requisite Consents (i) shall not have been obtained or
(ii) shall not be currently in full force and effect;
(J) as of the expiration of the Offer, the Company shall have
failed to deliver to Parent and Sub a copy of the audited financial
statements of the Company for the year ended December 31, 1996, prepared
in accordance with GAAP and accompanied by a signed report thereon by
the Company's independent certified public accountants; or
(K) either the Brodkin Amendment shall not be a valid and
binding obligation of the Company and Bart S. Brodkin or
A-3
<PAGE>
EXHIBIT 2
EXECUTION
SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT
------------------------------------------------
SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT as amended and restated as
of January 22, 1997, by and between SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN
CALIFORNIA, INC., a Delaware corporation (the "Company"), and BART S. BRODKIN
("Executive").
WHEREAS, the Company and Executive entered into a Management Agreement
dated as of September 25, 1995 (the "Initial Agreement"), which Initial
Agreement was amended and restated pursuant to the terms of an Amended and
Restated Management Agreement, dated as of May 8, 1996 (the "Amended and
Restated Agreement"); and
WHEREAS, the Company and Executive have agreed to enter into this Second
Amended and Restated Management Agreement on the date hereof (the "Agreement")
in order to amend certain provisions of the Amended and Restated Agreement.
Accordingly, the Company and Executive agree that the Amended and Restated
Agreement shall be amended and restated as follows:
1. Prior Management Agreement. The Amended and Restated Agreement dated
--------------------------
as of May 8, 1996 is hereby terminated and superseded in its entirety by this
Agreement.
2. Employment. Company agrees to employ Executive, and Executive accepts
----------
such employment by Company, upon the terms and conditions set forth in this
Agreement for the period beginning on the date hereof (the "Commencement Date")
and ending upon termination pursuant to paragraph 2(d) hereof (the "Employment
Period").
(a) Salary and Benefits. (i) During the Employment Period, Company will
-------------------
pay Executive an initial base salary (the "Base Salary") from the date hereof
for the duration of the Employment Period (subject to renewal as provided in
Section 2(d)) at a rate of $400,000 per annum. Executive's Base Salary for any
partial year will be prorated based upon the number of days elapsed in such
year. Such Base Salary shall be payable on the regular payment dates set for
payment of the Company's employee payroll. Executive's Base Salary will be
subject to review and increase by the board of directors of Company (excluding
Executive) (the "Board") on an annual basis beginning on January 1, 1998. During
the Employment Period, Executive will be entitled to (x) a maximum of five weeks
vacation and (y) participate in such benefit plans as are approved and
established by the Board for senior management of the Company, including health,
disability, insurance, pension, profit sharing or other employee benefit plans
that the Board may establish from time to time in which Executive is otherwise
eligible to participate. Executive shall also be entitled to receive (x) an
allowance equal in amount to $2,000 per month for automobile and club expenses,
(y) such fringe benefits as are described on Exhibit A to this Agreement, and
---------
(z) such other benefits, payments, or allowances as the Board (or an appropriate
committee of the Board) may from time to time make available to Executive.
<PAGE>
(ii) Executive shall be a participant in the Company's Annual Incentive
Plan and shall be eligible for an annual award (a "Bonus") under such plan
pursuant to the terms thereof.
(b) Services. (i) During the Employment Period, Executive will serve as
--------
President and Chief Executive Officer of Company, and shall serve in such
positions of Company's Subsidiaries as designated by the Board. Executive shall
have the normal duties, responsibilities, and authority of such offices, subject
to (x) any limitations imposed by the by-laws of the Company and (y) the power
of the Board to expand or limit such duties, responsibilities, and authority and
to override actions of the Executive. Executive will devote his best efforts
and substantially all of his business time to the business of Company and its
Affiliates (except for reasonable periods of illness or other incapacity).
(ii) Executive's principal office and place of employment shall be at the
Company's principal executive offices located at 3220 East 26th Street, Vernon,
California, 90023-4298, unless a different place is mutually agreed upon by the
Board and the Executive. This paragraph 2(b)(ii) is a material part of this
Agreement.
(c) Business Expenses. The Company shall reimburse Executive for all
-----------------
reasonable and necessary expenses incurred by him in connection with the
performance of his duties and responsibilities pursuant to this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment, and other business expenses, subject to the
Company's reasonable requirements with respect to reporting and documentation of
such expenses.
(d) Termination. The Employment Period will be from the date hereof until
-----------
December 31, 1999; provided, however, that such period will automatically be
-------- -------
renewed for successive one year periods after such date unless Company or the
Executive give prior written notification of such termination to the other
party, which notification shall be sent at least 90 days prior to the end of
each one year period. In addition, the Employment Period will terminate on the
first to occur of (i) Executive's death or Disability (as defined below), (ii)
the date on which Executive is terminated for Cause (as defined below), or (iii)
Executive's normal retirement at age 65 or older.
(e) Severance Pay. (i) In the event that Executive resigns for Good Reason
-------------
or Executive's employment is terminated without Cause, so long as Executive is
in compliance with paragraphs 3, 4, or 5 hereof, (A) Executive shall be entitled
to continue to receive his Base Salary (as in effect on the Termination Date)
through the remainder of the Employment Period (as in effect immediately prior
to the Termination Date and without regard to the automatic extension provisions
of Section 2(d) hereof) (the "Remaining Term"), and (B) the Company will
maintain in full force and effect, for Executive's continued benefit, until the
earlier of (x) the expiration of the Remaining Term, or (y) Executive's 65th
birthday, all life, medical, and dental insurance programs in which Executive
was entitled to participate, so long as his continued participation is possible
under the general terms and provisions of such programs. The amounts payable
pursuant to this paragraph 2(e)(i) in respect of Base Salary may be payable, at
Executive's discretion, in one lump sum payment within 30 days following the
Termination Date, which payment shall be equal to the present value (determined
by using a discount rate equal to the prime
<PAGE>
rate of interest charged by Citibank, N.A. plus two percentage points) of the
payments otherwise payable pursuant to this paragraph 2(e)(i).
(ii) If Executive resigns (other than for Good Reason) or his employment is
terminated by reason of his death, the Company will pay to Executive (A) his
Base Salary in effect at such time through the Termination Date, and (B)
severance in the amount of one year's Base Salary. In such event, the Company
shall have no further obligations to Executive under this Agreement.
(iii) In the event that Executive's employment is terminated for any other
reason, Company will not be obligated to make any severance payments.
(iv) Except as expressly set forth in this paragraph 2(e), Executive shall
not be entitled to any other compensation or other payment or distribution after
the Termination Date.
(f) Change of Control. Notwithstanding anything in this paragraph 2 to the
-----------------
contrary, if the Company terminates Executive within thirty-six (36) months
after the occurrence of a Change of Control (unless such termination is due to
Executive's death or Retirement, or Executive's termination for Cause or
Disability) or Executive resigns for Good Reason within 36 months after the
occurrence of a Change of Control, then:
(i) the Company shall pay to Executive, no later than 30 days following the
Termination Date, the Executive's accrued but unpaid Base Salary through the
Termination Date plus compensation for current and carried-over unused vacation
and compensation days in accordance with the Company's personnel policy;
(ii) in lieu of any further payments of Base Salary to the Executive after
the Termination Date (including payments under paragraph 2(e)(i) hereof), the
Company shall pay to Executive, not later than thirty (30) days following the
Termination Date and notwithstanding any dispute between the Executive and the
Company as to the payment to the Executive of any other amounts under this
Agreement or otherwise, a lump sum severance payment (the "Severance Payment")
-----------------
equal to three (3) times an amount equal to the sum of (x) Executive's Base
Salary in effect on the Termination Date and (y) Executive's Bonus for the
previous year;
(iii) the Company (or an Affiliated Corporation) shall maintain in full
force and effect, for the Executive's continued benefit, until the earlier of
(A) thirty-six (36) months after the Termination Date, or (B) the Executive's
65th birthday, all life, medical, and dental insurance programs in which the
Executive was entitled to participate immediately prior to the Termination Date,
so long as his continued participation is possible under the general terms and
provisions of such programs; provided, that in the event the Executive's
--------
participation in any such program is barred, the Company (or an Affiliated
Corporation) shall arrange to provide the Executive with benefits substantially
similar to those which he was entitled to receive under such programs; and
(iv) within ninety (90) days after the Termination Date, the Company or an
Affiliated Corporation shall (A) pay to the Executive an additional amount
sufficient to (x) defray all of the Executive's current or prospective liability
to any taxing authority for excise taxes,
<PAGE>
penalties, or any other taxes assessed in excess of those normally imposed on
salaries, incurred by reason of the payments made to Executive under this
Agreement, and (y) defray the Executive's increased income tax liability by
reason of the payment under clause (A)(x) and (A)(y) of this paragraph
(2)(f)(iv), and (B) cause the Company's independent auditors to determine,
within such ninety (90) days, the amount to be paid to the Executive pursuant to
clauses (A)(x) and (A)(y) above, and provide a copy to the Executive of the
detailed determination of the Company's independent auditors.
(g) Mitigation of Damages. Executive shall not be required to mitigate the
---------------------
amount of any payment provided for in paragraphs 2(e) and 2(f) by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in paragraphs 2(e) and 2(f) be reduced by any compensation earned by the
Executive as the result of employment by another employer or by reason of the
Executive's receipt of or right to receive any retirement or other benefits
after the Termination Date or otherwise.
3. Confidential Information. Executive acknowledges that the information,
------------------------
observations and data obtained by him during the course of his performance under
this Agreement concerning the business or affairs of Company and its Affiliates
are the property of Company. Therefore, Executive agrees that he will not
disclose to any unauthorized person or use for his own account any of such
information, observations or data without the Board's prior written consent,
unless but only to the extent that the aforementioned matters become generally
known to and available for use by the public other than as a result of
Executive's acts or omissions to act. Notwithstanding the foregoing, in the
event that Executive is required to disclose any such information pursuant to
any court or other governmental proceedings, Executive may disclose such
information after giving Company not less than 48 hours prior written notice of
such disclosure in order to permit Company to seek an appropriate protective
order. Executive agrees to deliver to Company at the termination of his
employment, or at any other time Company may request, all memoranda, notes,
plans, records, reports and other documents (and all copies thereof) relating to
the business of Company and its Affiliates which he may then possess or have
under his control.
4. Inventions and Patents. Executive agrees that all inventions,
----------------------
innovations or improvements in Company's or any other of its Affiliates' method
of conducting their business (including new contributions, improvements, ideas
and discoveries, whether patentable or not) conceived or made by him during his
employment belong to the Company. Executive will promptly disclose such
inventions, innovations or improvements to the Board and perform all actions
reasonably requested by the Board to establish and confirm such ownership by the
Company.
5. Other Businesses. During the Employment Period. Executive agrees that
----------------
he will not, except with the express written consent of the Board, become
engaged in, render services for, or permit his name to be used in connection
with, any business other than the business of the Company and its Affiliates.
Nothing in this paragraph 5 shall prohibit Executive from engaging in personal
investment activities which do not interfere with Executive's performance of his
duties hereunder.
<PAGE>
6. Definitions. As used in this Agreement, the following terms shall have
-----------
the following meanings.
"Affiliate" has the meaning given such term in Rule 12b-2 promulgated under
---------
the Exchange Act.
"Affiliated Corporation" means any corporation that is a member of the
----------------------
Company's "affiliated group" (as such term is defined under Section 1504 of the
Code).
"Annual Incentive Plan" means the Annual Incentive Plan of the Company, as
---------------------
adopted by the Board, and as amended and in effect from time to time.
"Cause" shall mean (i) the commission of an act by Executive involving
-----
fraud, embezzlement, or a felony, (ii) the commission of any act by Executive
constituting financial dishonesty resulting in damage to the Company or its
Subsidiaries, (iii) the refusal or failure by Executive to follow the lawful,
good faith directives of the Board after written notice from the Board, (iv)
gross dereliction of duty to Company or its Subsidiaries after written notice
from the Board, (v) an act involving moral turpitude which (A) brings Company or
any of its Subsidiaries into public disrepute or disgrace, or (B) causes
material harm to the customer relations, franchisor relations, operations or
business prospects of Company or any of its Subsidiaries, or (vi) the material
breach by Executive of the provisions of paragraphs 3, 4, or 5 hereof.
Notwithstanding the foregoing, with respect to termination for Cause arising out
of conduct described in clauses (ii), (iii), (iv), (v), or (vi) above, the
Executive may not be terminated for Cause unless there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire Board, at a meeting of such Board
called and held for that purpose (after reasonable notice to the Executive and
an opportunity for the Executive, together with his counsel or other advisors,
to be heard at such meeting), finding that in the good faith opinion of the
Board, the Executive had engaged in conduct described above in clauses (ii),
(iii), (iv), (v), or (vi) above and specifying the particulars thereof in
detail. Such a finding by the Board is a prerequisite to a termination for
Cause pursuant to clauses (ii), (iii), (iv), (v), or (vi) above; provided,
--------
however, that such a finding may be challenged, by appropriate arbitral process,
- -------
on the merits (i.e., that Cause did not exist) or on the basis that the Board's
finding was not made in good faith (provided that proof that Cause for
termination existed shall be a complete defense to any showing that the Board's
finding was not made in good faith).
"Change of Control" means with respect to the Company and its Subsidiaries,
-----------------
(a) the consummation of a sale, transfer, or other disposition of all or
substantially all of the assets of the Company (determined on a consolidated
basis) after the date of this Agreement, (b) any transfer of voting power with
respect to the Company's capital stock after the date of this Agreement (whether
effected by agreement among stockholders, irrevocable proxy, voting trust,
issuance or transfer of capital stock, merger, consolidation, or other
reorganization or means, including a reorganization under bankruptcy or
insolvency laws) if as a result of such transfer a Person (including a "group",
as such term is defined under Section 13(d)(3) of the Exchange Act) becomes the
beneficial owner of shares of the Company having 50% or more of the total number
of votes that may be cast for the election of directors of the Company, (c) a
change in the composition of the Board arising as the result of, or in
connection with, any cash tender offer or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions
<PAGE>
(a "Transaction"), such that the persons who were directors of the Company
before the Transaction shall cease to constitute a majority of the Board or the
board of directors of any successor to the Company, or (d) the adoption by the
Company of a plan of liquidation or dissolution (other than pursuant to a
bankruptcy or insolvency) after the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Cost of Living Amount" means an amount calculated by multiplying the Base
---------------------
Salary then in effect by a fraction, (a) the numerator of which shall be the
amount (not less than zero) by which the latest Cost of Living Index available
as of the time of determination exceeds the Cost of Living Index for the same
period during the immediately preceding year, and (b) the denominator of which
shall be the latest Cost of Living Index for the same period during the
immediately preceding year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Good Reason" means, unless the Executive shall have consented in writing
-----------
thereto, any of the following:
(a) a material reduction in the Executive's title, duties,
responsibilities, or status, as compared to such title, duties,
responsibilities, or status immediately prior to the Change of Control or as the
same may be increased after the Change of Control;
(b) the assignment to the Executive of a material amount of different or
additional duties that are significantly inconsistent with the Executive's
office on the date of the Change of Control or as the same may be increased
after the Change of Control;
(c) a requirement that the Executive relocate anywhere not acceptable to
him or the imposition on the Executive of business travel obligations
substantially greater than his business travel obligations during the year prior
to the Change of Control;
(d) the relocation after a Change of Control, without Executive's consent
(which consent may be withheld for any reason) of all or substantially all of
the executive level employees (or their successors-in-office) who were employed
at the Company's principal executive offices at the time of the occurrence of
the Change of Control to a location outside the greater metropolitan area where
the Company's principal executive offices are located at such time;
(e) the failure by the Company or its successor to continue in effect any
material fringe benefit or compensation plan, retirement plan, life insurance
plan, health and accident plan, or disability plan (or plans providing the
Executive with substantially similar benefits), in which the Executive is
participating at the time of a Change of Control, the taking of any action by
the Company or its successor (including an amendment or modification to any such
plan) that would adversely affect the Executive's participation in or materially
reduce his benefits under any of such plans or deprive him of any material
fringe benefit enjoyed by him at the time of the Change of Control;
<PAGE>
(f) the adoption or pursuit by the Company or its successor of one or more
policies or practices which, in the sole opinion of the Executive, differ
materially and adversely from the ethics, traditions, policies, or practices of
the Company, as in effect immediately prior to the Change of Control; or
(g) any material breach of this Agreement on the part of the Company or its
successor.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated association, or a government or any department or
agency or political subdivision thereof.
"Retirement" means termination of Executive's employment in accordance with
----------
the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time after attaining age 60 or at
any earlier time upon the occurrence of any event entitling Executive to receive
disability benefits under any long-term disability policy maintained by the
Company that covers the Executive) or in accordance with any other retirement
arrangement established with the Executive's consent with respect to the
Executive.
"Subsidiary" means a corporation, association, or other business entity of
----------
which the Company holds, directly or indirectly, fifty percent (50%) or more of
the outstanding capital stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether any
other class or classes of capital stock of such corporation may have voting
power by reason or the happening of any contingencies).
"Termination Date" means (i) if Executive's employment is terminated as a
----------------
result of Executive's death, the last day of the month next succeeding the month
during which Executive's death occurred, and (ii) if Executive's employment is
terminated for any other reason, the date upon which such termination is
effective.
7. Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally, mailed
by certified or registered mail, return receipt requested and postage prepaid,
or sent via a nationally recognized overnight courier to the recipient. Such
notices, demands, and other communications will be sent to the addresses
indicated below:
To Company:
Louis Janicich
Senior Vice President-Human Resources
3220 East 26th Street
Vernon, CA 90023
<PAGE>
To Executive:
Bart S. Brodkin
3220 East 26th Street
Vernon, CA 90023
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
8. Survival. Paragraphs 3, 4, and 5 shall survive and continue in full
--------
force in accordance with their terms notwithstanding any termination of the
Employment Period.
9. Remedy for Breach. In the event of a breach by Executive of any of the
-----------------
provisions of paragraphs 3, 4, or 5, the Company or its successors or assigns
may, in addition to other rights and remedies existing in its favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce or prevent any violations of the provisions
hereof.
10. Choice of Law. All questions concerning the construction, validity
-------------
and interpretation of the employment provisions of this Agreement will be
governed by the internal law, and not the law of conflicts, of the State of
California.
11. Arbitration; Submission to Jurisdiction. Each of the parties hereto
---------------------------------------
agrees that any dispute relating to the interpretation, performance or breach of
this Agreement shall be determined by arbitration, such arbitration to be
conducted in the City of New York, New York, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") and the
Supplementary Procedures for International Commercial Arbitration, except as
provided herein. Any party hereto seeking arbitration shall serve on the other
party hereto (i) a demand for arbitration and (ii) the name of an arbitrator
selected by the demanding party; the other party shall serve on the demanding
party (i) its answer to the demand and (ii) the name of an arbitrator selected
by such party; and the two arbitrators so selected shall themselves select a
third arbitrator who may be, but need not be, from a panel proposed by the AAA
(the three arbitrators so chosen shall hereafter be referred to as the
"Arbitrators"). The Arbitrators shall award to the prevailing party the costs
of the arbitration, including fees of the AAA, the Arbitrators, and legal
counsel of the prevailing party. Judgment upon the award rendered by the
Arbitrators may be entered in any court having jurisdiction thereof. Each of
the parties hereto agrees that this paragraph 11 is a specific and material
aspect of this Agreement and acknowledges that each of Executive and the
Company would not enter into this Agreement if this paragraph 11 were not part
of this Agreement.
12. Arbitration Expenses. The Company shall pay reasonable attorneys'
--------------------
fees and expenses of Executive in connection with any arbitration arising under,
pursuant to, or in connection with the terms of this Agreement.
13. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended and waived only with the prior written consent of the Company and
Executive.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
By: /s/ Lou Janicich
---------------------------------------------------
Its: Senior Vice President
/s/ Bart S. Brodkin
-------------------------------------------------------
BART S. BRODKIN
<PAGE>
FIRST AMENDMENT
TO
MANAGEMENT AGREEMENT
First Amendment, dated as of February 28, 1997 (the "First Amendment"), to
the Second Amended and Restated Management Agreement, dated as of January 22,
1997 (the "Second Amended and Restated Agreement"), by and between Seven-Up/RC
Bottling Company of Southern California, Inc., a Delaware corporation (the
"Company"), and Bart S. Brodkin (the "Executive").
WHEREAS, Dr Pepper Bottling Company of Texas, a Texas corporation
("Parent"), and DPB Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent ("Subsidiary"), and the Company propose to enter into an
Agreement and Plan of Merger, to be dated as of February 28, 1997 (as the same
may be amended from time to time, the "Merger Agreement"), pursuant to which
Parent will acquire the Company pursuant to a tender offer (the "Tender Offer")
followed by a merger of Subsidiary with and into the Company, resulting in the
Company becoming a wholly-owned subsidiary of Parent;
WHEREAS, Parent and Subsidiary will not enter into the Merger Agreement
unless the Company and the Executive enter into this First Amendment; and
WHEREAS, the Executive and the Company wish to induce Parent and
Subsidiary to enter into the Merger Agreement and, accordingly, desire to amend
the Second Amended and Restated Agreement as provided herein;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Amendment of Section 2(a)(i). Section 2(a)(i) of the Second Amended
and Restated Agreement is hereby amended by deleting the last sentence in that
section in its entirety and replacing such sentence with the following sentence:
Executive shall also be entitled to receive (y) an allowance equal in
amount to $2,000 per month for automobile and club expenses and (z) such
other benefits, payments, allowances as the Board (or an appropriate
committee of the Board) may from time to time make available to
Executive.
<PAGE>
2. Amendment of Section 2(b)(i). Section 2(b)(i) of the Second Amended
and Restated Agreement is hereby amended by deleting the last sentence of the
section in its entirety and replacing such sentence with the following
sentence:
Executive will devote his best efforts and all of his business time to the
business of the Company and its Affiliates (except for reasonable periods
of illness or other incapacity).
3. Amendment of Section 2(b)(ii). Section 2(b)(ii) of
the Second Amended and Restated Agreement is hereby deleted in its entirety and
replaced with the following new Section 2(b)(ii):
(ii) The Executive's principal office and place of employment shall be
at a location not greater than 50 miles from its location as of the
consummation of the Tender Offer.
4. Amendment of Section 2(d). Section 2(d) of the
Second Amended and Restated Agreement is hereby deleted in its entirety and is
replaced with the following new Section 2(d):
(d) Termination. The Employment Period will be from the date hereof until
December 31, 1999; provided, however, that the Employment Period will
automatically renew on the last day of the Employment Period for a period
of one year unless the Company or the Executive notify the other in
writing at least 90 days prior to the expiration of the Employment Period
of the Company's or Executive's intention not to renew the Employment
Period and thereby terminate this Agreement. In addition, this Agreement
will terminate upon the (i) the Executive's death or Disability (as
defined below), (ii) the date on which the Executive is terminated for
Cause (as defined below) or (iii) the Executive's normal retirement at age
65 or older, whichever occurs first.
5. Amendment of Section 2(e)(i)(B). Section 2(e)(i)(B) of the Second
Amended and Restated Agreement is hereby deleted in its entirety and replaced
with the following new Section 2(e)(i)(B):
(B), until the earlier of the expiration of the Remaining Term or the
Executive's 65th birthday,
2
<PAGE>
the Executive shall continue to be eligible to participate in all life, medical
and dental insurance plans on the same basis as senior management employees of
the Company who are eligible to participate from time to time (it being agreed
that in the event Executive shall elect to so participate in any such plan
pursuant to this clause (B), the Company will provide benefits at its expense
under such plan to the Executive to the same extent that it provides benefits at
its expense under such plan to senior management employees).
6. Amendment to Section 2(e)(i). Section 2(e)(i) of the Second Amended
and Restated Agreement is hereby amended by adding the following sentence to the
end of Section 2(e)(i):
Notwithstanding an election by Executive to receive the amounts payable
pursuant to this Section 2(e)(i) in respect of Base Salary in a lump sum
payment, the Company's obligation to make such lump sum payment shall be
suspended to the extent, and for only so long as, such payment is
prohibited by, or otherwise would constitute or could reasonably be
expected to result in a default or an event of default under, any of the
debt financing agreements to which Parent or any of its subsidiaries may
be a party from time to time.
7. Amendment of Section 2(e)(ii). Section 2(e)(ii) of
the Second Amended and Restated Agreement is hereby deleted in its entirety and
replaced with the following text:
(ii) If Executive's employment is terminated by reason of his death,
the Company will pay to Executive's estate or representative a severance
payment in the amount of one year's Base Salary as in effect at such time.
In such event, the Company shall have no further obligations to Executive
under this Agreement.
8. Amendment of Section 2(f). Section 2(f) of the Second Amended and
Restated Agreement is hereby deleted in its entirety and replaced with the
following text:
(f) Reserved.
3
<PAGE>
9. Amendments to Section 6.
a. Amendment of Definition of "Cause". The definition of "Cause" under
Section 6 ("Definitions") of the Second Amended and Restated Agreement is
hereby amended by deleting the phrase "clauses (ii), (iii), (iv), (v) or (vi)
above" in each place where it occurs and replacing it with the phrase
"clauses (v) or (vi)."
b. Amendment of Definition of "Good Reason". The definition of "Good
Reason" under Section 6 ("Definitions") of the Second Amended and Restated
Agreement is hereby amended as follows:
(i) Subparagraph (c) is deleted and restated in its entirety to read as
follows:
(c) a requirement that the Executive relocate to a location more
than 50 miles away from the present location of the Company's
principal executive offices as of the consummation of the Change of
Control or the imposition on the Executive of business travel
obligations substantially greater than his business travel obligations
during the year prior to the consummation of the Change of Control;
(ii) Subparagraph (d) is deleted in its entirety and is restated to
read as follows:
(d) reserved;
(iii) Subparagraph (e) is deleted and restated in its entirety to read
as follows:
(e) a substantial reduction in the level of retirement, life,
health, accident or disability benefits provided under Company Plans
in the aggregate from the level of such benefits that existed prior to
the consummation of the Change of Control;
(iv) Subparagraph (f) is deleted in its entirety and is restated to
read as follows:
(f) reserved.
c. Inclusion of Definition of "Disability". The following definition for
"Disability" is added to
4
<PAGE>
Section 6 ("Definitions") of the Second Amended and Restated Agreement to
read as follows:
"Disability" shall have the same meaning as the term "Total Disability"
has under the Company's Employee Long-Term Disability Coverage program.
10. Effectiveness. This First Amendment shall become effective
immediately prior to the purchase of shares of common stock in the Tender Offer
by Subsidiary and shall be of no further force or effect if the Merger
Agreement is terminated.
11. Continuing Effect. Except as expressly amended hereby, the Second
Amended and Restated Agreement, and all rights and obligations of the Executive
and the Company thereunder, shall remain in full force and effect. This First
Amendment shall not, except as expressly provided herein, be deemed to be a
consent to any waiver or modification of any terms or provisions of the Second
Amended and Restated Agreement.
12. Governing Law. This First Amendment shall be governed by the
construed in accordance with the laws of the State of California, without
giving effect to the principles of conflicts of law thereof.
13. Counterparts. This First Amendment may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
14. Amendment, Supplement and Waiver. This First Amendment may not be
amended or supplemented, nor may any rights or obligations hereunder be waived,
except in writing and then only with the prior written consent of Parent, who
shall be a third party beneficiary of this First Amendment.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this First Amendment as of the date first above written.
EXECUTIVE:
/s/ BART S. BRODKIN
-------------------------
Bart S. Brodkin
COMPANY:
SEVEN-UP/RC BOTTLING CO. OF
SOUTHERN CALIFORNIA, INC.
By: /s/ BARTON S. BRODKIN
---------------------------------
Name: Barton S. Brodkin
-------------------------------
Title: Chairman, President and CEO
------------------------------
Joined in as of the 28th day
of February, 1997, for the purposes
set forth in Section 14 above:
DR PEPPER BOTTLING OF TEXAS
By: /s/ JIM L. TURNER
---------------------------
Name: Jim L. Turner
---------------------------
Title: President
---------------------------
6
<PAGE>
EXHIBIT 3
EXECUTION
MANAGEMENT AGREEMENT
--------------------
MANAGEMENT AGREEMENT, dated as of February 10, 1997, by and between
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC., a Delaware
corporation (the "Company"), and RICK FERGUSON ("Executive").
NOW, THEREFORE, in consideration of the mutual undertakings contained
herein, the Company and Executive agree as follows:
1. Change of Control. If the Company terminates Executive within twelve
-----------------
(12) months after the occurrence of a Change of Control (unless such termination
is due to Executive's death or Retirement, or Executive's termination for Cause
or Disability) or Executive resigns for Good Reason within twelve (12) months
after the occurrence of a Change of Control, then:
(a) the Company shall pay to Executive, no later than 30 days
following the Termination Date, the portion of Executive's base salary in effect
on the Termination Date (the "Base Salary") that is accrued but unpaid through
the Termination Date plus compensation for current and carried-over unused
vacation and compensation days in accordance with the Company's personnel
policy;
(b) in lieu of any further payments of Base Salary to the Executive
after the Termination Date, the Company shall pay to Executive, no later than
thirty (30) days following the Termination Date and notwithstanding any dispute
between the Executive and the Company as to the payment to the Executive of any
other amounts under this Agreement or otherwise, a lump sum severance payment
(the "Severance Payment") equal to the sum of (x) Executive's Base Salary and
-----------------
(y) Executive's Bonus for the previous year;
(c) the Company (or an Affiliated Corporation) shall maintain in full
force and effect, for the Executive's continued benefit, until the earlier of
(A) twelve (12) months after the Termination Date, or (B) the Executive's 65th
birthday, all life, medical, and dental insurance programs in which the
Executive was entitled to participate immediately prior to the Termination Date,
so long as his continued participation is possible under the general terms and
provisions of such programs; provided, that in the event the Executive's
--------
participation in any such program is barred, the Company (or an Affiliated
Corporation) shall arrange to provide the Executive with benefits substantially
similar to those which he was entitled to receive under such programs; and
(d) within ninety (90) days after the Termination Date, the Company or
an Affiliated Corporation shall (A) pay to the Executive an additional amount
sufficient to (x) defray all of the Executive's current or prospective liability
to any taxing authority for excise taxes, penalties, or any other taxes assessed
in excess of those normally imposed on salaries, incurred by reason of the
payments made to Executive under this Agreement, and (y) defray the Executive's
increased income tax liability by reason of the payment under clause (A)(x) and
(A)(y) of this paragraph (1)(d), and (B) cause the Company's independent
auditors to determine, within such ninety (90) days, the amount to be paid to
the Executive pursuant to clauses (A)(x) and (A)(y) above, and provide a copy to
the Executive of the detailed determination of the Company's independent
auditors.
2. Mitigation of Damages. Executive shall not be required to mitigate
---------------------
the amount of any payment provided for in paragraph 2 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in paragraph 2 be reduced by any compensation earned by the Executive as the
result of employment by another employer or by reason of the Executive's receipt
of or right to receive any retirement or other benefits after the Termination
Date or otherwise.
<PAGE>
3. Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings.
"Affiliated Corporation" means any corporation that is a member of the
----------------------
Company's "affiliated group" (as such term is defined under Section 1504 of the
Code).
"Annual Incentive Plan" means the Annual Incentive Plan of the
---------------------
Company, as adopted by the Board, and as amended and in effect from time to
time.
"Board" means the board of directors of the Company.
-----
"Bonus" means an annual award payable by the Company to Executive
-----
pursuant to the terms of the Company's Annual Incentive Plan.
"Cause" shall mean (i) the commission of an act by Executive involving
-----
fraud, embezzlement, or a felony, (ii) the commission of any act by Executive
constituting financial dishonesty resulting in damage to the Company or its
Subsidiaries, (iii) the refusal or failure by Executive to follow the lawful,
good faith directives of the Board after written notice from the Board, (iv)
gross dereliction of duty to Company or its Subsidiaries after written notice
from the Board, or (v) an act involving moral turpitude which (A) brings Company
or any of its Subsidiaries into public disrepute or disgrace, or (B) causes
material harm to the customer relations, franchisor relations, operations or
business prospects of Company or any of its Subsidiaries. Notwithstanding the
foregoing, with respect to termination for Cause arising out of conduct
described in clauses (ii), (iii), (iv), or (v) above, the Executive may not be
terminated for Cause unless there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire Board, at a meeting of such Board called and held
for that purpose (after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel or other advisors, to be heard at
such meeting), finding that in the good faith opinion of the Board, the
Executive had engaged in conduct described above in clauses (ii), (iii), (iv),
or (v) above and specifying the particulars thereof in detail. Such a finding
by the Board is a prerequisite to a termination for Cause pursuant to clauses
(ii), (iii), (iv), or (v) above; provided, however, that such a finding may be
-------- -------
challenged, by appropriate arbitral process, on the merits (i.e., that Cause did
not exist) or on the basis that the Board's finding was not made in good faith
(provided that proof that Cause for termination existed shall be a complete
defense to any showing that the Board's finding was not made in good faith).
"Change of Control" means with respect to the Company and its
-----------------
Subsidiaries, (i) the consummation of a sale, transfer, or other disposition of
all or substantially all of the assets of the Company (determined on a
consolidated basis) after the date of this Agreement, (ii) any transfer of
voting power with respect to the Company's capital stock after the date of this
Agreement (whether effected by agreement among stockholders, irrevocable proxy,
voting trust, issuance or transfer of capital stock, merger, consolidation, or
other reorganization or means, including a reorganization under bankruptcy or
insolvency laws) if as a result of such transfer a Person (including a "group",
as such term is defined under Section 13(d)(3) of the Exchange Act) becomes the
beneficial owner of shares of the Company having 50% or more of the total number
of votes that may be cast for the election of directors of the Company, (iii) a
change in the composition of the Board arising as the result of, or in
connection with, any cash tender offer or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions (a "Transaction"), such that the persons who were
directors of the Company before the Transaction shall cease to constitute a
majority of the Board or the board of directors of any successor to the Company,
or (iv) the adoption by the Company of a plan of liquidation or dissolution
(other than pursuant to a bankruptcy or insolvency) after the date of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
-2-
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Good Reason" means, unless the Executive shall have consented in
-----------
writing thereto, any of the following:
(a) a material reduction in the Executive's title, duties,
responsibilities, or status, as compared to such title, duties,
responsibilities, or status immediately prior to the Change of Control or as the
same may be increased after the Change of Control;
(b) the assignment to the Executive of a material amount of different
or additional duties that are significantly inconsistent with the Executive's
office on the date of the Change of Control or as the same may be increased
after the Change of Control;
(c) a requirement that the Executive relocate anywhere not acceptable
to him or the imposition on the Executive of business travel obligations
substantially greater than his business travel obligations during the year prior
to the Change of Control;
(d) the relocation after a Change of Control, without Executive's
consent (which consent may be withheld for any reason) of all or substantially
all of the executive level employees (or their successors-in-office) who were
employed at the Company's principal executive offices at the time of the
occurrence of the Change of Control to a location outside the greater
metropolitan area where the Company's principal executive offices are located at
such time;
(e) the failure by the Company or its successor to continue in effect
any material fringe benefit or compensation plan, retirement plan, life
insurance plan, health and accident plan, or disability plan (or plans providing
the Executive with substantially similar benefits), in which the Executive is
participating at the time of a Change of Control, the taking of any action by
the Company or its successor (including an amendment or modification to any such
plan) that would adversely affect the Executive's participation in or materially
reduce his benefits under any of such plans or deprive him of any material
fringe benefit enjoyed by him at the time of the Change of Control;
(f) the adoption or pursuit by the Company or its successor of one or
more policies or practices which, in the sole opinion of the Executive, differ
materially and adversely from the ethics, traditions, policies, or practices of
the Company, as in effect immediately prior to the Change of Control; or
(g) any material breach of this Agreement on the part of the Company
or its successor.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated association, or a government or any department or
agency or political subdivision thereof.
"Retirement" means termination of Executive's employment in accordance
----------
with the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time after attaining age 60 or at
any earlier time upon the occurrence of any event entitling Executive to receive
disability benefits under any long-term disability policy maintained by the
Company that covers the Executive) or in accordance with any other retirement
arrangement established with the Executive's consent with respect to the
Executive.
"Subsidiary" means a corporation, association, or other business
----------
entity of which the Company holds, directly or indirectly, fifty percent (50%)
or more of the outstanding capital stock having ordinary
-3-
<PAGE>
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether any other class or classes of capital stock of such
corporation may have voting power by reason or the happening of any
contingencies).
"Termination Date" means (i) if Executive's employment is terminated
----------------
as a result of Executive's death, the last day of the month next succeeding the
month during which Executive's death occurred, and (ii) if Executive's
employment is terminated for any other reason, the date upon which such
termination is effective.
4. Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally, mailed
by certified or registered mail, return receipt requested and postage prepaid,
or sent via a nationally recognized overnight courier to the recipient. Such
notices, demands, and other communications will be sent to the addresses
indicated below:
To Company:
Louis Janicich
Senior Vice President-Human Resources
3220 East 26th Street
Vernon, CA 90023
To Executive:
Rick Ferguson
3220 East 26th Street
Vernon, CA 90023
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
5. Choice of Law. All questions concerning the construction, validity
-------------
and interpretation of the employment provisions of this Agreement will be
governed by the internal law, and not the law of conflicts, of the State of
California.
6. Arbitration; Submission to Jurisdiction. Each of the parties hereto
---------------------------------------
agrees that any dispute relating to the interpretation, performance or breach of
this Agreement shall be determined by arbitration, such arbitration to be
conducted in the City of New York, New York, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"), except as
provided herein. Any party hereto seeking arbitration shall serve on the other
party hereto (i) a demand for arbitration and (ii) the name of an arbitrator
selected by the demanding party; the other party shall serve on the demanding
party (i) its answer to the demand and (ii) the name of an arbitrator selected
by such party; and the two arbitrators so selected shall themselves select a
third arbitrator who may be, but need not be, from a panel proposed by the AAA
(the three arbitrators so chosen shall hereafter be referred to as the
"Arbitrators"). The Arbitrators shall award to the prevailing party the costs
of the arbitration, including fees of the AAA, the Arbitrators, and legal
counsel of the prevailing party. Judgment upon the award rendered by the
Arbitrators may be entered in any court having jurisdiction thereof. Each of
the parties hereto agrees that this paragraph 6 is a specific and material
aspect of this Agreement and acknowledges that each of Executive and the Company
would not enter into this Agreement if this paragraph 6 were not part of this
Agreement.
-4-
<PAGE>
7. Arbitration Expenses. The Company shall pay reasonable attorneys'
--------------------
fees and expenses of Executive in connection with any arbitration arising under,
pursuant to, or in connection with the terms of this Agreement.
8. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended and waived only with the prior written consent of the Company and
Executive.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
By: /s/Lou Janicich
-----------------------------
Its: Senior Vice President
/s/ Rick Ferguson
--------------------------------
RICK FERGUSON
<PAGE>
TERMINATION AGREEMENT
Termination Agreement, dated as of February 28, 1997 (the "Agreement"), by
and between Seven-UpRC Bottling Company of Southern California, Inc., a
Delaware corporation (the "Company"), and Rick Ferguson (the "Executive").
WHEREAS, the Company and Executive are parties to a Management Agreement,
dated as of February 10, 1997 (the "Management Agreement");
WHEREAS, Dr Pepper Bottling Company of Texas, a Texas corporation
("Parent"), and DPB Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent ("Subsidiary"), and the Company propose to enter into an
Agreement and Plan of Merger, to be dated as of February 28, 1997 (as the same
may be amended from time to time, the "Merger Agreement"), pursuant to which
Parent will acquire the Company pursuant to a tender offer (the "Tender Offer")
followed by a merger of Subsidiary with and into the Company, resulting in the
Company becoming a wholly-owned subsidiary of Parent;
WHEREAS, Parent and Subsidiary will not enter into the Merger Agreement
unless the Company and the Executive enter into this Agreement; and
WHEREAS, the Executive and the Company wish to induce Parent and
Subsidiary to enter into the Merger Agreement and, accordingly, desire to enter
into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Termination of Management Agreement. Effective immediately prior to
the purchase of shares of common stock in the Tender Offer by Subsidiary, the
Management Agreement shall be terminated and shall cease to be of any further
force or effect.
2. Continuing Effect. Except as expressly provided herein, the Management
Agreement, and all rights and obligations of the Executive and the Company
thereunder, shall remain in full force and effect. This Agreement shall not,
except as expressly provided herein, be deemed to be a consent to any waiver or
modification of any terms or provisions of the Management Agreement.
3. Governing Law. This Agreement shall be governed by the construed in
accordance with the laws of the State of California, without giving effect to
the principles of conflicts of law thereof.
4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
5. Amendment, Supplement and Waiver. This Agreement may not be amended or
supplemented, nor may any rights or obligations hereunder be waived, except in
writing and then only with the prior written consent of Parent, who shall be a
third party beneficiary of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
EXECUTIVE:
/s/ RICK FERGUSON
--------------------------
Rick Ferguson
COMPANY:
SEVEN-UPRC BOTTLING CO. OF
SOUTHERN CALIFORNIA, INC.
By: /s/ BART S. BRODKIN
----------------------------
Name: Bart S. Brodkin
----------------------------
Title: President
----------------------------
Joined in as of the 28th day
of February, 1997, for the purposes
set forth in Section 5 above:
DR PEPPER BOTTLING OF TEXAS
By: /s/ JIM L. TURNER
---------------------------
Name: Jim L. Turner
---------------------------
Title: President
---------------------------
2
<PAGE>
EXHIBIT 4
EXECUTION
MANAGEMENT AGREEMENT
--------------------
MANAGEMENT AGREEMENT, dated as of February 10, 1997, by and between
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC., a Delaware
corporation (the "Company"), and ROY BRENEMAN ("Executive").
NOW, THEREFORE, in consideration of the mutual undertakings contained
herein, the Company and Executive agree as follows:
1. Change of Control. If the Company terminates Executive within twelve
-----------------
(12) months after the occurrence of a Change of Control (unless such termination
is due to Executive's death or Retirement, or Executive's termination for Cause
or Disability) or Executive resigns for Good Reason within twelve (12) months
after the occurrence of a Change of Control, then:
(a) the Company shall pay to Executive, no later than 30 days
following the Termination Date, the portion of Executive's base salary in effect
on the Termination Date (the "Base Salary") that is accrued but unpaid through
the Termination Date plus compensation for current and carried-over unused
vacation and compensation days in accordance with the Company's personnel
policy;
(b) in lieu of any further payments of Base Salary to the Executive
after the Termination Date, the Company shall pay to Executive, no later than
thirty (30) days following the Termination Date and notwithstanding any dispute
between the Executive and the Company as to the payment to the Executive of any
other amounts under this Agreement or otherwise, a lump sum severance payment
(the "Severance Payment") equal to the sum of (x) Executive's Base Salary and
-----------------
(y) Executive's Bonus for the previous year;
(c) the Company (or an Affiliated Corporation) shall maintain in full
force and effect, for the Executive's continued benefit, until the earlier of
(A) twelve (12) months after the Termination Date, or (B) the Executive's 65th
birthday, all life, medical, and dental insurance programs in which the
Executive was entitled to participate immediately prior to the Termination Date,
so long as his continued participation is possible under the general terms and
provisions of such programs; provided, that in the event the Executive's
--------
participation in any such program is barred, the Company (or an Affiliated
Corporation) shall arrange to provide the Executive with benefits substantially
similar to those which he was entitled to receive under such programs; and
(d) within ninety (90) days after the Termination Date, the Company or
an Affiliated Corporation shall (A) pay to the Executive an additional amount
sufficient to (x) defray all of the Executive's current or prospective liability
to any taxing authority for excise taxes, penalties, or any other taxes assessed
in excess of those normally imposed on salaries, incurred by reason of the
payments made to Executive under this Agreement, and (y) defray the Executive's
increased income tax liability by reason of the payment under clause (A)(x) and
(A)(y) of this paragraph (1)(d), and (B) cause the Company's independent
auditors to determine, within such ninety (90) days, the amount to be paid to
the Executive pursuant to clauses (A)(x) and (A)(y) above, and provide a copy to
the Executive of the detailed determination of the Company's independent
auditors.
2. Mitigation of Damages. Executive shall not be required to mitigate
---------------------
the amount of any payment provided for in paragraph 2 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in paragraph 2 be reduced by any compensation earned by the Executive as the
result of employment by another employer or by reason of the Executive's receipt
of or right to receive any retirement or other benefits after the Termination
Date or otherwise.
<PAGE>
3. Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings.
"Affiliated Corporation" means any corporation that is a member of the
----------------------
Company's "affiliated group" (as such term is defined under Section 1504 of the
Code).
"Annual Incentive Plan" means the Annual Incentive Plan of the
---------------------
Company, as adopted by the Board, and as amended and in effect from time to
time.
"Board" means the board of directors of the Company.
-----
"Bonus" means an annual award payable by the Company to Executive
-----
pursuant to the terms of the Company's Annual Incentive Plan.
"Cause" shall mean (i) the commission of an act by Executive involving
-----
fraud, embezzlement, or a felony, (ii) the commission of any act by Executive
constituting financial dishonesty resulting in damage to the Company or its
Subsidiaries, (iii) the refusal or failure by Executive to follow the lawful,
good faith directives of the Board after written notice from the Board, (iv)
gross dereliction of duty to Company or its Subsidiaries after written notice
from the Board, or (v) an act involving moral turpitude which (A) brings Company
or any of its Subsidiaries into public disrepute or disgrace, or (B) causes
material harm to the customer relations, franchisor relations, operations or
business prospects of Company or any of its Subsidiaries. Notwithstanding the
foregoing, with respect to termination for Cause arising out of conduct
described in clauses (ii), (iii), (iv), or (v) above, the Executive may not be
terminated for Cause unless there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire Board, at a meeting of such Board called and held
for that purpose (after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel or other advisors, to be heard at
such meeting), finding that in the good faith opinion of the Board, the
Executive had engaged in conduct described above in clauses (ii), (iii), (iv),
or (v) above and specifying the particulars thereof in detail. Such a finding
by the Board is a prerequisite to a termination for Cause pursuant to clauses
(ii), (iii), (iv), or (v) above; provided, however, that such a finding may be
-------- -------
challenged, by appropriate arbitral process, on the merits (i.e., that Cause did
not exist) or on the basis that the Board's finding was not made in good faith
(provided that proof that Cause for termination existed shall be a complete
defense to any showing that the Board's finding was not made in good faith).
"Change of Control" means with respect to the Company and its
-----------------
Subsidiaries, (i) the consummation of a sale, transfer, or other disposition of
all or substantially all of the assets of the Company (determined on a
consolidated basis) after the date of this Agreement, (ii) any transfer of
voting power with respect to the Company's capital stock after the date of this
Agreement (whether effected by agreement among stockholders, irrevocable proxy,
voting trust, issuance or transfer of capital stock, merger, consolidation, or
other reorganization or means, including a reorganization under bankruptcy or
insolvency laws) if as a result of such transfer a Person (including a "group",
as such term is defined under Section 13(d)(3) of the Exchange Act) becomes the
beneficial owner of shares of the Company having 50% or more of the total number
of votes that may be cast for the election of directors of the Company, (iii) a
change in the composition of the Board arising as the result of, or in
connection with, any cash tender offer or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions (a "Transaction"), such that the persons who were
directors of the Company before the Transaction shall cease to constitute a
majority of the Board or the board of directors of any successor to the Company,
or (iv) the adoption by the Company of a plan of liquidation or dissolution
(other than pursuant to a bankruptcy or insolvency) after the date of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
-2-
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Good Reason" means, unless the Executive shall have consented in
-----------
writing thereto, any of the following:
(a) a material reduction in the Executive's title, duties,
responsibilities, or status, as compared to such title, duties,
responsibilities, or status immediately prior to the Change of Control or as the
same may be increased after the Change of Control;
(b) the assignment to the Executive of a material amount of different
or additional duties that are significantly inconsistent with the Executive's
office on the date of the Change of Control or as the same may be increased
after the Change of Control;
(c) a requirement that the Executive relocate anywhere not acceptable
to him or the imposition on the Executive of business travel obligations
substantially greater than his business travel obligations during the year prior
to the Change of Control;
(d) the relocation after a Change of Control, without Executive's
consent (which consent may be withheld for any reason) of all or substantially
all of the executive level employees (or their successors-in-office) who were
employed at the Company's principal executive offices at the time of the
occurrence of the Change of Control to a location outside the greater
metropolitan area where the Company's principal executive offices are located at
such time;
(e) the failure by the Company or its successor to continue in effect
any material fringe benefit or compensation plan, retirement plan, life
insurance plan, health and accident plan, or disability plan (or plans providing
the Executive with substantially similar benefits), in which the Executive is
participating at the time of a Change of Control, the taking of any action by
the Company or its successor (including an amendment or modification to any such
plan) that would adversely affect the Executive's participation in or materially
reduce his benefits under any of such plans or deprive him of any material
fringe benefit enjoyed by him at the time of the Change of Control;
(f) the adoption or pursuit by the Company or its successor of one or
more policies or practices which, in the sole opinion of the Executive, differ
materially and adversely from the ethics, traditions, policies, or practices of
the Company, as in effect immediately prior to the Change of Control; or
(g) any material breach of this Agreement on the part of the Company
or its successor.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated association, or a government or any department or
agency or political subdivision thereof.
"Retirement" means termination of Executive's employment in accordance
----------
with the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time after attaining age 60 or at
any earlier time upon the occurrence of any event entitling Executive to receive
disability benefits under any long-term disability policy maintained by the
Company that covers the Executive) or in accordance with any other retirement
arrangement established with the Executive's consent with respect to the
Executive.
"Subsidiary" means a corporation, association, or other business
----------
entity of which the Company holds, directly or indirectly, fifty percent (50%)
or more of the outstanding capital stock having ordinary
-3-
<PAGE>
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether any other class or classes of capital stock of such
corporation may have voting power by reason or the happening of any
contingencies).
"Termination Date" means (i) if Executive's employment is terminated
----------------
as a result of Executive's death, the last day of the month next succeeding the
month during which Executive's death occurred, and (ii) if Executive's
employment is terminated for any other reason, the date upon which such
termination is effective.
4. Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally, mailed
by certified or registered mail, return receipt requested and postage prepaid,
or sent via a nationally recognized overnight courier to the recipient. Such
notices, demands, and other communications will be sent to the addresses
indicated below:
To Company:
Louis Janicich
Senior Vice President-Human Resources
3220 East 26th Street
Vernon, CA 90023
To Executive:
Roy Breneman
3220 East 26th Street
Vernon, CA 90023
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
5. Choice of Law. All questions concerning the construction, validity
-------------
and interpretation of the employment provisions of this Agreement will be
governed by the internal law, and not the law of conflicts, of the State of
California.
6. Arbitration; Submission to Jurisdiction. Each of the parties hereto
---------------------------------------
agrees that any dispute relating to the interpretation, performance or breach of
this Agreement shall be determined by arbitration, such arbitration to be
conducted in the City of New York, New York, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"), except as
provided herein. Any party hereto seeking arbitration shall serve on the other
party hereto (i) a demand for arbitration and (ii) the name of an arbitrator
selected by the demanding party; the other party shall serve on the demanding
party (i) its answer to the demand and (ii) the name of an arbitrator selected
by such party; and the two arbitrators so selected shall themselves select a
third arbitrator who may be, but need not be, from a panel proposed by the AAA
(the three arbitrators so chosen shall hereafter be referred to as the
"Arbitrators"). The Arbitrators shall award to the prevailing party the costs
of the arbitration, including fees of the AAA, the Arbitrators, and legal
counsel of the prevailing party. Judgment upon the award rendered by the
Arbitrators may be entered in any court having jurisdiction thereof. Each of
the parties hereto agrees that this paragraph 6 is a specific and material
aspect of this Agreement and acknowledges that each of Executive and the Company
would not enter into this Agreement if this paragraph 6 were not part of this
Agreement.
-4-
<PAGE>
7. Arbitration Expenses. The Company shall pay reasonable attorneys'
--------------------
fees and expenses of Executive in connection with any arbitration arising under,
pursuant to, or in connection with the terms of this Agreement.
8. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended and waived only with the prior written consent of the Company and
Executive.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
By: /s/ Lou Janicich
-----------------------
Its: Senior Vice President
/s/ Roy Breneman
-----------------------
ROY BRENEMAN
<PAGE>
EXHIBIT 5
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
February 3, 1997
[NAME AND ADDRESS OF OPTIONEE]
Re: Seven-Up/RC Bottling Company of Southern
California, Inc. (the "Company")
Grant of Nonqualified Stock Option
----------------------------------
Dear [NAME OF OPTIONEE]:
The Company is pleased to advise you that its Board of Directors has
granted to you a stock option (an "Option"), as provided below.
1. Definitions. For the purposes of this Option, the following terms
shall have the meanings set forth below:
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (i) your theft or embezzlement, or attempted theft
or embezzlement, of money or property of the Company, your perpetration or
attempted perpetration of fraud, or your participation in a fraud or attempted
fraud, on the Company or your unauthorized appropriation of, or your attempt to
misappropriate, any tangible or intangible assets or property of the Company,
(ii) any act or acts of disloyalty, misconduct or moral turpitude by you
injurious to the interest, property, operations, business or reputation of the
Company or your conviction of a crime the commission of which results in injury
to the Company or (iii) your failure or inability (other than by reason of your
Disability) to carry out effectively your duties and obligations to the Company
or to participate effectively and actively in the management of the Company, as
determined in the reasonable judgment of the Board.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute.
"Common Stock" shall mean the Common Stock, par value $0.01 per share,
of the Company outstanding on the date hereof, or, in the event that the
outstanding Common Stock is hereafter changed into or exchanged for different
stock or securities of the Company, such other stock or securities.
"Company" shall mean Seven-Up/RC Bottling Company of Southern
California, Inc., a Delaware corporation, and (except to the extent the context
requires otherwise) any subsidiary corporation of Seven-Up/RC Bottling Company
of Southern California, Inc. as such term is defined in Section 425(f) of the
Code.
"Disability" shall mean your inability, due to illness, accident,
injury, physical or mental incapacity or other disability, to carry out
effectively your duties and obligations to the Company or to participate
effectively and actively in the management of the Company for a period of at
least 90 consecutive days or for shorter periods aggregating at least 120 days
(whether or not consecutive) during any twelve-month period, as determined in
the reasonable judgment of the Board.
"Option Shares" shall mean (i) all shares of Common Stock issued or
issuable upon the exercise of the Option and (ii) all shares of Common Stock
issued with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with any conversion, merger,
consolidation or recapitalization or other reorganization affecting the Common
Stock. Option Shares shall continue to be Option Shares in the hands of
1
<PAGE>
any holder other than you (except for the Company), and each such transferee
thereof shall succeed to the rights and obligations of a holder of Option Shares
hereunder.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Public Sale" means any sale of Option Shares to the public pursuant
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
"Sale of the Company" shall mean a merger or consolidation with and
into another person pursuant to which the Company is not the surviving Person of
such merger or consolidation, a sale of all or substantially all of the
Company's assets or a sale of a majority of the Company's outstanding voting
securities.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and any successor statute.
2. Option.
(a) Terms. Your Option is for the purchase of up to a number of
shares of Common Stock determined pursuant to Section 2(b) below (the "Option
Shares"), at a price per share of equal to the quotient of the following
fraction (the "Exercise Price"): the numerator of which equals the sum of $70
million plus the amount of cash on hand at the Company as of Consummation minus
the aggregate principal amount of all interest-bearing liabilities (specifically
including capitalized leases) of the Company as of Consummation (as defined in
the First Amended Joint Plan of Reorganization, dated as of June 19, 1996, of
the Company and Beverage Group Acquisition Corp.) and the denominator of which
equals 5,000,000, payable upon exercise as set forth in paragraph 2(b) below.
Your Option shall expire at the close of business on December 31, 2001 (the
"Expiration Date"), subject to earlier expiration as provided in paragraph 3(c)
below or upon termination of your employment as provided in paragraph 4(b)
below. Your Option is not intended to be an "incentive stock option" within the
meaning of Section 422A of the Code.
(b) Number of Shares. The number of shares into which this Option
is exercisable shall be equal to (i) the sum of the Option Base Shares as
determined pursuant to Section 2(b)(i), the Option Initial Catch-Up Shares as
determined pursuant to Section 2(b)(ii) and the Option Final Catch-Up Shares as
determined pursuant to Section 2(b)(iii), less (ii) the number of shares of
Common Stock already issued in connection with partial exercises of this Option.
(i) Option Base Shares. The number of Option Base Shares of Common
Stock into which this Option is initially exercisable shall be equal to [_____]
(the "Option Base Shares").
(ii) Option Initial Catch-Up Shares. If (i) all the Option Base
Shares under this Option have been issued and (ii) any shares of Common Stock
are issued by the Company pursuant to the exercise of the stock purchase warrant
to be entered into between the Company and WB Bottling Corporation and to be
dated the Date of Issuance hereof (the "WB Warrant") and such shares constitute
"Warrant Base Shares" under Section 1A(i) of the WB Warrant (such Warrant Base
Shares issued upon the exercise or partial exercise of the WB Warrant being
referred to as "Issued Warrant Base Shares"), then the number of shares of
Common Stock into which this Option is exercisable as of any time shall be
increased by an amount which is equal to the product of (x) [___] and (y) the
quotient obtained by dividing the number of Issued Warrant Base Shares as of
such time by [____] (such additional number of shares of Common Stock being
referred to as "Option Initial Catch-Up Shares"). Any shares of Common Stock
issued pursuant to Sections 1A(ii) (the shares issuable pursuant to such section
being referred to as "Warrant Initial Catch-Up Shares") or 1A(iii) (the shares
issuable pursuant to such section being referred to as "Warrant Final Catch-Up
Shares") of the WB Warrant shall not cause an increase in the number of shares
into which this Option is exercisable pursuant to this Section 2(b)(ii).
(iii) Option Final Catch-Up Shares. If (i)
all the Option Base Shares and Option Initial Catch-Up Shares under this Option
have been issued and (ii) and all the Warrant Base Shares and Warrant Initial
Catch-Up Shares have been issued under the WB Warrant, then the number of shares
of Common Stock into which this Option
2
<PAGE>
is exercisable shall be increased by 49 ("Option Final Catch-Up Shares");
provided that this Option shall be exercised with respect to such additional
shares pursuant to this Section 1A(iii) in full only and no partial exercise for
such shares will be permitted.
(c) Payment of Option Price. Subject to paragraph 2(b)(iii) above
and paragraph 3 below, your Option may be exercised in whole or in part upon
payment of an amount (the "Option Price") equal to the product of (i) the
Exercise Price multiplied by (ii) the number of Option Shares to be acquired.
Payment shall be made in cash (including check, bank draft or money order) or,
in the discretion of the Board, by delivery of a promissory note.
3. Exercisability/Vesting.
(a) Normal Vesting. Your Option may be exercised only to the extent
it has become vested. Your Option shall vest and become exercisable with respect
to 33.33% of the Option Base Shares portion of your Option Shares (rounded to
the nearest whole share) upon the issuance of the Company's audited financial
statements for each of the Company's fiscal years ending on December 31, 1996,
December 31, 1997, and December 31, 1998, if and only if you are, and have been,
continuously employed by the Company from the date of this Option through the
date on which such financial statements are issued. Your Option shall vest and
become exercisable with respect to any Option Initial Catch-Up Shares and Option
Final Catch-Up Shares at the time that the number of Option Shares is increased
pursuant to Section 2(b)(ii) or 2(b)(iii), as applicable, hereof.
(b) Effect on Vesting in Case of Employment Termination.
Notwithstanding paragraph 3(a) above, the following special vesting rules shall
apply if your employment with the Company terminates prior to the Expiration
Date:
(i) Death or Disability. If you die or become subject to any
Disability while an employee of the Company, your Option shall be vested and
become fully exercisable with respect to a number of Option Shares equal to the
sum of (x) the Option Shares with respect to which this Option was exercisable
on the date of your death or Disability, plus (y) 25% of the Option Shares,
excluding Option Initial Catch-Up Shares and Option Final Catch-Up Shares, with
respect to which this Option was not exercisable on the date of your death or
Disability. Your Option with respect to the remaining Option Shares with respect
to which this Option was not exercisable on the date of your death or Disability
shall expire and be forfeited.
(ii) Retirement. If you retire (with the approval of the Board)
from employment with the Company, your Option shall be vested and fully
exercisable with respect to that portion of your Option that was exercisable on
the date of your retirement. Any portion of your Option that was not exercisable
on the date of your retirement shall expire and be forfeited.
(iii) Other Termination of Employment.
Unless otherwise determined by the Board, if your employment terminates other
than for death, Disability, retirement (with the approval of the Board),
resignation or discharge for Cause, your Option shall be vested and fully
exercisable with respect to that portion of your Option that was vested and
exercisable on the date your employment with the Company ceased and any portion
of your Option that was not vested and exercisable on such date shall expire and
be forfeited. If you resign or are discharged for Cause, all of your Option not
previously exercised shall expire and be forfeited whether exercisable or not.
Except as provided in this paragraph 3(b), the number of Option Shares with
respect to which your Option may be exercised shall not increase once you cease
to be employed by the Company.
(c) Acceleration of Vesting on Sale of the Company. If you have
been continuously employed by the Company from the date of this Option until a
Sale of the Company, the portion of your outstanding Option which has not become
vested at the effective date of such event shall immediately vest and become
exercisable with respect to 100% of the Option Shares that have not been
purchased pursuant to this Option prior to the effective date of such event
simultaneously with the consummation of the Sale of the Company. In any event,
any portion of your Option which has not been exercised prior to the effective
date of or in connection with the Sale of the Company as provided in this
Section 3(c) shall be forfeited, unless otherwise determined by the Board.
3
<PAGE>
4. Expiration of Option.
(a) Normal Expiration. In no event shall any part of your Option be
exercisable after the Expiration Date set forth in paragraph 2(a) above.
(b) Early Expiration Upon Termination of Employment. Any portion of
your Option that was not vested and exercisable on the date your employment with
the Company terminated shall expire and be forfeited on such date, and any
portion of your Option that was vested and exercisable on the date your
employment with the Company terminated shall also expire and be forfeited;
provided that: (i) if you die or become subject to any Disability, the portion
of your Option that is vested and exercisable shall expire 180 days from the
date of your death or Disability, but in no event after the Expiration Date,
(ii) if you retire (with the approval of the Board), the portion of your Option
that is vested and exercisable shall expire 90 days from the date of your
retirement, but in no event after the Expiration Date, and (iii) if you are
discharged other than for Cause, the portion of your Option that is vested and
exercisable shall expire 30 days from the date of your discharge, but in no
event after the Expiration Date.
5. Procedure for Exercise. You may exercise all or any portion of your
Option, to the extent it has vested and is outstanding, at any time and from
time to time prior to the Expiration Date, by delivering written notice to the
Company (to the attention of the Company's Secretary) and your written
acknowledgment that you have read and have been afforded an opportunity to ask
questions of management of the Company regarding all financial and other
information provided to you regarding the Company, together with payment of the
Option Price in accordance with the provisions of paragraph 2(c) above. As a
condition to any exercise of your Option, you shall permit the Company to
deliver to you all financial and other information regarding the Company it
believes necessary to enable you to make an informed investment decision, and
you shall make all customary investment representations which the Company
requires.
6. Securities Laws Restrictions and Other Restrictions on Transfer of
Option Shares. You represent that when you exercise your Option you shall be
purchasing Option Shares for your own account and not on behalf of others. You
understand and acknowledge that federal and state securities laws govern and
restrict your right to offer, sell or otherwise dispose of any Option Shares
unless your offer, sale or other disposition thereof is registered under the
Securities Act and state securities laws, or in the opinion of the Company's
counsel, such offer, sale or other disposition is exempt from registration or
qualification thereunder. You agree that you shall not offer, sell or otherwise
dispose of any Option Shares in any manner which would: (i) require the Company
to file any registration statement with the Securities and Exchange Commission
(or any similar filing under state law) or to amend or supplement any such
filing or (ii) violate or cause the Company to violate the Securities Act, the
rules and regulations promulgated thereunder or any other state or federal law.
You further understand that the certificates for any Option Shares you purchase
shall bear such legends as the Company deems necessary or desirable in
connection with the Securities Act or other rules, regulations or laws.
7. Non-Transferability of Option. Your Option is personal to you and is
not transferable by you other than by will or the laws of descent and
distribution. During your lifetime only you (or your guardian or legal
representative) may exercise your Option. In the event of your death, your
Option may be exercised only (i) by the executor or administrator of your estate
or the person or persons to whom your rights under the Option shall pass by will
or the laws of descent and distribution and (ii) to the extent that you were
entitled hereunder at the date of your death.
8. Rights of Grantee. Nothing in this Option shall interfere with or
limit in any way the right of the Company to terminate your employment at any
time (with or without Cause), nor confer upon you any right to continue in the
employ of the Company for any period of time or to continue your present (or any
other) rate of compensation, and in the event of your termination of employment
(including, but not limited to, termination by the Company without Cause) any
portion of your Option that was not previously vested and exercisable shall be
forfeited. Nothing in this Option shall confer upon you any right to further
option grants.
9. Withholding of Taxes. The Company shall be entitled, if necessary or
desirable, to withhold from you any amounts due and payable by the Company to
you (or secure payment from you in lieu of withholding) the amount
4
<PAGE>
of any withholding or other tax due with respect to any Option Shares issuable
under this Option, and the Company may defer such issuance unless indemnified by
you to its satisfaction.
10. Adjustments. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board may, in order to prevent the dilution or enlargement of
rights under your Option, make such adjustments in the number and type of shares
covered by your Option and the Exercise Price specified herein as may be
determined to be appropriate and equitable.
11. Restrictions on Transfer.
(a) Restrictive Legend. The certificates representing the Option
Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
_____________________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
THEREUNDER."
(b) Opinion of Counsel. You may not sell, transfer or dispose of any
Option Shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company that registration
under the Securities Act or any applicable state securities law is not required
in connection with such transfer.
12. Remedies. The parties hereto shall be entitled to enforce their
rights under this Option specifically, to recover damages by reason of any
breach of any provision of this Option and to exercise all other rights existing
in their favor. The parties hereto acknowledge and agree that money damages
would not be an adequate remedy for any breach of the provisions of this Option
and that any party hereto may, in its sole discretion, apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting bond or other security) in order to enforce or prevent
any violation of the provisions of this Option.
13. Amendment. Except as otherwise provided herein, any provision of
this Option may be amended or waived only with the prior written consent of you
and the Company.
14. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Option by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors and permitted assigns of the parties hereto whether so expressed or
not.
15. Severability. Whenever possible, each provision of this Option shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Option is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Option.
16. Counterparts. This Option may be executed simultaneously in two or
more counterparts, each of which shall constitute an original, but all of which
taken together shall constitute one and the same Option.
17. Descriptive Headings. The descriptive headings of this Option are
inserted for convenience only and do not constitute a part of this Option.
18. Governing Law. The corporate law of Delaware shall govern all
questions concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation of
this Option shall be governed by the internal law, and not the law of conflicts,
of New York.
5
<PAGE>
19. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Option shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
(a) If to the Optionee:
[NAME AND ADDRESS OF OPTIONEE]
(b) If to the Company:
Seven-Up/RC Bottling Company of Southern California, Inc.
3220 East 26th Street
Vernon, CA 90023
Attention: Lou Janicich
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
20. Entire Option. This Option constitutes the entire understanding
between you and the Company, and supersedes all other agreements, whether
written or oral, with respect to the acquisition by you of Common Stock of the
Company.
* * * *
6
<PAGE>
Please execute the extra copy of this Option in the space below and return
it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Option.
Very truly yours,
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN
CALIFORNIA, INC.
By: ___________________________________
Name
Title
Enclosures: Extra copy of this Option
<PAGE>
The undersigned hereby acknowledges having read this Option and hereby
agrees to be bound by all provisions set forth herein.
Dated as of _____________________, 1997
OPTIONEE____________________________
Name _______________________________
[Provision for Community Property Jurisdiction]
CONSENT
-------
The undersigned spouse of _____________________ hereby acknowledges that I
have read the foregoing Stock Option and that I understand its contents. I am
aware that the Option provides for the repurchase of my spouse's shares of
Common Stock under certain circumstances and imposes other restrictions on the
transfer of such Common Stock. I agree that my spouse's interest in the Common
Stock is subject to this Option and any interest I may have in such Common Stock
shall be irrevocably bound by this Option and further that my community property
interest, if any, shall be similarly bound by this Option.
I am aware that the legal, financial and other matters contained in this
Option are complex and I am free to seek advice with respect thereto from
independent counsel. I have either sought such advice or determined after
carefully reviewing this Option that I will waive such right.
----------------------------------
[Spouse]
----------------------------------
Witness
<PAGE>
EXHIBIT 6
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
1996-1997 STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
---------------
The 1996-1997 Stock Option Plan (the "Plan") of Seven-Up/RC Bottling
Company of Southern California, Inc. (the "Company"), adopted by the Board of
Directors of the Company on January 30, 1997 (the "Adoption Date"), for
directors, officers, executives, and other key employees of the Company, is
intended to advance the best interests of the Company by providing those persons
who have a substantial responsibility for its management and growth with
additional incentives by allowing them to acquire an ownership interest in the
Company and thereby encouraging them to contribute to the success of the Company
and to remain in its employ. The availability and offering of stock options
under the Plan also increases the Company's ability to attract and retain
individuals of exceptional managerial talent upon whom, in large measure, the
sustained progress, growth, and profitability of the Company depends.
ARTICLE II
Definitions
-----------
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
"Board" shall mean the Board of Directors of the Company.
-----
"Cause" shall mean (i) a Participant's theft or embezzlement, or
-----
attempted theft or embezzlement, of money or property of the Company, a
Participant's perpetration or attempted perpetration of fraud, or a
Participant's participation in a fraud or attempted fraud, on the Company or a
Participant's unauthorized appropriation of, or a Participant's attempt to
misappropriate, any tangible or intangible assets or property of the Company,
(ii) any act or acts of disloyalty, misconduct, or moral turpitude by a
Participant injurious to the interest, property, operations, business, or
reputation of the Company or a Participant's conviction of a crime the
commission of which results in injury to the Company or (iii) a Participant's
failure or inability (other than by reason of Disability) to carry out
effectively his duties and obligations to the Company or to participate
effectively and actively in the management of the Company, as determined in the
reasonable judgment of the Board.
"Change of Control" means with respect to the Company and its
-----------------
Subsidiaries, (a) the consummation of a sale, transfer, or other disposition of
all or substantially all of the assets of the Company (determined on a
consolidated basis) after the Adoption Date, (b) any transfer of voting power
with respect to the Company's capital stock after the Adoption Date (whether
effected by agreement among stockholders, irrevocable proxy, voting trust,
issuance or transfer of capital stock, merger, consolidation, or other
reorganization or means, including a reorganization under bankruptcy or
insolvency laws) if as a result of such transfer a Person (including a "group,"
as such term is defined under Section 13(d)(3) of the Exchange Act) becomes the
beneficial owner of shares of the Company having 50% or more of the total number
of votes that may be cast for the election of directors of the Company, (c) a
change in the composition of the Board arising as the result of, or in
connection with, any cash tender offer or exchange offer, merger or other
<PAGE>
business combination, sale of assets or contested election, or any combination
of the foregoing transactions (a "Transaction"), such that the persons who were
directors of the Company before the Transaction shall cease to constitute a
majority of the Board or the board of directors of any successor to the Company,
or (d) the adoption by the Company of a plan of liquidation or dissolution
(other than pursuant to a bankruptcy or insolvency) after the Adoption Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
----
and any successor statute.
"Committee" shall mean the Compensation Committee of the Board. The
---------
membership of the Compensation Committee shall be constituted so as to comply at
all times with the applicable requirements of Rule 16b-3 under the Exchange Act
and Section 162(m) of the Code.
"Common Stock" shall mean the Company's Common Stock, par value $0.01
------------
per share, or if the outstanding Common Stock is hereafter changed into or
exchanged for different stock or securities of the Company, such other stock or
securities.
"Disability" shall mean the inability, due to illness, accident,
----------
injury, physical or mental incapacity or other disability, of any Participant to
carry out effectively such Participant's duties and obligations to the Company
or to participate effectively and actively in the management of the Company for
a period of at least 90 consecutive days or for shorter periods aggregating at
least 120 days (whether or not consecutive) during any twelve-month period, as
determined in the reasonable judgment of the Board.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Fair Market Value" of a share of Common Stock means, as of the date
-----------------
in question, the officially-quoted closing selling price of such share (or if no
selling price is quoted, the bid price) on the principal securities exchange on
which the Common Stock is then listed for trading (including, for this purpose,
any over-the-counter market) (the "Market") for the immediately preceding
trading day or, if the Common Stock is not then listed or quoted in the Market,
the Fair Market Value shall be the fair value of the Common Stock determined in
good faith by the Committee or, in the absence of the Committee, by the Board.
"Options" shall have the meaning set forth in Article IV.
-------
"Participant" shall mean any director, officer, executive, or other
-----------
key employee of the Company who has been selected to participate in the Plan by
the Committee or the Board.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiary" means a corporation, association, or other business
-----------
entity of which the Company holds, directly or indirectly, fifty percent (50%)
or more of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
any other class or classes of capital stock of such corporation may have voting
power by reason or the happening of any contingencies).
-2-
<PAGE>
"Sale of the Company" shall mean (i) a merger or consolidation
-------------------
effecting a change in control of the Company with and into another Person
pursuant to which the Company is not the surviving Person of such merger or
consolidation, (ii) a sale of all or substantially all of the Company's assets,
or (iii) a sale of a majority of the Company's outstanding voting securities.
ARTICLE III
Administration
--------------
The Plan shall be administered by the Committee; provided, that the
Board may, in its discretion, at any time and from time to time, resolve to
administer the Plan, in which case the term "Committee" shall be deemed to mean
the Board for all purposes herein. Subject to the limitations of the Plan, the
Committee shall be authorized to: (i) select Participants, (ii) grant Options
(as defined in Article IV below) to Participants in such forms and amounts as it
shall determine, (iii) impose such limitations, restrictions, and conditions
upon such Options as it shall deem appropriate, (iv) interpret the Plan and
adopt, amend, or rescind administrative guidelines and other rules and
regulations relating to the Plan, (v) correct any defect or omission or
reconcile any inconsistency in the Plan or in any Option granted hereunder, and
(vi) make all other determinations and take all other actions necessary or
advisable for the implementation and administration of the Plan. Decisions of
the Committee on all matters within its authority and relating to the Plan shall
be conclusive and binding upon the Participants, the Company, and all other
Persons. All expenses associated with the administration of the Plan shall be
borne by the Company. No member of the Committee and no officer of the Company
shall be liable for any action taken or omitted to be taken by such member or
officer, by any other member of the Committee, or by any officer of the Company
in connection with the performance of such Person's duties under the Plan,
except for such Person's own willful misconduct or as expressly provided by
statute.
ARTICLE IV
Limitation on Aggregate Shares
------------------------------
The number of shares of Common Stock with respect to which options may
be granted under the Plan (the "Options") and which may be issued upon the
exercise thereof shall not exceed, in the aggregate, 417,693 shares; provided,
that the type and the aggregate number of shares of Common Stock that may be
subject to Options shall be subject to adjustment in accordance with the
provisions of paragraph 6.8 below; provided further, that to the extent any
Options expire unexercised or are canceled, terminated, or forfeited in any
manner without the issuance of Common Stock thereunder, or if any Options are
exercised and the shares of Common Stock issued thereunder are repurchased by
the Company, such shares shall again be available under the Plan. The shares of
Common Stock available under the Plan may be either authorized and unissued
shares, treasury shares, or a combination thereof, as the Committee shall
determine in its sole discretion.
-3-
<PAGE>
ARTICLE V
Awards
------
5.1 Options. The Committee may grant Options to Participants
-------
in accordance with this Article V.
5.2 Form of Option. Options granted under this Plan shall be
--------------
nonqualified stock options and are not intended to be "incentive stock options"
---
within the meaning of Section 422A of the Code or any successor provision.
5.3 Exercise Price. The option exercise price per share of Common
--------------
Stock shall be fixed by the Committee from time to time at $8.00 (the "Exercise
Price").
5.4 Exercisability. Options shall be exercisable at such time or
--------------
times as the Committee shall determine at or subsequent to the time of grant.
5.5 Payment of Exercise Price.
-------------------------
(a) Options shall be exercised in whole or in part by written notice
to the Company (to the attention of the Company's Secretary) accompanied by
payment in full of the Exercise Price. Payment of the Exercise Price shall be
made in (i) in cash (including check, bank draft or money order), (ii) by
delivery of outstanding shares of Common Stock with a Fair Market Value on the
date of exercise equal to the aggregate Exercise Price payable with respect to
the exercise of such Options, (iii) by simultaneous sale through a broker
reasonably acceptable to the Committee of shares of Common Stock acquired on
exercise, as permitted under Regulation T of the Federal Reserve Board, (iv) by
authorizing the Company to withhold from issuance a number of shares of Common
Stock issuable upon exercise of the Options which, when multiplied by the Fair
Market Value of a share of Common Stock on the date of exercise is equal to the
aggregate Exercise Price payable with respect to the Options so exercised, or
(v) by any combination of the foregoing. Options may also be exercised upon
payment of the Exercise Price of the shares of Common Stock to be acquired by
delivery of the Participant's promissory note, but only to the extent
specifically approved by and in accordance with the policies of the Committee.
(b) In the event that a Participant elects to pay the Exercise Price
payable with respect to an Option pursuant to Section 5.5(a)(ii) above, (A) only
a whole number of share(s) of Common Stock (and not fractional shares of Common
Stock) may be tendered in payment thereof, (B) such Participant must present
evidence acceptable to the Company that such Participant has owned any such
shares of Common Stock tendered in payment of the Exercise Price (and that such
tendered shares of Common Stock have not been subject to any substantial risk of
forfeiture) for at least six months prior to the date of exercise, and (C)
Common Stock must be delivered to the Company. Delivery for this purpose may,
at the election of the Participant, be made either by (A) physical delivery of
the certificate(s) for all such shares of Common Stock tendered in payment of
the Exercise Price, accompanied by duly executed instruments of transfer in a
form acceptable to the Company, or (B) direction to the Participant's broker to
transfer, by book entry, such shares of Common Stock from a brokerage account of
the Participant to a brokerage account specified by the Company. When payment
of the Exercise Price is made by delivery of Common Stock, the difference, if
any, between the aggregate Exercise Price payable with respect to the Option
being exercised and the Fair Market Value of the share(s) of Common Stock
tendered in payment thereof (plus any applicable taxes) shall be paid
-4-
<PAGE>
in cash. No Participant may tender shares of Common Stock having a Fair Market
Value exceeding the aggregate Exercise Price payable with respect to the Option
being exercised.
(c) In the event that a Participant elects to pay the Exercise Price
payable with respect to an Option pursuant to Section 5.5(a)(iv) above, (A) only
a whole number of share(s) of Common Stock (and not fractional shares of Common
Stock) may be withheld in payment thereof and (B) such Participant must present
evidence acceptable to the Company that such Participant has owned a number of
shares of Common Stock at least equal to the number of shares of Common Stock to
be withheld in payment of the aggregate Exercise Price (and that such owned
shares of Common Stock have not been subject to any substantial risk of
forfeiture) for at least six months prior to the date of exercise. When payment
of the aggregate Exercise Price is made by the Company's withholding shares of
Common Stock, the difference, if any, between the aggregate Exercise Price
payable with respect to the Option being exercised and the Fair Market Value of
the share(s) of Common Stock withheld in payment thereof (plus any applicable
taxes) shall be paid in cash. No Participant may authorize the withholding of
shares of Common Stock having a Fair Market Value exceeding the aggregate
Exercise Price payable with respect to the Option being exercised. Any withheld
shares of Common Stock shall no longer be issuable under such Option.
5.6 Terms of Options. The Committee shall determine the term of
----------------
each Option, which term shall in no event exceed ten years from the date of
grant.
ARTICLE VI
General Provisions
------------------
6.1 Conditions and Limitations on Exercise. Options may be made
--------------------------------------
exercisable in one or more installments, upon the happening of certain events,
upon the passage of a specified period of time, upon the fulfillment of certain
conditions or upon the achievement by the Company of certain performance goals,
as the Committee shall decide in each case when the Options are granted. Unless
otherwise provided herein or in the terms of the related Option Agreement (as
defined below), a Participant may exercise an Option only if such Participant
is, and has been continuously since the date the Option was granted to such
Participant, a director, officer, or employee of the Company.
6.2 Sale of the Company. In the event of a Sale of the Company or a
-------------------
Change of Control, the Committee may provide, in its discretion, that the
Options shall become immediately exercisable by any Participants who are
employed by the Company at the time of the Sale of the Company and that such
Options shall terminate if not exercised as of the date of the Sale of the
Company or other prescribed period of time.
6.3 Written Agreement. Each Option granted hereunder to a
-----------------
Participant shall be embodied in a written agreement (an "Option Agreement")
which shall be signed by the Participant and by the Chairman or the President of
the Company for and in the name and on behalf of the Company and shall be
subject to the terms and conditions of the Plan prescribed in the Agreement
(including, but not limited to, (i) the right of the Company and such other
Persons as the Committee shall designate ("Designees") to repurchase from each
Participant, and such Participant's transferees, all shares of Common Stock
issued or issuable to such Participant on the exercise of an Option in the event
of such Participant's termination of employment, (ii) rights of first refusal
granted to the Company and Designees, (iii) holdback and other registration
right restrictions in the event of a public registration of any equity
securities of the Company, and (iv) any other terms and conditions which the
Committee shall deem necessary and desirable).
-5-
<PAGE>
6.4 Listing, Registration, and Compliance with Laws and Regulations.
---------------------------------------------------------------
Options shall be subject to the requirement that if at any time the Committee
shall determine, in its discretion, that the listing, registration, or
qualification of the shares of Common Stock subject to the Options upon any
securities exchange or under any state or federal securities law or other law or
regulation, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition to or in connection with the granting of
the Options or the issuance or purchase of shares of Common Stock thereunder, no
Options may be granted or exercised, in whole or in part, unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee. The holders of
such Options shall supply the Company with such certificates, representations,
and information as the Company shall request and shall otherwise cooperate with
the Company in obtaining such listing, registration, qualification, consent or
approval. In the case of officers of the Company and other Persons subject to
Section 16(b) of the Exchange Act, the Committee may, at any time, impose any
limitations upon the exercise of an Option that, in the Committee's sole
discretion, are necessary or desirable in order to comply with such Section
16(b) and the rules and regulations promulgated thereunder. If the Company, as
part of an offering of securities or otherwise, finds it desirable because of
federal or state regulatory requirements to reduce the period during which any
Options may be exercised, the Committee, may, in its sole discretion and without
the Participant's consent, so reduce such period on not less than 15 days
written notice to the holders thereof.
6.5 Nontransferability. Options may not be transferred other than
------------------
by will or the laws of descent and distribution and, during the lifetime of the
Participant, may be exercised only by such Participant (or his legal guardian or
legal representative). In the event of the death of a Participant, exercise of
Options granted hereunder shall be made only:
(i) by the executor or administrator of the estate of the deceased
Participant or the Person or Persons to whom the deceased Participant's rights
under the Option shall pass by will or the laws of descent and distribution; and
(ii) to the extent that the deceased Participant was entitled thereto
at the date of his death, unless otherwise provided by the Committee in such
Participant's Option Agreement.
6.6 Expiration of Options.
---------------------
(a) Normal Expiration. In no event shall any part of any Option be
-----------------
exercisable after the date of expiration thereof (the "Expiration Date"), as
determined by the Committee pursuant to paragraph 5.6 above.
(b) Early Expiration Upon Termination of Employment. Except as
-----------------------------------------------
otherwise provided by the Committee in the Option Agreement, any portion of a
Participant's Option that was not vested and exercisable on the date of the
termination of such Participant's employment with the Company shall expire and
be forfeited as of such date, and any portion of a Participant's Option that was
vested and exercisable on the date of the termination of such Participant's
employment with the Company shall expire and be forfeited as of such date,
except that: (i) if any Participant dies or becomes subject to any Disability,
such Participant's Option shall expire 180 days after the date of his death or
Disability, but in no event after the Expiration Date, (ii) if any Participant
retires (with the approval of the Board), his Option shall expire 90 days after
the date of his retirement, but in no event after the Expiration Date, and (iii)
if any Participant is discharged other than for Cause, such Participant's Option
shall expire 30 days after the date of his discharge, but in no event after the
Expiration Date.
-6-
<PAGE>
6.7 Withholding Taxes. The Company shall be entitled, if
-----------------
necessary or desirable, to withhold from any Participant from any amounts due
and payable by the Company to such Participant (or secure payment from such
Participant in lieu of withholding) the amount of any withholding or other tax
due from the Company with respect to any shares of Common Stock issuable under
the Options, and the Company may defer such issuance unless indemnified to its
satisfaction.
6.8 Adjustments. In the event of a reorganization,
-----------
recapitalization, stock dividend or stock split, or combination or other change
in the shares of Common Stock, the Board or the Committee may, in order to
prevent the dilution or enlargement of rights under outstanding Options, make
such adjustments in the number and type of shares authorized by the Plan, the
number and type of shares covered by outstanding Options, and the Exercise
Prices specified therein as may be determined to be appropriate and equitable.
6.9 Rights of Participant. Nothing in this Option shall
---------------------
interfere with or limit in any way the right of the Company to terminate any
Participant's employment with the Company at any time (with or without Cause),
nor confer upon any Participant any right to continue in the employ of the
Company for any period of time or to continue his present (or any other) rate of
compensation, and except as otherwise provided under this Plan or by the
Committee in the Option Agreement, in the event of any Participant's termination
of employment with the Company (including, but not limited to, the termination
of such Participant's employment by the Company without Cause) any portion of
such Participant's Option that was not previously vested and exercisable shall
expire and be forfeited as of the date of such termination. No employee shall
have a right to be selected as a Participant or, having been so selected, to be
reselected as a Participant.
6.10 Amendment, Suspension, and Termination of Plan. The
----------------------------------------------
Board or the Committee may suspend or terminate the Plan (or any portion
thereof) at any time and may amend the Plan from time to time in such respects
as the Board or the Committee may deem advisable; provided, that no such
amendment shall be made without approval of the Company's Stockholders to the
extent such approval is required by law, agreement, or the rules of any exchange
upon which the Common Stock is then listed, and no such amendment, suspension,
or termination shall impair the rights of Participants under outstanding Options
without the consent of the Participants affected thereby. No Options shall be
granted hereunder after the tenth anniversary of the adoption by the Company of
the Plan.
6.11 Amendment, Modification, and Cancellation of Outstanding
--------------------------------------------------------
Options. The Committee may amend or modify any Option in any manner to the
- -------
extent that the Committee would have had the authority under the Plan initially
to grant such Option; provided, that no such amendment or modification shall
impair the rights of any Participant under any Option without the consent of
such Participant. With the Participant's consent, the Committee may cancel any
Option and issue a new Option to such Participant.
6.12 Indemnification. In addition to such other rights of
---------------
indemnification as they may have as members of the Board or the Committee, the
members of the Committee shall be indemnified by the Company against all costs
and expenses reasonably incurred by them in connection with any action, suit, or
proceeding to which they or any of them may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding; provided, that any such Committee member shall be entitled
to the indemnification rights set forth in this paragraph 6.12 only if such
member has acted in good faith and in a manner that such member reasonably
believed to be in
-7-
<PAGE>
or not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
conduct was unlawful, and further provided that upon the institution of any such
action, suit or proceeding a Committee member shall give the Company written
notice thereof and an opportunity, at its own expense, to handle and defend the
same before such Committee member undertakes to handle and defend it on his own
behalf.
* * * *
-8-
<PAGE>
EXHIBIT 7
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
February 4, 1997
[NAME OF OPTIONEE]
c/o Seven-Up/RC Bottling Company of Southern California, Inc.
3220 East 26th Street
Vernon, CA 90023
Re: Seven-Up/RC Bottling Company of Southern California, Inc. (the
"Company") Grant of Nonqualified Stock Option
--------------------------------------------------------------
Dear [NAME OF OPTIONEE]:
The Company is pleased to advise you that its Board of Directors has
granted to you a stock option (an "Option"), as provided below, under the 1996-
------
1997 Stock Option Plan (the "Plan"), a copy of which is attached hereto and the
----
terms and conditions of which are incorporated herein by reference.
1. Definitions. For the purposes of this Agreement, the following terms
-----------
shall have the meanings set forth below:
"Board" shall mean the Board of Directors of the Company.
-----
"Cause" shall mean (i) your theft or embezzlement, or attempted theft
-----
or embezzlement, of money or property of the Company, your perpetration or
attempted perpetration of fraud, or your participation in a fraud or attempted
fraud, on the Company or your unauthorized appropriation of, or your attempt to
misappropriate, any tangible or intangible assets or property of the Company,
(ii) any act or acts of disloyalty, misconduct, or moral turpitude by you
injurious to the interest, property, operations, business, or reputation of the
Company, or your conviction of a crime the commission of which results in injury
to the Company, or (iii) your failure or inability (other than by reason of your
Disability) to carry out effectively your duties and obligations to the Company
or to participate effectively and actively in the management of the Company, as
determined in the reasonable judgment of the Board.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
any successor statute.
"Committee" shall mean the Compensation Committee of the Board. The
---------
membership of the Compensation Committee shall be constituted so as to comply at
all times with the applicable requirements of Rule 16b-3 under the Exchange Act
and Section 162(m) of the Code.
"Common Stock" shall mean the Company's Common Stock, par value $.01
------------
per share, or, in the event that the outstanding Common Stock is hereafter
changed into or exchanged for different stock or securities of the Company, such
other stock or securities.
<PAGE>
"Disability" shall mean your inability, due to illness, accident,
----------
injury, physical or mental incapacity or other disability, to carry out
effectively your duties and obligations to the Company or to participate
effectively and actively in the management of the Company for a period of at
least 90 consecutive days or for shorter periods aggregating at least 120 days
(whether or not consecutive) during any twelve-month period, as determined in
the reasonable judgment of the Board.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Fair Market Value" of a share of Common Stock means, as of the date
-----------------
in question, the officially-quoted closing selling price of such share (or if no
selling price is quoted, the bid price) on the principal securities exchange on
which the Common Stock is then listed for trading (including, for this purpose,
any over-the-counter market) (the "Market") for the immediately preceding
------
trading day or, if the Common Stock is not then listed or quoted in the Market,
the Fair Market Value shall be the fair value of the Common Stock determined in
good faith by the Committee or, in the absence of the Committee, by the Board.
"Option Shares" shall mean (i) all shares of Common Stock issued or
-------------
issuable upon the exercise of the Option and (ii) all shares of Common Stock
issued with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with any conversion, merger,
consolidation, or recapitalization or other reorganization affecting the Common
Stock. Option Shares shall continue to be Option Shares in the hands of any
holder other than you (except for the Company), and each such transferee thereof
shall succeed to the rights and obligations of a holder of Option Shares
hereunder.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and any successor statute.
2. Option.
------
(a) Terms. Your Option is for the purchase of up to [_____] shares of
-----
Common Stock (the "Option Shares") at a price per share of $8.00 (the "Exercise
------------- --------
Price"), payable upon exercise as set forth in paragraph 2(b) below. Your
- -----
Option shall expire at the close of business on the tenth anniversary of the
date hereof (the "Expiration Date"). Your Option is not intended to be an
---------------
"incentive stock option" within the meaning of Section 422A of the Code.
(b) Payment of Option Price.
-----------------------
(i) Your Option may be exercised in whole or in part by written notice
to the Company (to the attention of the Company's Secretary) accompanied by
payment in full of an amount (the "Option Price") equal to the product of (A)
------------
the Exercise Price and (B) the number of Option Shares to be acquired.
(ii) Payment of the Option Price shall be made (A) in cash (including
check, bank draft or money order), (B) by delivery of outstanding shares of
Common Stock with a Fair Market Value on the date of exercise equal to the
Option Price, (C) by simultaneous sale through a broker reasonably acceptable to
the Committee of Option Shares acquired on exercise of your Option, as permitted
under Regulation T of the Federal Reserve Board, (D) by authorizing the Company
to withhold from issuing to you a number of Option Shares which, when multiplied
by the Fair Market Value of a
2
<PAGE>
share of Common Stock on the date of exercise of your Option, is equal to the
Option Price, or (E) by any combination of the foregoing. Options may also be
exercised upon payment of the Option Price by delivering your promissory note to
the Company, but only to the extent specifically approved by and in accordance
with the policies of the Committee.
(iii) In the event that you elect to pay the Option Price pursuant
to the provisions of paragraph 2(b)(ii)(B) above, (A) only a whole number of
share(s) of Common Stock (and not fractional shares of Common Stock) may be
tendered in payment thereof, (B) you must present evidence acceptable to the
Company that you have owned any such shares of Common Stock tendered in payment
of the Option Price (and that such tendered shares of Common Stock have not been
subject to any substantial risk of forfeiture) for at least six months prior to
the date of exercise of your Option, and (C) you must deliver Common Stock to
the Company. Delivery for this purpose may, at your election, be made either by
(A) physical delivery of the certificate(s) for all such shares of Common Stock
tendered in payment of the Option Price, accompanied by duly executed
instruments of transfer in a form acceptable to the Company, or (B) direction to
your broker to transfer, by book entry, such shares of Common Stock from your
brokerage account to a brokerage account specified by the Company. When payment
of the Option Price is made by delivery of shares of Common Stock, the
difference, if any, between the Option Price and the Fair Market Value of the
share(s) of Common Stock tendered in payment thereof (plus any applicable taxes)
shall be paid in cash. You may not tender shares of Common Stock having a Fair
Market Value exceeding the Option Price.
(iv) In the event that you elect to pay the Option Price pursuant to
the provisions of paragraph 2(b)(ii)(D) above, (A) only a whole number of Option
Shares (and not fractional Option Shares) may be withheld in payment thereof and
(B) you must present evidence acceptable to the Company that you have owned a
number of shares of Common Stock at least equal to the number of Option Shares
to be withheld in payment of the Option Price (and that such owned shares of
Common Stock have not been subject to any substantial risk of forfeiture) for at
least six months prior to the date of exercise of your Option. When payment of
the Option Price is made by the Company's withholding Option Shares, the
difference, if any, between the Option Price and the Fair Market Value of the
Option Shares withheld in payment thereof (plus any applicable taxes) shall be
paid in cash. You may not authorize the Company to withhold Option Shares
having a Fair Market Value exceeding the Option Price. Any withheld Option
Shares shall no longer be issuable under such Option.
3. Expiration of Option. In no event shall any part of your Option be
--------------------
exercisable after the Expiration Date set forth in paragraph 2(a) above.
4. Procedure for Exercise. You may exercise all or any portion of your
----------------------
Option at any time and from time to time prior to its expiration, by delivering
written notice to the Company (to the attention of the Company's Secretary) and
your written acknowledgment that you have read and have been afforded an
opportunity to ask questions of management of the Company regarding all
financial and other information provided to you regarding the Company, together
with payment of the Option Price in accordance with the provisions of paragraph
2(b) above. As a condition to any exercise of your Option, you shall permit the
Company to deliver to you all financial and other information regarding the
Company it believes necessary to enable you to make an informed investment
decision, and you shall make all customary investment representations which the
Company requires.
5. Securities Laws Restrictions and Other Restrictions on Transfer of
------------------------------------------------------------------
Option Shares. You represent that when you exercise your Option you shall be
- -------------
purchasing Option Shares for your own
3
<PAGE>
account and not on behalf of others. You understand and acknowledge that
federal and state securities laws govern and restrict your right to offer, sell,
or otherwise dispose of any Option Shares unless your offer, sale, or other
disposition thereof is registered under the Securities Act and state securities
laws, or in the opinion of the Company's counsel, such offer, sale, or other
disposition is exempt from registration or qualification thereunder. You agree
that you shall not offer, sell or otherwise dispose of any Option Shares in any
manner that would: (i) require the Company to file any registration statement
with the Securities and Exchange Commission (or any similar filing under state
law) or to amend or supplement any such filing or (ii) violate or cause the
Company to violate the Securities Act, the rules and regulations promulgated
thereunder or any other state or federal law. You further understand that the
certificates for any Option Shares you purchase shall bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations, or laws.
6. Non-Transferability of Option. Your Option is personal to you and is
-----------------------------
not transferable by you other than by will or the laws of descent and
distribution. During your lifetime only you (or your guardian or legal
representative) may exercise your Option. In the event of your death, your
Option may be exercised only (i) by the executor or administrator of your estate
or the person or persons to whom your rights under the Option shall pass by will
or the laws of descent and distribution and (ii) to the extent that you were
entitled hereunder at the date of your death.
7. Conformity with Plan. Your Option is intended to conform in all
--------------------
respects with, and is subject to all applicable provisions of, the Plan (which
is incorporated herein by reference). Inconsistencies between this Option and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Option, you acknowledge your
receipt of this Option and the Plan and agree to be bound by all of the terms of
this Option and the Plan.
8. Rights of Participants. Nothing in this Option shall interfere with
----------------------
or limit in any way the right of the Company to terminate your employment at any
time (with or without Cause), nor confer upon you any right to continue in the
employ of the Company for any period of time or to continue your present (or any
other) rate of compensation, and in the event of your termination of employment
(including, but not limited to, termination by the Company without Cause) any
portion of your Option that was not previously vested and exercisable shall be
forfeited. Nothing in this Agreement shall confer upon you any right to be
selected again as a Plan participant, and nothing in the Plan or this Agreement
shall provide for any adjustment to the number of Option Shares subject to your
Option upon the occurrence of subsequent events except as provided in paragraph
10 below.
9. Withholding of Taxes. The Company shall be entitled, if necessary or
--------------------
desirable, to withhold from you from any amounts due and payable by the Company
to you (or secure payment from you in lieu of withholding) the amount of any
withholding or other tax due from the Company with respect to any Option Shares
issuable under this Plan, and the Company may defer such issuance unless
indemnified by you to its satisfaction.
10. Adjustments. In the event of a reorganization, recapitalization,
-----------
stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board or the Committee may, in order to prevent the dilution
or enlargement of rights under your Option, make such adjustments in the number
and type of shares authorized by the Plan, the number and type of shares covered
by your Option and the Exercise Price specified herein as may be determined to
be appropriate and equitable.
4
<PAGE>
11. Additional Restrictions on Transfer.
-----------------------------------
(a) Restrictive Legend. The certificates representing the Option
------------------
Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION THEREUNDER."
(b) Opinion of Counsel. You may not sell, transfer, or dispose of any
------------------
Option Shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company that registration
under the Securities Act or any applicable state securities law is not required
in connection with such transfer.
12. Remedies. The parties hereto shall be entitled to enforce their
--------
rights under this Option specifically, to recover damages by reason of any
breach of any provision of this Option and to exercise all other rights existing
in their favor. The parties hereto acknowledge and agree that money damages
would not be an adequate remedy for any breach of the provisions of this Option
and that any party hereto may, in its sole discretion, apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.
13. Amendment. Except as otherwise provided herein, any provision of this
---------
Agreement may be amended or waived only with the prior written consent of you
and the Company.
14. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties hereto whether so
expressed or not.
15. Severability. Whenever possible, each provision of this Option shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Option is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Option.
16. Counterparts. This Option may be executed simultaneously in two or
------------
more counterparts, each of which shall constitute an original, but all of which
taken together shall constitute one and the same Option.
17. Descriptive Headings. The descriptive headings of this Option are
--------------------
inserted for convenience only and do not constitute a part of this Option.
5
<PAGE>
18. Governing Law. The corporate law of Delaware shall govern all
-------------
questions concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation of
this Option shall be governed by the internal law, and not the law of conflicts,
of New York.
19. Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Option shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
(a) If to the Optionee:
[NAME OF OPTIONEE]
c/o Seven-Up/RC Bottling Company of Southern California, Inc.
3220 East 26th Street
Vernon, CA 90023
(b) If to the Company:
Seven-Up/RC Bottling Company of Southern California, Inc.
3220 East 26th Street
Vernon, CA 90023
Attention: Louis Janicich
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
20. Entire Option. This Option constitutes the entire understanding
-------------
between you and the Company, and supersedes all other Options, whether written
or oral, with respect to the acquisition by you of Common Stock of the Company.
* * * *
6
<PAGE>
Please execute this Option in the space on the following page and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Option.
Very truly yours,
Seven-Up/RC Bottling Company of Southern
California, Inc.
By: ____________________________________________
Name
Title
Enclosures: Copy of the Plan
<PAGE>
The undersigned hereby acknowledges having read this Option and the
Plan and hereby agrees to be bound by all provisions set forth herein and in the
Plan.
Dated as of: OPTIONEE
____________, 1997
___________________________________
Name ______________________________
[Provision for Community Property Jurisdiction]
CONSENT
-------
The undersigned spouse of ___________hereby acknowledges that I have
read the foregoing Option and that I understand its contents. I am aware that
the provides for the repurchase of my spouse's shares of Common Stock under
certain circumstances and imposes other restrictions on the transfer of such
Common Stock. I agree that my spouse's interest in the Common Stock is subject
to the terms and provisions of this Option and any interest I may have in such
Common Stock shall be irrevocably bound by this Option and further that my
community property interest, if any, shall be similarly bound by this Option.
I am aware that the legal, financial and other matters contained in
this Option are complex and I am free to seek advice with respect thereto from
independent counsel. I have either sought such advice or determined after
carefully reviewing this Option that I will waive such right.
______________________________
[Spouse]
______________________________
Witness
<PAGE>
EXHIBIT 8
SEVEN-UP/RC BOTTLING COMPANY OF
SOUTHERN CALIFORNIA, INC.
3220 East 26th Street
Los Angeles, CA 90023-4298
February 26, 1997
Dr Pepper Bottling Company of Texas
2304 Century Center Blvd.
Irving, Texas 75062
Attention: Jim L. Turner
Ladies and Gentlemen:
You have requested financial and other information (the "Evaluation
Material") concerning the business and affairs of Seven-Up/RC Bottling Company
of Southern California, Inc. (the "Company") to evaluate a possible purchase of
all the issued and outstanding shares of the common stock, par value $0.01 per
share, of the Company (the "Transaction"). The term "Evaluation Material"
includes any information furnished to you or your Representatives (as defined
below) by the Company or its Representatives (whether prepared by the Company,
its Representatives or otherwise), but does not include information which (i)
was or becomes generally available to the public other than as a result of a
disclosure by you or your Representatives, or (ii) was or becomes available to
you on a nonconfidential basis from a source other than the Company or its
Representatives, provided that, to your knowledge, such source is not bound by a
confidentiality obligation to the Company. "Representatives" means, with respect
to a party, such party's and its affiliates' directors, officers, affiliates,
partners, stockholders, employees, agents or advisors. As a condition to you
and your Representatives being furnished with any Evaluation Material, you agree
as follows:
(1) You recognize and acknowledge the competitive value and confidential nature
of the Evaluation Material and the damage that could result to the Company
if information contained therein is disclosed to any third party. The
Evaluation Material will not be used by you or your Representatives in any
way detrimental to the Company, including, without limitation, in
competition with the Company.
(2) You agree that the Evaluation Material will be used solely for the purpose
of evaluating the possible Transaction. You also agree that you will keep
the Evaluation Material confidential and will not disclose any of the
Evaluation Material now or hereafter received or obtained from the Company
or any of its Representatives to any third party, without the prior written
consent of the Company. The Evaluation Material may be disclosed to your
Representatives, but only to those who need to know or review such
Evaluation Material for the purpose of evaluating the Transaction (and only
then upon the condition that such Representatives shall be informed by you
of the confidential nature of the Evaluation Material). You shall be
<PAGE>
responsible for any breach of this Agreement or improper use of the
Evaluation Material by your Representatives.
(3) In addition, without prior written consent of the Company, you and your
Representatives will not disclose to any person (which shall include,
without limitation, any corporation, company, group, partnership or
individual) (a) that the Evaluation Material has been made available to
you, (b) that you have inspected any portion thereof or (c) that
discussions or negotiations are taking place concerning a possible
Transaction with the Company or any of the terms, conditions or other facts
with respect to any such possible Transaction, including the status
thereof.
(4) In the event that none of the Transactions contemplated by this Agreement
are consummated, or upon the Company's request, all Evaluation Material
(and all copies, extracts or other reproductions in whole or in part
thereof) shall be returned to the Company or destroyed and not retained by
you or your Representatives in any form or for any reason. You, on behalf
of you and your Representatives, agree to certify in writing to the Company
that such Evaluation Material was either destroyed or returned to the
Company.
(5) Neither you nor any or your Representatives will for a period of two years
from the date of this Agreement, without the prior written consent of the
Company's Board of Directors (a) submit any proposal, unsolicited or
otherwise, to acquire the Company, or engage in any other extraordinary
transaction involving the company, (b) other than the Transaction, acquire,
offer to acquire, or agree to acquire, directly or indirectly, by purchase
or otherwise, any voting securities or direct or indirect rights or options
to acquire any voting securities of the Company, (c) other than in
connection with the Transaction, make, or in any way participate, directly
or indirectly, in any "solicitation" of "proxies" to vote or consents (as
such terms are used in the proxy rules of the Securities and Exchange
Commission), or seek to advise or influence any person or entity with
respect to the voting of (or giving of consents with respect to) any voting
securities of the Company or (d) other than in connection with the
Transaction, otherwise act, alone or in concert with others, to seek to
control or influence the management, Board of Directors or policies of the
Company.
(6) The Company and its Representatives do not make any representations or
warranties as to the accuracy or completeness of the Evaluation Material.
(7) Notwithstanding anything to the contrary set forth herein, in the event
that you or any of your Representatives are requested or become legally
compelled (by oral questions, interrogatories, request for information or
documents, subpoena, civil investigative demand or similar process) to
disclose any of the Evaluation Material or take any other action prohibited
hereby, you will provide the Company with prompt written notice so that the
Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. In the event that
such protective order or other remedy is not obtained, or that the Company
waives compliance with provisions of this Agreement, you will furnish only
that
2
<PAGE>
portion of the Evaluation Material or take only such action as is legally
required by binding order and will exercise your reasonable commercial
efforts to obtain reliable assurance that confidential treatment will be
accorded any Evaluation Material so furnished.
(8) It is understood that the Company may institute appropriate proceedings
against you to enforce its rights hereunder and that money damages may not
be a sufficient remedy for any violation of the terms of this Agreement
and, accordingly, the Company shall be entitled to specific performance and
injunctive relief as remedies for any violation. These remedies shall not
be deemed to be the exclusive remedies for a violation of the terms of this
Agreement but shall be in addition to all other remedies available to the
Company at law or equity. This Agreement shall be governed and construed
in accordance with the laws of the State of California without giving
effect to the conflicts of law provisions thereof. You hereby irrevocably
submit to the jurisdiction of any State or Federal court located in Los
Angeles, California over any action or proceeding to enforce or defend any
right, under this Agreement.
(9) This Agreement may not be assigned without the prior written consent of the
non-assigning party. Subject to the foregoing, this Agreement shall be
binding on and inure to the benefit of the parties hereto and their
respective successors and assigns.
(10) If any portion of this Agreement shall be declared invalid or
unenforceable, the remainder of this Agreement shall be unaffected thereby
and shall remain in full force and effect. This Agreement may be signed in
one or more counterparts, each of which need not contain the signature of
all parties hereto, and all of such counterparts taken together shall
constitute a single agreement. This Agreement may be amended, modified or
waived only by a separate writing by the Company and you. No course of
dealing between the parties shall be deemed to modify or amend any
provision of this Agreement and no delay by the Company in the exercise (or
partial exercise) of any of its rights and remedies shall operate as a
waiver thereof.
(11) This Agreement will terminate upon the earlier to occur of (i) the purchase
of shares of capital stock of the Company by you in a tender offer that is
part of the Transaction, (ii) the acquisition of shares of capital stock of
the Company by you in a merger that is part of the Transaction, or (iii)
the second anniversary of the date hereof.
(12) This Agreement supersedes all prior agreements and understandings between
the parties with respect to the subject matter hereof.
* * * *
3
<PAGE>
Please acknowledge your agreement to the foregoing by countersigning
this letter in the place provided below.
Very truly yours,
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
By: /s/ Bart S. Brodkin
-------------------
Name: Bart S. Brodkin
Title: Chairman
Agreed to and Accepted:
DR PEPPER BOTTLING
COMPANY OF TEXAS
By: /s/ Jim L. Turner
-----------------
Name: Jim L. Turner
Title: Chairman
<PAGE>
EXHIBIT 9
DR. PEPPER BOTTLING COMPANY OF TEXAS TO ACQUIRE
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
FOR $12.00 PER SHARE
Dallas, Texas, March 3, 1997 --- Dr. Pepper Bottling Company of Texas
and Seven-Up/RC Bottling Company of Southern California, Inc. announced today
that they have entered into a definitive merger agreement providing for the
acquisition of Seven-Up/RC by Dr. Pepper Bottling at a price of $12.00 per
share. The agreement provides that DPB Acquisition Corp., a newly-formed
wholly-owned subsidiary of Dr. Pepper Bottling, will commence a cash tender
offer for all of the issued and outstanding shares of common stock of
Seven-Up/RC at a price of $12.00 per share, net to the seller in cash.
Following the completion of the tender offer, DPB Acquisition will be merged
with and into Seven-Up/RC, with each remaining share of Seven-Up/RC then
outstanding being converted into the right to receive cash in the same amount
as will be paid in the tender offer. As a result of the merger, Seven-Up/RC
will become a wholly-owned subsidiary of Dr. Pepper Bottling.
Jim L. Turner, Principal and Chairman of Dr. Pepper Bottling Company of
Texas said: "We're pleased about adding Seven-Up/RC Company of Southern
California to our company. The transaction will combine the largest Seven-Up
bottler in the country with the largest Dr. Pepper bottler. The dynamic
markets served by the combined companies represent exciting opportunities for
the future."
Bart S. Brodkin, President, CEO and Chairman of Seven-Up/RC Bottling
Company of Southern California said: "I am very excited about the merger of
our Company with Jim Turner and the Dr. Pepper Bottling Company of Texas. Jim
is a terrific bottler and one that I deeply respect. I believe this merger
will, most importantly, provide long term growth and stability for our
franchise partners and will strengthen the competitive posture of our core
beverage trademarks, most of which are already leaders in their respective
flavor categories."
The tender offer is subject to certain conditions, including there
being validly tendered and not withdrawn at least 65% of the issued and
outstanding shares of common stock of Seven-Up/RC on a fully diluted basis,
funding under the debt financing commitment obtained by Dr. Pepper Bottling,
and the expiration of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act.
The merger agreement provides that Dr. Pepper Bottling will be entitled
to receive a fee in the event the transaction is not effected under certain
circumstances.
Dr. Pepper Bottling Company of Texas is the largest independent
franchise bottler of Dr. Pepper brand products, and is one of the largest
independent soft drink bottlers, in the United States. Dr. Pepper Bottling is
also one of the ten largest bottlers of SEVEN-UP brand products in the U.S.
Dr. Pepper Bottling's principal franchise territories are Dallas/Fort Worth and
Houston, Texas.
<PAGE>
[LOGO OF SEVEN UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA INC.]
March 7, 1997
To Our Stockholders:
On behalf of the Board of Directors of Seven Up/RC Bottling Company of
Southern California, Inc. (the "Company"), we are pleased to inform you that on
February 28, 1997, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Dr Pepper Bottling Company of Texas and DPB
Acquisition Corp. (the "Purchaser"). Pursuant to the Merger Agreement, the
Purchaser has today commenced a cash tender offer (the "Offer") to purchase all
of the issued and outstanding shares of Common Stock of the Company (the
"Shares") at $12.00 net per Share in cash (the "Offer Consideration").
Pursuant to the terms and conditions of the Merger Agreement, the Offer will
be followed by a merger of the Company and the Purchaser whereby each Share
will be converted into the right to receive the Offer Consideration.
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE OFFER AND MERGER AND HAS
UNANIMOUSLY DETERMINED THAT THE OFFER AND MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY TENDER THEIR SHARES
PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including the
written opinion dated February 28, 1997 of Houlihan, Lokey, Howard and Zukin,
Inc., the Company's financial advisor, to the effect that, as of such date and
based upon and subject to certain matters stated therein, the consideration to
be received by holders of Shares (other than the Purchaser and its affiliates)
pursuant to the terms of the Merger Agreement is fair to such holders from a
financial point of view. The Schedule 14D-9 contains other important
information relating to the Offer, and you are encouraged to read the Schedule
14D-9 carefully.
In addition to the attached Schedule 14D-9, enclosed also is the Offer to
Purchase dated March 7, 1997, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and provide instructions
as to how to tender your Shares. We urge you to read these documents carefully
in making your decisions with respect to tendering your Shares pursuant to the
Offer.
On behalf of the Board of Directors,
/S/ Bart S. Brodkin
Bart S. Brodkin Chairman of the Board,
President and Chief Executive Officer
<PAGE>
EXHIBIT 11
[LETTERHEAD OF HOULIHAN LOKEY HOWARD & ZUKIN]
February 28, 1997
To The Board of Directors
of Seven-Up/RC Bottling Company
of Southern California, Inc.
Gentlemen:
We understand that Dr Pepper Bottling Company of Texas, Inc., a Texas
corporation ("DP Texas"), proposes to make a cash tender offer (the "Offer") to
purchase 100% of the outstanding shares of common stock, par value $0.01 per
share ("Common Stock"), of Seven-Up/RC Bottling Company of Southern California,
Inc., a Delaware corporation (the "Company"), for $12.00 per share. In
connection with the Offer, the Company, DP Texas and a wholly owned subsidiary
of DP Texas ("Sub") will enter into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which Sub will merge with and into the Company
("the Merger"). The Offer, the Merger and all transactions related thereto are
referred to collectively herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction. We
express no opinion with regard to the terms and/or fairness of the Merger
Agreement, except with regard to the consideration to be received by the
Company's stockholders in the Transaction.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed (a) the Company's annual reports to shareholders and on
Form 10-K for the fiscal years ended December 31, 1995 and December
31, 1994, (b) quarterly report on Form 10-Q for the quarter ended
September 30, 1996, and (c) Company-prepared financial and
operating statements for the fiscal years ended December 31, 1992,
December 31, 1993, December 31, 1994, December 31, 1995 and
December 31, 1996, which the Company's management has identified as
being the most current financial statements available;
<PAGE>
Board of Directors
Seven-Up/RC Bottling Company
of Southern California, Inc.
February 28, 1997 -2-
2. reviewed copies of the following documents:
a) the Merger Agreement,
b) the Company's 1996-1997 Stock Option Plan,
c) the Company's Management Incentive Plan, and
d) the Company's 1997 Cost Reduction Plan;
3. reviewed the various company prepared operating and other
statements, and other documentation presented to DP Texas by the
Company on February 7, 1997;
4. reviewed the Company's Disclosure Statement dated June 19, 1996;
5. met with certain members of senior management of the Company to
discuss the operations, financial condition, future prospects
and projected operations and performance of the Company;
6. visited certain facilities and business offices of the Company;
7. reviewed management-prepared forecasts and projections of the
Company's financial performance for the years ended December 31,
1997 through 2000;
8. reviewed the historical market prices and trading volume for
the Company's publicly traded securities and selected individual
block trades;
9. reviewed certain confidential detailed information regarding the
Company's 1997 financial performance, the Company's compensation
arrangements and employee benefit plans, and the Company's
franchise assets and fixed assets;
10. reviewed certain other publicly available financial data for
selected companies that we deem comparable to the Company, and
publicly available prices and premiums paid in other
transactions that we considered similar to the Transaction; and
11. conducted such other studies, analyses and inquiries as we have
deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
<PAGE>
Board of Directors
Seven-Up/RC Bottling Company
of Southern California, Inc.
February 28, 1997 -3-
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility for independent verification with respect to it. We have not
made any physical inspection or independent appraisal of any of the properties
or assets of the Company. Our opinion is necessarily based on business,
economic, market and other conditions as they exist and can be evaluated by us
at the date of this letter.
For purposes of this opinion, we have assumed that the Company's capital stock
consists of five million shares of outstanding Common Stock, outstanding
warrants to purchase 280,899 shares of Common Stock exercisable at $7.30 per
share, outstanding options to purchase 337,079 shares of Common Stock
exercisable at $7.30 per share, and outstanding options to purchase 382,022
shares of Common Stock exercisable at $8.00 per share.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by the stockholders of the Company in connection
with the Transaction is fair to them from a financial point of view.
HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
/s/ Houlihan Lokey Howard & Zukin
