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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
----------------------
SCHEDULE 13D
------------
(Rule 13d-101)
Under the Securities Exchange Act of 1934
-----------------------------------------
CENTRAL GARDEN & PET COMPANY
----------------------------
(Name of Issuer)
Common Stock, $.01 Par Value
----------------------------
(Title of Class of Securities)
153527-10-6
-------------------------------
(CUSIP Number)
Brooks Pennington III
1280 Atlanta Highway
Madison, Georgia 30303
(706) 342-1234
--------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and
Communications)
Copy to:
John F. Seegal, Esq.
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, CA 94111
(415) 773-5797
February 27, 1998
-------------------------------------
(Date of Event Which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box: [_]
Page 1 of 7 Pages
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SCHEDULE 13D FORMS 7060
CUSIP NO. 153527-10-6 13D
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Brooks Pennington III
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEM 2(d) or 2(e)
[_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
USA
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SOLE VOTING POWER
7 (Option to Acquire Up to 600,000 Shares of Common
Stock in Certain Circumstances)
NUMBER OF
1,627,612
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
41,940
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9 (Option to Acquire Up to 600,000 Shares of Common
REPORTING Stock in Certain Circumstances)
PERSON 1,669,552
-----------------------------------------------------------
WITH SHARED DISPOSITIVE POWER
10
41,940
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,669,552
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.67%/1/
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
IN
- ------------------------------------------------------------------------------
- ---------------------
/1/ Assumes a total of 29,434,559 shares outstanding based on information
provided by the Issuer on March 2, 1998.
Page 2 of 7 Pages
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STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OF 1934
Item 1. Security and Issuer
-------------------
The class of equity securities to which this Statement on Schedule 13D
relates is the Common Stock, $.01 par value ("Central Common Stock"), of Central
Garden & Pet Company. (the "Issuer"), a Delaware corporation. The Issuer's
principal executive offices are located at 3697 Mt. Diablo Boulevard, Lafayette,
California 94107-0933.
Item 2. Identity and Background
-----------------------
This Schedule 13D is being filed on behalf of Brooks Pennington III ("Mr.
Pennington"). Mr. Pennington is a citizen of the United States and his
principal business address is Pennington Seed, Inc., 1280 Atlanta Highway,
Madison, Georgia 30650. Mr. Pennington's principal occupation is President of
Pennington Seed, Inc. Mr. Pennington is a member of the Board of Directors of
the Issuer.
During the last five years, Mr. Pennington has not (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of which was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
Pursuant to the Agreement and Plan of Reorganization between Pennington
Seed, Inc. ("PSI"), the stockholders of PSI, the Issuer and PS Sub, Inc., a
wholly owned subsidiary of the Issuer, dated February 17, 1998, as amended on
February 27, 1998 (as amended, the "Merger Agreement"), PSI was merged with and
into PS Sub, Inc. Each issued and outstanding share of PSI was converted into
$8,161.08 in cash and other consideration and 213.2182 shares of Central Common
Stock. Mr. Pennington, prior to the merger, was the beneficial owner of
7,830.24 shares of PSI common stock and following the merger became the
beneficial owner of 1,669,552 shares of Central Common Stock. In addition,
pursuant to the Merger Agreement, Mr. Pennington was appointed to the Board of
Directors of the Issuer.
The foregoing description of the terms of the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Merger Agreement, a copy of which is attached as Exhibit I hereto,
and is specifically incorporated by reference herein.
Of the 1,669,552 shares of Central Common Stock beneficially owned by Mr.
Pennington, 130,140 shares are owned by Mr. Pennington directly, 41,940 shares
are owned by Mr. Pennington's minor children, 1,033,044 shares are owned by
Pennington Partners L.P. over which Mr. Pennington has voting control as the
President of its general partner Pennington Management Company LLC, and 464,478
are owned by the Trust of Jacquelyn Pennington dated January 28, 1998 of which
Mr. Pennington is Trustee.
Page 3 of 7 Pages
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Item 4. Purpose of Transaction.
----------------------
Mr. Pennington obtained the beneficial interest in the Central Common Stock
as a result of the merger of PSI with and into PS Sub, Inc., a wholly owned
subsidiary of the Issuer. See Item 3.
Item 5. Interest in Securities of the Issuer.
------------------------------------
Mr. Pennington has sole power to vote, or to direct the vote, and sole
power to dispose, or direct the disposal, of 1,627,612 shares of Central Common
stock and shared power to vote, or to direct the vote of, and shared power to
dispose, or direct the disposition, of 41,940 shares of Central Common Stock.
These 1,669,552 shares of Central Common Stock are owned as follows:
(i) Mr. Pennington individually owns 130,140 shares of Central Common
Stock.
(ii) Christian Pennington, a minor child of Mr. Pennington, owns 24,115
shares of Central Common Stock. Mr. Pennington shares the power to
vote and dispose of these shares with his wife Patricia Pennington.
(iii) Brooks Pennington IV, a minor child of Mr. Pennington, owns 17,825
shares of Central Common Stock. Mr. Pennington shares the power to
vote and dispose of these shares with his wife Patricia Pennington.
(iv) Pennington Partners LP owns 1,033,044 shares of Central Common
Stock. Pennington Management Company LLC is the general partner of
Pennington Partners LP. Pennington Partners LP and Pennington
Management Company LLC each have as their principal business
address 1280 Atlanta Highway, Madison, Georgia 30650. Mr.
Pennington is the President of Pennington Management LLC and, as
such, has sole voting and dispositive power over the shares of
Central Common Stock owned by Pennington Partners LP.
(v) The Trust of Jacquelyn Pennington dated January 28, 1998 owns
464,428 shares of Central Common Stock. Mr. Pennington is the
Trustee of the trust and has sole voting and dispositive power
over the assets in the trust.
Mr. Pennington disclaims beneficial ownership of the 6,938 shares of Central
Common Stock owned by his wife Patricia Pennington.
Item 6. Contracts, Arrangements, Understandings or Relationships
--------------------------------------------------------
with Respect to Securities of the Issuer.
----------------------------------------
Mr. Pennington, in his capacity as President of Pennington Management
Company LLC (the general partner of Pennington Partners LP), has the right to
vote and dispose of the shares of Central Common Stock owned by Pennington
Partners LP. In addition, Mr. Pennington, under the Trust Agreement of
Jacquelyn Pennington dated January 29, 1998, has the right to vote and dispose
of the shares of Central Common Stock owned by the Trust.
Page 4 of 7 Pages
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William Brown, the Issuer's Chairman and Chief Executive Officer, entered
into a voting agreement with the former stockholders of PSI on February 27, 1998
whereby Mr. Brown agreed to vote his shares of Central Common Stock for the
election to the Board of Directors of the Issuer of the nominee appointed by the
former stockholders of PSI. The voting agreement will terminate on the earlier
of (i) February 27, 2002 and (ii) the date the former stockholders of PSI own of
record less than 33% of the shares of Central Common Stock issued to them
pursuant to the Merger Agreement.
Item 7. Material to be filed as Exhibits.
--------------------------------
The following Exhibits are filed as part of this Schedule 13D Statement:
99.1. Agreement and Plan of Reorganization dated as of February 17, 1998
among Pennington Seed, Inc., the stockholders of Pennington Seed,
Inc., Central Garden & Pet Company and PS Sub, Inc. (the "Merger
Agreement").
99.2. Amendment No. 1 to the Merger Agreement dated February 27, 1998.
99.3. Stockholder Voting Agreement between William Brown and the
stockholders of Pennington Seed, Inc. dated February 27, 1998.
Page 5 of 7 Pages
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SIGNATURES
----------
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.
Dated: March 9, 1998.
/s/ Brooks Pennington III
-----------------------------------
Brooks Pennington III
Page 6 of 7 Pages
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INDEX TO EXHIBITS
-----------------
99.1. Agreement and Plan of Reorganization dated as of February 17, 1998
among Pennington Seed, Inc., the stockholders of Pennington Seed,
Inc., Central Garden & Pet Company and PS Sub, Inc. (the "Merger
Agreement").
99.2. Amendment No. 1 to the Merger Agreement dated February 27, 1998.
99.3. Stockholder Voting Agreement between William Brown and the
stockholders of Pennington Seed, Inc. dated February 27, 1998.
Page 7 of 7 Pages
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EXHIBIT 99.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of February 17, 1998,
among Central Garden & Pet Company, a Delaware corporation ("Central"), PS Sub,
Inc., a Delaware corporation and a wholly owned subsidiary of Central ("Merger
Sub"), Pennington Seed, Inc., a Georgia corporation (the "Company"), and the
persons and entities listed in Exhibit I hereto, who own all of the stock of the
Company ("Stockholders"). References herein to the Subsidiaries shall be deemed
to mean the subsidiaries of Company listed on Schedule 1.03 hereto.
WHEREAS, Central has formed Merger Sub as a direct wholly owned
subsidiary corporation for the purpose of the Company merging with and into
Merger Sub (the "Merger") so that Merger Sub will continue as the Surviving
Corporation (as hereunder defined) after the Merger;
WHEREAS, the respective Boards of Directors of the Company, Central
and Merger Sub have approved and declared advisable the Merger, the terms and
provisions of this Agreement and the transactions contemplated hereby and the
Board of Directors of the Company has recommended that the stockholders of the
Company approve the Merger upon the terms of this Agreement;
WHEREAS, the respective Boards of Directors of Central and the Company
have determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders; and
WHEREAS, the parties desire that the Company be reorganized pursuant
to a Plan of Reorganization under the provisions of Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code"), through the merger (the
"Merger") of Company with and into the Subsidiary.
NOW, THEREFORE, in consideration of the agreements hereinafter set
forth the parties hereto agree as follows:
I.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to Central, as follows:
1.01. MATERIAL ADVERSE EFFECT AND KNOWLEDGE. As used in this
-------------------------------------
Agreement, the phrase "Material Adverse Effect on the Company" means a material
adverse effect on (a) the financial condition, business or results of operations
of the Company and the Subsidiaries on a consolidated basis or (b) the ability
of the Company to consummate the transactions contemplated by this Agreement.
As used in this Agreement, the phrase "to the knowledge of the Company" or
<PAGE>
words of similar import mean the actual knowledge of the Stockholders, directors
or executive vice presidents of the Company.
1.02. ORGANIZATION Each of the Company and the Subsidiaries is a
------------
corporation duly organized, existing and in good standing under the laws of its
state of incorporation, has full power and authority to own its properties and
to carry on its business as now conducted, and is in good standing and duly
qualified to conduct business as a foreign corporation in each of the
jurisdictions in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure to qualify
will not have a Material Adverse Effect on the Company.
1.03. CAPITAL STOCK. The Company's authorized capital stock consists
-------------
of 100,000 shares of Preferred Stock (the "Preferred Stock"), of which 395.39
shares (the "Preferred Stock") are issued and outstanding, and 10,000,000 shares
of Common Stock (the "Common Stock"), of which 10,000 shares (the "Shares") are
issued, outstanding and owned of record and beneficially by the Stockholders.
No other shares of capital stock of the Company are issued or outstanding.
Attached hereto as Schedule 1.03 is a schedule setting forth the outstanding
capital stock of the Company and each of its Subsidiaries. All of the Shares
are validly issued, fully paid and nonassessable, and there are no options,
calls, warrants or other securities or rights outstanding which are convertible
into, exercisable for or relate to any shares of capital stock of the Company or
the Subsidiaries. Except as set forth on Schedule 1.03, there are no authorized
or outstanding stock appreciation, phantom stock, voting agreements, proxies or
other agreements or understandings with respect to any capital stock of the
Company.
1.04. SUBSIDIARIES. Schedule 1.03 contains a true and complete list
------------
of the Subsidiaries. Except as set forth in Schedule 1.03, the Company owns all
of the stock of the Subsidiaries. All of the outstanding shares of the
Subsidiaries are validly issued, fully paid and nonassessable, and there are no
options, calls, warrants or other securities or rights outstanding which are
convertible into, exercisable for or relate to any shares of capital stock of
any of the Subsidiaries and except as set forth in Schedule 1.04, the Company
does not own, directly or indirectly, any interest or have any investment in any
corporation or other business. Except as shown on Schedule 1.04, at the
Effective Date, as defined in the Agreement of Merger, by operation of law
Merger Sub will become the owner of each and every such investment or financial
interest shown on Schedule 1.04.
1.05. FINANCIAL STATEMENTS. The Company has made available to
--------------------
Central copies of the Company's balance sheets as of the end of, and the related
statements of income and cash flows for, each of the three fiscal years ended
June 30, 1995, 1996 and 1997, which have been audited by Arthur Andersen LLP.
The Company has made available to Central copies of the Company's balance sheet
as of December 31, 1997 and the related statements of income and cash flows for
the three month period ending as of such date, setting forth comparative data
for the corresponding date and period in the preceding fiscal year. The
financial information referenced in this Section 1.05 (hereinafter collectively
referred to as the "Company Financial Statements"):
2
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(i) present fairly the financial position of the Company and
results of operations and cash flows for the Company as of the respective
dates and for the respective periods stated above.
(ii) the audited balance sheets and related statements of
income and cash flows for the fiscal years ended June 30, 1995, 1996 and
1997 have been prepared pursuant to and in accordance with generally
accepted accounting principles applied on a consistent basis.
(iii) The balance sheet as of December 31, 1997 and the related
unaudited statements of income and cash flows for the three months then
ended have been prepared pursuant to and in accordance with generally
accepted accounting principles applied on a consistent basis, subject to
normal year-end adjustments.
1.06. LIABILITIES. Provision has been made in the Company Financial
-----------
Statements for doubtful accounts and other receivables in accordance with
generally accepted accounting principles; and the Company did not and does not
have any material liability or obligation, whether accrued, absolute or
contingent, arising out of transactions entered into or any fact existing on or
prior to the dates of the Company Financial Statements, not reflected therein
that should be reflected therein in accordance with generally accepted
accounting principles. Any items of income or expense which are unusual or of a
nonrecurring nature have been separately disclosed in the Company Financial
Statements in accordance with generally accepted accounting principles or are
shown on Schedule 1.06.
1.07. TAXES. Except as set forth in Schedule 1.07:
-----
(a) All material federal, state and local tax returns and reports of
the Company and each Subsidiary required by law to be filed have been duly and
timely filed. All taxes, fees or other governmental charges of any nature owed
by the Company and each Subsidiary which are required by law to have been paid
(whether or not shown on any tax returns or report) have been paid. There is no
asserted claim or deficiency reflected in any written document received by the
Company for additional tax or governmental charge, and there is no tax
proceeding pending before any agency or court to which the Company or any
Subsidiary is a party.
(b) With respect to all taxing authorities having jurisdiction, as of
the date of the respective balance sheets, no unpaid tax liabilities (including
interest and penalties) of the Company or any Subsidiary existed which are not
disclosed in the balance sheets of the Company included in the Company Financial
Statements. There are no unpaid taxes (including interest and penalties) of the
Company or any Subsidiary which are a lien on its properties and assets, except
liens for taxes not yet due and payable.
(c) The federal income tax returns of the Company for the taxable
years ended June 30, 1994 and 1995 have been examined by the Internal Revenue
Service and any adjustments resulting therefrom have been paid. There are no
open federal income tax returns for any period ending on or before June 30,
1994. No consents extending the statute of limitations which remain in effect
have been given by the Company or any Subsidiary with respect to the Company's
or any
3
<PAGE>
Subsidiary's tax liability for any taxable year. Neither the Company nor any
Subsidiary has made or become obligated to make any payments that will not be
deductible under Section 280G of the Code. Each Stockholder is a United States
person, and is not subject to tax under Section 1445(a) of the Code. All monies
required to be withheld by the Company and each Subsidiary from employees for
income taxes, social security and unemployment insurance taxes, or required to
be withheld with respect to backup withholding or U.S. tax withholding, have
been collected or withheld, and either paid to the respective governmental
agencies or set aside in accounts for such purpose, or accrued, reserved
against, and entered upon the books of the Company. The Company and each
Subsidiary have never filed any consent under Section 341(f) of the Code.
Neither the Company nor any Subsidiary owns any interest in a "passive foreign
investment company" as that term is defined in 1296 of the Code or is a
beneficiary of a foreign trust the distributions of which may be subject to the
interest charge determined under section 668 of the Code.
1.08. MATERIAL ADVERSE CHANGE. Except as set forth in Schedule 1.08,
-----------------------
since June 30, 1997 and except for changes having an industrywide effect, there
has been no material adverse change in the business, properties, financial
position, results of operations, assets or net worth of the Company and the
Subsidiaries.
1.09. ORDINARY COURSE. Except as set forth in Schedule 1.09, since
---------------
June 30, 1997, the business of the Company and the Subsidiaries has been
conducted in the ordinary course. Without limiting the generality of the
foregoing, except as set forth in Schedule 1.10, or as specifically contemplated
by this Agreement, the Company has not:
(i) issued capital stock or declared or paid a dividend or
made any other payment from capital or surplus or other distribution of any
nature, or, directly or indirectly, redeemed, purchased or otherwise
acquired or recapitalized or reclassified any of its capital stock or
liquidated in whole or in part;
(ii) merged or consolidated with another corporation;
(iii) created, incurred or assumed or committed to create, incur
or assume indebtedness or other liability, except for indebtedness or other
liabilities less than $100,000 in the aggregate and for accounts payable or
other current liabilities which (1) are not for borrowed money, (2) were
incurred in the usual and ordinary course of business, and (3) are not
materially adverse to the business, properties, financial position or
results of operations of the Company;
(iv) mortgaged, pledged or otherwise encumbered any of its
assets other than in the ordinary course of business;
(v) raised salaries, hourly rates or the rate of bonuses or
commissions or other compensation, except for normal increases therein
consistent with past practice;
(vi) altered or amended its Articles of Incorporation or By-
laws;
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(vii) entered into, materially amended or terminated any
material contract, agreement, franchise, permit or license except in the
ordinary course of business;
(viii) acquired or agreed to acquire any assets which are
material, individually or in the aggregate, to the Company, except in its
ordinary course of business consistent with prior practice;
(ix) sold, leased or otherwise disposed of any of its assets,
which are material, individually or in the aggregate, to the Company,
except in the ordinary course of business consistent with prior practice;
(x) adopted or amended in any material respect any agreement
with employees or benefit plans, other than in the ordinary course of
business consistent with prior practice;
(xi) sustained any material loss or damage to its properties,
whether or not insured;
(xii) changed in any significant manner the way in which it
conducts business;
(xiii) made any payment or transfer to or for the benefit of any
stockholder or permitted any person, including, without limitation, any
stockholder, to withdraw assets from the Company, other than compensation
for employment, compensation paid to directors and dividends paid in the
ordinary course of business;
(xiv) engaged in any other activity outside the ordinary course
of business; or
(xv) agreed to incur, take, enter into, make or permit any of
the matters described in clauses (i) through (xiv).
1.10. CUSTOMERS. Schedule 1.10 contains a true and correct list of
---------
the Company's largest 15 customers for the years ended June 30, 1997 and June
30, 1996. Except as set forth in Schedule 1.10, to the knowledge of the
Company, none of the Company's customers listed on Schedule 1.10 intends to
cease dealing with the Company or materially reduce its business with the
Company or that the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement would be likely
to adversely affect the relationship of the Company with any such customer after
the date of this Agreement.
1.11. CONTRACTS. Included in Schedule 1.11 is a list of all
---------
executory contracts, agreements and commitments, written and oral, and other
instruments to which the Company or any Subsidiary is a party of the following
nature (the "Contracts"): (i) contract for employment of any employee; (ii)
profit sharing, bonus, deferred compensation, stock option, severance pay,
pension or retirement plan or agreement or other employee benefit plan or
agreement; (iii) agreement or arrangement for the purchase or sale (otherwise
than in the ordinary course of
5
<PAGE>
business) of any material assets; (iv) agreement, contract or indenture relating
to the borrowing of money; (v) agreement with unions; (vi) material governmental
permit or registration; (vii) lease of any real or personal property involving
an annual rental of $100,000 or more; (viii) agreement restricting the Company
or any Subsidiary from competing with any person or in any geographic area; and
(ix) except for contracts to purchase grass seed in the ordinary course of
business, any other material contract, agreement or commitment to which the
Company or any Subsidiary is a party involving payments made by or to the
Company or any Subsidiary of $100,000 or more. True and complete copies of the
Contracts (or in the case of oral agreements or understandings, descriptions of
such agreements or understandings) referred to in Schedule 1.11 have been
delivered to Central or provided to Central for inspection. Except as indicated
in Schedule 1.11, the Contracts are and, immediately after the Closing will be,
valid, in full force and effect, enforceable in accordance with their respective
terms for the period stated, and no consent of any person is required as a
result of the transactions contemplated hereby with respect to such Contracts,
and, to the knowledge of the Company, no party has repudiated any provision and
no action or claim is pending or, to the knowledge of the Company, threatened to
revoke, modify, terminate or render invalid any such Contracts.
Except as indicated in Schedule 1.11 hereto, none of the Contracts
involves as a party any shareholder, officer or director of the Company or any
Subsidiary or any corporation or firm in which such person owns in excess of 10%
of the equity interest or any individual with whom such person has any direct or
indirect relation by blood or marriage or adoption.
The Company and the Subsidiaries have performed all the obligations
required to be performed by them to date under the Contracts, are not in default
in any respect under any such Contract except as will not have a Material
Adverse Effect on the Company, and have not received any notice, written or
oral, of any claim, charge or, to the knowledge of the Company, threat that any
of them has materially breached any such Contract. To the knowledge of the
Company, all other parties to such Contracts are in material compliance
therewith and none are in material default thereunder.
1.12. EMPLOYEE TERMINATIONS. Except as listed on Schedule 1.12, no
---------------------
officer or other key employee of the Company or any Subsidiary has terminated
employment since June 30, 1997. To the knowledge of the Company, no officer or
other key employee of the Company or any Subsidiary has notified the Company of
his or her intention to terminate employment.
1.13. LABOR MATTERS. No employees of the Company or any Subsidiary
-------------
are, and since January 1, 1995 no employees of the Company or any Subsidiary
have been, represented by a union or other labor organization in connection with
their employment by the Company or any Subsidiary. Since January 1, 1995, there
have been no labor disputes to which the Company or any Subsidiary has been a
party and neither the Company nor any Subsidiary has received notice from any
union or group of employees setting forth demands for representation or
elections or for present or future changes in wages, terms of employment or
working conditions.
1.14. ERISA. Except as set forth on Schedule 1.14 hereto, neither
-----
the Company nor the Subsidiaries maintains or has any obligation to make
contributions to, any employee benefit plan (an "ERISA Plan") within the meaning
of Section 3(3) of the United States Employee
6
<PAGE>
Retirement Income Security Act of 1974, as amended ("ERISA"), or any other
retirement, profit sharing, stock option, stock bonus or material employee
benefit plan (a "Non-ERISA Plan"). All such ERISA Plans and Non-ERISA Plans have
been maintained and operated in all material respects in accordance with all
federal, state and local laws applicable to such plans and the terms and
conditions of the respective plan documents. The Internal Revenue Service has
issued a favorable determination letter with respect to each ERISA Plan that is
intended to be a "qualified plan" within the meaning of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). Except as set forth on
Schedule 1.14 hereto, no ERISA Plan is subject to Title IV or Section 302 of
ERISA or Section 412 of the Code. Except as set forth on Schedule 1.14, no ERISA
Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA
(a "Multiemployer Plan") or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA (a "Multiple Employer Plan"), nor has the Company at any time
contributed to, or been obligated to contribute to, any Multiemployer Plan or
any Multiple Employer Plan. Except as set forth on Schedule 1.14, the Company
has never been a member of a group described in Sections 414(b), (c), (m) or (o)
of the Code. Except for continuation coverage as required by Section 4980(B) of
the Code or by applicable state insurance laws, no ERISA Plan or Non-ERISA Plan
provides life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof.
1.15. CORPORATE POWER AND AUTHORITY. The Company has full corporate
-----------------------------
power and authority to enter into this Agreement and, subject to the approval by
the Stockholders in accordance with law, to consummate the transactions
contemplated herein. This Agreement has been duly authorized, executed and
delivered by the Company and, except for the approval of the Agreement of Merger
(as hereinafter defined) by the Stockholders in accordance with law, is a valid
and legally binding obligation of the Company enforceable in accordance with its
terms. Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will constitute or cause a breach or violation
of the Articles of Incorporation, By-Laws or other covenants or obligations
binding upon the Company or affecting any of its properties, or cause a lien or
other encumbrance to attach to any of its properties.
1.16. GOVERNMENTAL APPROVALS. Except as set forth on Schedule 1.16,
----------------------
no approval of or filing with a federal, state or local court, authority or
administrative agency is necessary to authorize the execution and delivery of
this Agreement or a Certificate of Merger in substantially the form of Exhibit
IV attached hereto, an Employment Agreement in substantially the form of Exhibit
V attached hereto, a Noncompetition Agreement in substantially the form of
Exhibit VI attached hereto, a Lockup Agreement in substantially the form of
Exhibit VII attached hereto, a Registration Rights Agreement in substantially
the form of Exhibit VIII hereto, a Voting Agreement of William Brown in
substantially the form of Exhibit IX hereto and the Seeds West Purchase
Agreement in substantially the form of Exhibit X hereto (collectively the
"Ancillary Agreements") by the Company or the Stockholders or the consummation
by the Company or the Stockholders of the transactions contemplated herein or
therein, except for the filing of the Certificate of Merger with the Secretaries
of State of Delaware and of Georgia and the filing with the United States
Federal Trade Commission and the Department of Justice of premerger notification
reports generally required by law.
7
<PAGE>
1.17. INVENTORIES. The inventory of the Company is maintained on the
-----------
financial records of the Company using historical valuation methods and
practices consistent with generally accepted accounting principles.
1.18. ACCOUNTS RECEIVABLE. All accounts receivable of the Company
-------------------
represent or will represent valid obligations arising from sales actually made
in the ordinary course of business and, subject to the reserve for doubtful
accounts set forth in the Company Financial Statements, have been established in
accordance with generally accepted accounting principles in accordance with past
practice. No payor has given the Company written notice of any inability to pay
such account receivable in due course or of any claim or defense against payment
of such account receivable; to the knowledge of the Company, no oral statements
to such effect have been made to the Company; to the knowledge of the Company,
no basis exists for any payor to raise any claim or defense against payment with
respect to any such account receivable, and Schedule 1.18 sets forth a true and
correct statement regarding the aging of such accounts receivable as of a date
within 10 days of the date of this Agreement. The foregoing representation and
warranty shall only be given effect to the extent that the losses arising from a
breach thereof are in excess of the reserve for doubtful accounts set forth in
the balance sheet of the Company as of September 30, 1997 referred to in Section
1.05(iii).
1.19. REAL PROPERTY. Schedule 1.19 includes a complete list of all
-------------
real property owned by the Company ("Owned Real Property") and all real property
leased by the Company ("Leased Real Property"). Except as set forth on Schedule
1.19, the Company has, or will have at Closing, good and marketable title to the
Owned Real Property (including the property acquired by the Company in
accordance with Section 6.13), and valid leasehold interests in all Leased Real
Property, free and clear of all mortgages, liens claims, charges, easements,
covenants, rights of way and other encumbrances or restrictions of any nature
whatsoever, except the following encumbrances or restrictions, whether or not
disclosed in Schedule 1.19: (i) zoning and other similar restrictions; (ii)
easements, covenants, rights of way or other restrictions which do not
materially adversely affect the use or value of the property to which they
relate; (iii) mechanics', carriers', workmen's, repairmen's or other like liens
arising or incurred in the ordinary course of business; (iv) liens for taxes,
assessments and other governmental charges which are not due and payable or
which may thereafter be paid without penalty; and (v) other imperfections of
title or encumbrances, if any, none of which liens, title imperfections or
encumbrances materially detract from the usefulness or value of the property
subject thereto for its current uses or individually or in the aggregate
adversely affect the operation of the business of the Company (all such
exceptions set forth in clauses (i)-(v) being referred to collectively as,
"Permitted Liens").
1.20. LITIGATION. Except as set forth in Schedule 1.20, there are no
----------
lawsuits, claims, proceedings or investigations pending or, to the knowledge of
the Company, threatened by or against or affecting the Company or any Subsidiary
or any of its properties, assets, operations or business which could have or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or its assets or Central's right to
utilize the assets of the Company.
8
<PAGE>
1.21. LICENSES. Schedule 1.21 contains a true and correct listing of
--------
each material license, permit or other governmental authorization (collectively
hereinafter referred to as "Licenses") held by the Company or any Subsidiary.
Except as set forth on Schedule 1.21 the Company holds all Licenses which are
required for the operation of its business and, all such Licenses are in full
force and effect.
1.22. EMPLOYMENT-RELATED CLAIMS. Except as set forth in Schedule
-------------------------
1.22, there are no employment-related claims, actions, proceedings or
investigations pending or to the knowledge of the Company threatened against or
relating to the Company before any court, governmental, regulatory or
administrative authority or body, or arbitrator or arbitration panel. Neither
the Company nor any Subsidiary is subject to any outstanding order, writ,
judgment, injunction, decision, award, compliance order, consent decree,
conciliation agreement, settlement agreement, affirmative action plan,
determination letter or advisory of any court, governmental, regulatory or
administrative authority or body, or arbitrator or arbitration panel. The
Company and each Subsidiary is in compliance in all material respects with all
collective bargaining agreements, contracts, and all laws and regulatory
requirements pertaining to employment and employee benefits.
1.23. COMPLIANCE WITH LAW. The Company and the Subsidiaries are in
-------------------
compliance with all applicable laws, orders, ordinances, rules and regulations
of any governmental authority, except where the failure to be in such compliance
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
1.24. BROKERAGE FEES. Except for the fee to Suntrust Capital
--------------
Markets, Inc., no agent, broker, investment banker, person or firm acting on
behalf of the Company or the Stockholders is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated herein.
1.25. INTELLECTUAL PROPERTY. Except as set forth in Schedule 1.25,
---------------------
there are no patents, registered trademarks, registered service marks,
registered trade names, registered copyrights, or applications therefor or
registrations thereof ("Intellectual Property"), which have been used or owned
within the last three years by the Company or any Subsidiary. Except as set
forth in Schedule 1.25, the Company does not have any agreement limiting the use
of the Intellectual Property and the Company has sole, full and clear title to
all of such items of Intellectual Property, without any liens, encumbrances or
restrictions whatsoever, and, assuming the Surviving Corporation takes all
action necessary to register the Intellectual Property, the consummation of the
transactions contemplated hereby will not result in the loss or impairment of
any Intellectual Property. There are no infringement suits, actions or
proceedings pending or, to the knowledge of the Company, threatened against the
Company or the Subsidiaries with respect to any such Intellectual Property owned
or licensed by the Company, and to the knowledge of the Company the conduct of
the business of the Company and the Subsidiaries as presently conducted does not
infringe or violate any intellectual property rights of a third party.
1.26. ENVIRONMENTAL. Except as identified on Schedule 1.26, since
-------------
June 30, 1997:
9
<PAGE>
(a) There have been no private or governmental claims, citations,
complaints, notices of violation or letters made, issued to or, to the knowledge
of the Company, threatened against the Company or any Subsidiary by any
governmental entity or private or other party for the impairment or diminution
of, or damage, injury or other adverse effects to, the environment or public
health resulting, in whole or in part, from the ownership, use or operation of
any of the Company's facilities which will be acquired by Central or Merger Sub
as a result of the transactions contemplated hereby ("the Property").
(b) The Property has not been used for the disposal of "hazardous
waste" or "hazardous materials" as those terms are defined below. As used in
this Agreement, the term "hazardous materials" or "hazardous waste" means any
hazardous or toxic substances, materials, and wastes listed as of the date
hereof in the United States Department of Transportation Hazardous Materials
Table (49 CFR 172.101) or by the Environmental Protection Agency as a hazardous
substance (40 CFR Part 302) and amendments thereto, or such substances,
materials and wastes which are or may become regulated under any applicable
local, state or federal law, including, without limitation, any material, waste
or substance which is (i) petroleum, (ii) asbestos, (iii) polychlorinated
biphenyls, (iv) defined as a "hazardous waste," "extremely hazardous waste" or
"restricted hazardous waste" or "hazardous material" under applicable state laws
and regulations, (v) designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. (S) 1251, et seq. (33 U.S.C. (S) 1321) or
-- ---
U.S.C. (S) 1317, (vi) defined as a "hazardous waste" pursuant to Section 1004 of
the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq. (42
-- ---
U.S.C. (S) 6903) or (vii) defined as a "hazardous substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. (S) 9601, et seq. (42 U.S.C. (S) 9601).
-- ---
To the knowledge of the Company, there are no hazardous materials or
hazardous waste, under, in or about the Property, including but not limited to
the air above the Property, the soil and groundwater at and below the Property,
and surface water on and running through the Property other than commercially
reasonable amounts of such materials or wastes used or produced in the
operations of the Company and its Subsidiaries.
The Company and the Subsidiaries have duly complied with, and the
Property is in compliance with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, except where the failure to do so would have
or would reasonable be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(c) The Company and the Subsidiaries have been issued, and will
maintain until the date of Closing, all required federal, state and local
permits, licenses, certificates and approvals with respect to the Property
relating to (i) air emissions, (ii) discharges to surface water or groundwater,
(iii) noise emissions, (iv) solid or liquid waste disposal, (v) the use,
generation, storage, transportation or disposal of hazardous materials or
hazardous wastes, or (vi) other environmental, health or safety matters, except
where the failure to do so would not have or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
10
<PAGE>
Neither the Company nor any Subsidiary has received notice of, any
fact(s) which might constitute violation(s) of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder, which relate to the use, ownership or
occupancy of the Property, and is not in violation of any covenants, conditions,
easements, rights of way or restrictions affecting the Property or any rights
appurtenant thereto, which has or would reasonable be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
The Company has provided Central with true, accurate and complete
copies of any written information in the possession of the Company which
pertains to the environmental history of the Property.
1.27. RULE 10B-5. No representation or warranty made by the
----------
Stockholders or the Company in this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained herein or therein not misleading.
1.28. TAX-FREE REORGANIZATION. Merger Sub will acquire at least 90
-----------------------
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets held by the Company immediately prior
to the Merger. For purposes of this representation, amounts paid by the Company
to dissenters, amounts paid by the Company to shareholders who receive cash or
other property, the Company assets used to pay its reorganization expenses, and
all redemptions and distributions (except for regular, normal dividends) made by
the Company immediately preceding the Merger, will be included as assets of the
Company held immediately prior to the Merger. The liabilities of the Company
assumed by Merger Sub and the liabilities to which the transferred assets of the
Company are subject were incurred by the Company in the ordinary course of its
business. The fair market value of the assets of the Company transferred to
Merger Sub will equal or exceed the sum of the liabilities assumed by Merger
Sub, plus the amount of liabilities, if any, to which the transferred assets are
subject. The Company is not an "investment company" within the meaning of
Section 368(a)(2)(F) of the Code nor under the jurisdiction of a Court in a
"title 11 or similar case" within the meaning of Section 368(a)(3)(A) of the
Code.
The representations and warranties made in this Section 1.28 and
Section 3.11 are made in connection with the parties' intention to qualify the
Merger as a reorganization within the meaning of Section 368(a)(2)(D) of the
Code.
1.29. MERGER. Neither the Company nor any Stockholder has taken any
-------
action which would jeopardize the treatment of the Merger as a reorganization
within the meaning of Section 368(a)(2)(D) of the Code.
1.30. LIKE-KIND EXCHANGES. The transfers of property contemplated by
--------------------
Section 5.11(b) will qualify as "like-kind exchanges" pursuant to Section 1031
of the Code (and corresponding provisions of state law) and the Company will not
recognize any gain or loss with respect to such property transfers.
11
<PAGE>
II.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each of the Stockholders represents and warrants to Central as
follows:
2.01. OWNERSHIP OF STOCK. Such Stockholder owns of record and
------------------
beneficially the number of shares of Common Stock set forth after such
Stockholder's name on Schedule 1.03 attached hereto.
2.02. POWER AND AUTHORITY. Such Stockholder has full power and
-------------------
authority to enter into this Agreement and the Ancillary Agreements to which the
Stockholder is a party, and to consummate the transactions contemplated herein
and therein. This Agreement has been duly executed and delivered by such
Stockholder and is a valid and legally binding obligation of such Stockholders
in accordance with its terms. The Ancillary Agreements to which such
Stockholder is a party have been approved by such Stockholder and will be duly
executed and delivered by such Stockholder and after such execution and delivery
will be valid and legally binding obligations of such Stockholder in accordance
with their terms. Neither the execution of this Agreement, or the Ancillary
Agreements to which such Stockholder is a party, nor the consummation of the
transactions contemplated herein or therein will constitute or cause a breach or
violation of a covenant or obligation binding upon such Stockholder or affecting
his properties that will materially adversely affect such Stockholder's ability
to consummate the transactions contemplated herein or therein.
2.03. STOCKHOLDER INVESTMENTS. Except for the ownership of interests
-----------------------
of 5% or less in securities of corporations the shares of which are publicly
traded, the Stockholders do not own directly or indirectly, any interest or have
any investment or profit participation in a corporation or other entity which is
a competitor or which, directly or indirectly, does business with the Company or
the Subsidiaries.
III.
REPRESENTATIONS AND WARRANTIES
OF CENTRAL AND MERGER SUB
Central and Merger Sub, jointly and severally, represent and warrant
to the Company and the Stockholders as follows:
3.01. MATERIAL ADVERSE EFFECT AND KNOWLEDGE. As used in this
-------------------------------------
Agreement, the phrase "Material Adverse Effect on Central" means a material
adverse effect on (a) the financial condition, business or results of operations
of Central and its subsidiaries on a consolidated basis or (b) the ability of
the Company and Merger Sub to consummate the transactions contemplated by this
Agreement. As used in this Agreement, the phrase "to the
12
<PAGE>
knowledge of Central" or words of similar import means the actual knowledge of
the executive officers of Central.
3.02. ORGANIZATION. Central and Merger Sub are corporations duly
------------
organized, existing and in good standing under the laws of the State of
Delaware, have full power and authority to own their respective properties and
to carry on their respective businesses as now conducted, and are in good
standing and duly qualified to conduct business as a foreign corporation in each
of the jurisdictions in which the ownership or leasing of their respective
properties or the conduct of their respective businesses requires such
qualification, except where the failure to qualify would have a Material Adverse
Effect on Central.
3.03. CORPORATE POWER AND AUTHORITY. Central and Merger Sub have
-----------------------------
full corporate power to enter into this Agreement and the Ancillary Agreements
and to consummate the transactions contemplated herein and therein. This
Agreement and the Ancillary Agreements have been duly authorized, executed and
delivered by Central and Merger Sub and are valid and legally binding
obligations of Central and Merger Sub. Neither the execution of this Agreement
or the Ancillary Agreements nor the consummation of the transactions
contemplated herein or therein will constitute or cause a breach or violation of
the charter or By-laws of Central or Subsidiary or other covenants or
obligations binding upon either of them or affecting any of their respective
properties or cause a lien or other encumbrance to attach to any of their
properties.
3.04. GOVERNMENTAL APPROVALS. No approval of or filing with a
----------------------
federal, state or local court, authority or administrative agency is necessary
to authorize the execution and delivery of this Agreement or the Ancillary
Agreements by Central or Merger Sub or the consummation by Central or Merger Sub
of the transactions contemplated herein or therein, other than such filings as
may be required under the Securities Act and state blue sky laws, the filing of
the Agreement of Merger with the Secretary of State of Delaware and the filing
with the United States Federal Trade Commission and the Department of Justice of
premerger reports generally required by law.
3.05. SEC REPORTS.
-----------
(a) Since January 1, 1996, Central has timely filed all reports,
registration statements, proxy statements or information statements and all
other documents, together with any amendments required to be made thereto,
required to be filed with the SEC under the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the "Exchange Act")
(collectively, the "Central Reports"). Central has not taken any actions or
omitted to take any actions which would disqualify Central from registering its
securities using Form S-3 under the Securities Act. Central has heretofore made
available to Company true copies of all the Central Reports, together with all
exhibits thereto, that Company has requested. Included in such Central Reports
are (i) audited consolidated balance sheets of Central and its subsidiaries at
September 27, 1997, September 28, 1996 and September 30, 1995 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended, and the notes thereto and (ii) the unaudited consolidated
balance sheets of Central and its subsidiaries at December 27, 1997 and the
related unaudited consolidated statements of income, stockholders' equity and
cash flows for the periods then ended and the notes thereto.
13
<PAGE>
(b) All of the financial statements included in the Central Reports
fairly present the consolidated financial position of Central and its
subsidiaries as of the dates mentioned and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods then
ended in conformity with generally accepted accounting principles (subject to
any exceptions as to consistency specified therein or as may be indicated in the
notes thereto or in the case of the unaudited statements, as may be permitted by
Form 10-Q of the SEC and subject, in the case of unaudited statements, to
normal, recurring audit adjustments). As of their respective dates, the Central
Reports complied in all material respects with all applicable rules and
regulations promulgated by the SEC and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except as set forth in the Central
Reports, neither Central nor any subsidiary of Central has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be set forth on a
consolidated balance sheet of Central and its consolidated subsidiaries or in
the notes thereto, other than liabilities or obligations which, individually or
in the aggregate, do not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Central.
(c) On or before the Effective Time, the registration statement
relating to the Central Common Stock to be received by the Stockholders pursuant
to this Agreement (the "Registration Statement") shall have been declared
effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the SEC.
The Registration Statement as of its effective date complies on its face as to
form in all material respects and is responsive in all material respects to the
requirements of the Securities Act and the rules and regulations of the SEC
promulgated thereunder. The information contained or incorporated by reference
in the Registration Statement did not contain any untrue statements of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company has satisfied all
requirements under the Securities Act and the Exchange Act and the respective
rules and regulations of the SEC thereunder in connection with the issuance of
the shares of Central Common Stock pursuant to the Registration Statement.
3.06. CENTRAL COMMON STOCK. The shares of Central Common Stock to be
--------------------
issued pursuant to this Agreement will be validly issued, fully paid and
nonassessable. At closing, the Stockholders will acquire good and marketable
title to all of such Central Common Stock, free and clear of any lien,
encumbrance, pledge, security interest or claim whatsoever. The Central Common
Stock is not subject to any preemptive rights in favor of any other person.
3.07. RULE 10B-5. No representation or warranty made by Central in
----------
this Agreement or the Ancillary Agreements attached to this Agreement contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the statements not misleading.
3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for the
------------------------------------
transactions contemplated by this Agreement, since September 27, 1997, there has
not been any change in the business, financial condition or results of
operations of Central and its subsidiaries which has or
14
<PAGE>
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Central.
3.09. BROKERS AND FINDERS Neither Central nor any of its
-------------------
subsidiaries, nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Central or any of its subsidiaries,
in connection with this Agreement or any of the transactions contemplated
hereby.
3.10. MERGER Neither Central nor any of its subsidiaries has taken
------
any action which would jeopardize the treatment of the Merger as a
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
3.11. TAX-FREE REORGANIZATION. Prior to the Merger, Central will be
-----------------------
in control of Merger Sub within the meaning of Section 368(c) of the Code.
Following the Merger, Merger Sub will not issue additional shares of its stock
that would result in Central losing control of Merger Sub within the meaning of
368(c) of the Code. Central has no plan or intention to reacquire any of the
shares of Central Common Stock issued in the Merger. Central has no plan or
intention to liquidate Merger Sub; to merge Merger Sub with or into another
corporation; to sell or otherwise dispose of the Merger Sub Common Stock; or to
cause Merger Sub to sell or otherwise dispose of any of the assets of Merger Sub
acquired in the Merger, except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C) of the Code. Following
the Merger, Merger Sub will continue the historic business of the Company or use
a significant portion of the historic business assets of the Company in a
business. Central will pay the reorganization expenses incurred by Central and
Merger Sub that are solely and directly related to the Merger. There is no
intercorporate indebtedness existing between Central and the Company or between
Merger Sub and the Company that was issued, acquired, or will be settled at a
discount. Neither Central nor Merger Sub is an "investment company" within the
meaning of Section 368(a)(2)(F) of the Code. No stock of Merger Sub will be
issued in the Merger.
IV.
COVENANTS
4.01. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS. The Company and
---------------------------------------------
the Stockholders each covenant and agree pending the Closing as follows:
(a) ORDINARY COURSE. Each of the Company and the Subsidiaries
---------------
shall carry on its business consistent with prior practice in the usual and
ordinary course, and shall use its customary efforts to preserve its business
organization intact and conserve the goodwill and relationships of its
customers, suppliers and others having business relations with it and the
services of its officers, employees, agents and representatives.
15
<PAGE>
(b) CORPORATE EXISTENCE. The Company shall maintain its corporate
-------------------
existence and good standing in Georgia and in each jurisdiction in which it is
qualified to do business, and will not amend its Articles of Incorporation or
By-laws except as contemplated hereby.
(c) NO DISTRIBUTIONS. Except as contemplated by this Agreement or
----------------
with Central's written consent, no payment, dividend or other distribution of
any nature will be declared, made, set aside or paid on or in respect of any
capital stock or surplus of the Company nor will the Company, directly or
indirectly, issue, redeem, retire, purchase or otherwise acquire shares of its
stock; provided, however, that the Company shall pay all outstanding principal
-------- -------
and interest on the note in favor of Jacquelyn Pennington described on Schedule
1.11.
(d) NO COMPENSATION INCREASES. Except with Central's written consent
-------------------------
or with respect to normal increases consistent with past practice, (i) no
increase will be made in the compensation or rate of compensation payable or to
become payable to the officers or employees of the Company, and (ii) no bonus,
profit sharing, retirement, insurance, death, fringe benefit or other
extraordinary or indirect compensation shall accrue, be set aside or be paid for
or on behalf of any such officer or employee, and no agreement or plan with
respect to the same shall be adopted or committed for.
(e) NO MERGERS OR BREACHES. The Company and each of the Subsidiaries
----------------------
shall:
(i) not merge or consolidate with or acquire any assets of
another corporation, business or other person except as contemplated
hereby;
(ii) not do any act or omit any act the doing or omission of
which would be a breach or default in any of the Contracts;
(iii) from the date hereof on reasonable notice afford Central
and its representatives full access during normal business hours throughout
the period prior to the Closing to all of the Company's offices, properties
and records; provided, however, that any investigation or inquiry made by
-------- -------
Central shall not in any way affect the representations and warranties
contained in this Agreement or their survival of the Closing.
(f) NO ACTIONS CONTRARY TO REPRESENTATIONS. Neither the Stockholders
--------------------------------------
nor the Company shall intentionally take any action or intentionally omit to
take any action within its reasonable control that would result in any
representation or warranty of the Company contained in this Agreement being
inaccurate or incorrect in any material respect on and as of the date of
Closing.
(g) REPAYMENT OF INDEBTEDNESS At or prior to the Closing, each
-------------------------
Stockholder, officer and director of the Company and each entity (other than
corporations the shares of which are publicly traded and other than any
Subsidiary listed on Schedule 1.03) in which the Company or any Stockholders has
an equity interest shall pay to the Company all outstanding indebtedness owed by
such stockholder, officer, director or entity to the Company or any of the
Subsidiaries.
16
<PAGE>
(h) ENVIRONMENTAL REPORTS. The Company shall promptly furnish to
---------------------
Central true, accurate and complete copies of any sampling and results which may
be obtained by the Company or any Subsidiary prior to the Closing from all
environmental audits and environmental and/or health samples and tests taken at
and around the Property.
(i) NO TRANSACTIONS IN CENTRAL STOCK. No Stockholder or any Affiliate
--------------------------------
or Associate of a Stockholder will, from the date of this Agreement until the
Closing, engage in the purchase or sale of, or any other transaction relating
to, the common stock or other securities of Central. For purposes of this
Agreement, the term "Associate" means with respect to any person (i) an
"associate" of such person within the meaning of Rule 12(b)-2 under the
Securities Exchange Act of 1934, and (ii) in the case of a person who is a human
being, the spouse of such person and any sibling, parent, grandparent or minor
child of such person or spouse. For purposes of this Section 4.11, the term
"Affiliate" means, with respect to any Stockholder, any person controlling,
controlled by, or under common control with the Stockholder, and the term
"control" (any variant thereof) has the meaning ascribed to that term in 16
C.F.R. (S)801.1(b), which will be construed with reference to the remainder of
16 C.F.R. part 801.
4.02. COVENANTS OF CENTRAL AND MERGER SUB. Central and Merger Sub
-----------------------------------
covenant and agree pending the Closing as follows:
(a) HSR FILING. Central will prepare and file with the U.S.
----------
Federal Trade Commission and the Department of Justice a pre-merger notification
application and shall bear all the filing fees associated with such application.
(b) ISSUANCE OF CENTRAL COMMON STOCK. Central shall take all steps
--------------------------------
necessary to issue the Central Common Stock including obtaining requisite
government approval (if required). Central shall comply with all applicable
securities laws and applicable rules and regulations of the NASDAQ National
Market required for the issuance of the Central Common Stock.
(c) RECORDS. From and after the Closing, Central and Merger Sub will:
-------
(i) not destroy or dispose of the books and records of the
Company relating to periods prior to the date of the Closing
for a period of seven (7) years after the date of the
Closing without giving adequate notice to the Stockholders
of such pending disposal and offering the Stockholders the
right to copy or take possession of such record; and
(ii) give the Stockholders and their counsel, accountants and
advisors full access upon reasonable notice during normal
business hours to all such records for any proper purpose
including, without limitation, preparing any tax returns,
tax elections or financial statements, or any judicial,
quasi-judicial, administrative, tax audit or arbitration
proceeding.
17
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(d) ENVIRONMENTAL REPORTS. Central shall promptly furnish to the
---------------------
Company true, accurate and complete copies of any sampling and results which may
be obtained by Central or any subsidiary of Central prior to the Closing from
all environmental audits and environmental and/or health samples and tests taken
at and around the Property.
(e) FORM 8-K. Immediately following the Closing, Central shall
--------
file a Form 8-K under the Exchange Act with the SEC in compliance with the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder as required in connection with the issuance of the Central Common
Stock pursuant to the Registration Statement.
4.03. COVENANTS OF COMPANY, THE STOCKHOLDERS AND CENTRAL. Company,
--------------------------------------------------
the Stockholders and Central covenant and agree as follows:
(a) CONSENTS. The Company, the Stockholders and Central will use
--------
all commercially reasonable efforts to obtain the written consent or approval of
each and every governmental authority and other regulatory body, the consent or
approval of which shall be required in order to permit Central, Merger Sub and
the Company to consummate the transactions contemplated by this Agreement. The
Company will use all commercially reasonable efforts to obtain the written
consent or approval, in form and substance reasonably satisfactory to Central,
of each person whose consent or approval shall be required in order to permit
Central, Merger Sub and the Company to consummate the transactions contemplated
by this Agreement, except for any contracts of the Company as to which the
failure to obtain any required written consent or approval thereunder would not
individually or in the aggregate result in, or be reasonably likely to result
in, a Material Adverse Effect on the Company. Central will use all commercially
reasonable efforts to obtain the written consent or approval, in form and
substance reasonably satisfactory to the Company, of each person whose consent
or approval shall be required in order to permit Central, Merger Sub and the
Company to consummate the transactions contemplated by this Agreement, except
for any contracts of Central as to which the failure to obtain any required
written consent or approval thereunder would not individually or in the
aggregate result in, or be reasonably likely to result in, a Material Adverse
Effect on Central.
(b) REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject
---------------------------------------------------
to the other provisions of this Agreement, the parties hereto shall each use all
commercially reasonable efforts to perform their obligations herein and to take,
or cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to obtain all regulatory approvals, including
notices and approvals under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") (provided, however, that in no event shall
Central be required to take any action in order to obtain any such regulatory
approval which would require it to divest any of its assets or limit its ability
to compete in any business or otherwise have a Material Adverse Effect on
Central), and satisfy all conditions to the obligations of the parties under
this Agreement and to cause the Merger and the other transactions contemplated
by this Agreement to be effected as soon as reasonably practicable in accordance
with the terms of this Agreement and shall cooperate fully with each other and
their respective officers, directors, employees, agents, counsel, accountants
and other designees in connection with any steps
18
<PAGE>
required to be taken as a part of their respective obligations under this
Agreement, including without limitation:
(i) The Company, Central and, if necessary, any Stockholders
shall promptly make their respective filings and submissions
and shall take, or cause to be taken, all actions and do, or
cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to obtain any required
approval of any other federal, state or local governmental
agency or regulatory body with jurisdiction over the
transactions contemplated by this Agreement.
(ii) If any claim, action, suit, investigation or other
proceeding by any governmental body or other person is
commenced which questions the validity or legality of this
Agreement or any of the other transactions contemplated by
this Agreement or seeks damages in connection with this
Agreement, the parties agree to cooperate and use all
commercially reasonable efforts to defend against such
claim, action, suit, investigation or other proceeding and,
if an injunction or other order is issued in any such
action, suit or other proceeding, to use all commercially
reasonable efforts to have such injunction or other order
lifted, and to cooperate reasonably regarding any other
impediment to the consummation of the transactions
contemplated by this Agreement.
(iii)Each party shall give prompt written notice to the other
of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any of
such party's representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Effective
Time and (ii) any failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement.
(c) NOTICE. Each of Company and Central shall promptly notify the
------
other of any material change in the normal course of its business or in the
operation of its properties and of the receipt by it or any of its subsidiaries
of notice of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or the receipt by
it or any of its subsidiaries of a notice of the institution or the threat of
litigation involving it or any of its subsidiaries which in any such case,
individually or in the aggregate, has or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or a
Material Adverse Effect on Central, as the case may be, and will keep the other
party fully informed with respect to such events.
(d) PRESS RELEASES; FILINGS. Without the consent of the other
-----------------------
parties, none of the parties shall issue any press release or make any public
announcement with regard to this Agreement or the Merger or any of the
transactions contemplated hereby or thereby; provided,
19
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however, that (i) nothing in this Section 4.03(d) shall be deemed to prohibit
any party hereto from making any disclosure which its counsel deems necessary or
advisable in order to fulfill such party's disclosure obligations imposed by law
or the rules of any national securities exchange or automated quotation system
so long as such party uses all commercially reasonable efforts to consult with
the other parties prior to such disclosure, and (ii) if this Agreement is
terminated, then each party may make such disclosure as it deems reasonably
appropriate so long as such party uses all commercially reasonable efforts to
consult with the other parties prior to such disclosure. Each of the Company and
Central shall promptly notify the other of each report, schedule and other
document filed by it or any of its respective subsidiaries with the SEC and of
any other document pertaining to the transactions contemplated hereby filed with
any other governmental authorities.
(e) TAX TREATMENT. Central, the Company and each Stockholder agree to
-------------
treat the Merger as a reorganization within the meaning of Section 368(a)(2)(D)
of the Code. During the period from the date of this Agreement through the
Effective Time, unless the parties shall otherwise agree in writing, none of
Central, the Company, any of their respective subsidiaries, or any Stockholder
shall knowingly take any action which would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a)(2)(D) of the
Code. Neither the Stockholders nor Central nor Merger Sub will take any action
that will jeopardize the treatment of the property transfers contemplated by
Section 5.11(b), (c) and (d) as like-kind exchanges pursuant to Section 1031 of
the Code.
4.04. SEEDS WEST, INC. Immediately following the Closing, Central
----------------
shall cause the Surviving Corporation to purchase the 40% ownership interest in
Seeds West, Inc. not owned by it by executing the Seeds West Purchase Agreement
in the form attached hereto as Exhibit IX (the "Seeds West Purchase Agreement")
and performing its obligations thereunder, including the issuance and delivery
of shares of Central Common Stock to the sellers thereunder.
V.
THE COMPANY'S AND THE
STOCKHOLDERS' CONDITIONS PRECEDENT
The following shall be conditions precedent to the obligations of the
Company and the Stockholders to consummate the transactions contemplated by this
Agreement:
5.01. CONSENTS. All material consents, authorizations, orders and
--------
approvals of (or filings or registrations with) any governmental authority or
other regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained. All authorizations,
consents, waivers and approvals from parties to contracts or other agreements to
which any of the Company or Central (or their respective subsidiaries) is a
party, or by which either is bound, as may be required to be obtained by them in
connection with the performance of this Agreement, the failure to obtain which
would prevent the consummation of the Merger or have, individually or in the
aggregate, a Material Adverse Effect on Company or, individually or in the
aggregate, a Material Adverse Effect on Central, shall have been obtained.
20
<PAGE>
5.02. REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties made by Central contained in this Agreement or in any written
document (including exhibits and schedules delivered by Central) shall be true
and correct in all material respects on and as of the date of Closing.
5.03. LEGAL OPINION. The Company and the Stockholders shall have
-------------
been furnished the opinion of Orrick, Herrington & Sutcliffe LLP, counsel to
Central dated as of the Closing, as to the matters set forth on Exhibit III
hereto.
5.04. COVENANTS. Central and Merger Sub shall have complied in all
---------
material respects with all of their respective obligations under this Agreement
which are required to be performed on or before the date of Closing.
5.05. HSR WAITING PERIOD. The waiting period imposed by the HSR Act
------------------
shall have expired or have been terminated.
5.06. ABSENCE OF STATUTES. There shall not be in effect any statute,
-------------------
rule or regulation which makes it illegal to consummate the transactions
contemplated herein or any order, decree or judgment which enjoins the
consummation of the transactions contemplated herein.
5.07. ABSENCE OF LITIGATION. No suit, action or other proceeding
---------------------
shall be pending or threatened before any court or governmental agency seeking
to restrain, to prohibit or to obtain material damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated herein, and there shall have been no investigation by a
governmental authority threatened or commenced in connection with this Agreement
or with the transactions contemplated herein.
5.08. ANCILLARY AGREEMENTS. The Ancillary Agreements shall have been
--------------------
duly executed and delivered by Central and Merger Sub, except for the Seeds West
Purchase Agreement which shall be executed immediately following the Closing.
5.09. OFFICER CERTIFICATE. The Company and the Stockholders shall
-------------------
have received a certificate dated the date of Closing, signed by an executive
officer of Central and Merger Sub to the effect that the representations and
warranties of Central and Merger Sub set forth herein are true and correct in
all material respects on the date of Closing and that Central and Merger Sub
have complied with Section 5.04 hereof as of the date of Closing.
5.10. TAX OPINION. The Stockholders shall have been furnished with
-----------
the opinion of King & Spalding dated as of the Closing to the effect that the
Merger qualifies as a reorganization under Section 368(a)(2)(D) of the Code.
5.11. OTHER TRANSACTIONS. The following transactions shall have been
------------------
consummated in a manner reasonably satisfactory to counsel for the Company and
the Stockholders:
21
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(a) The Company shall have purchased all of the interest in Mid-South,
Inc., owned by the Estate of Brooks Pennington (the "Estate") for $842,000;
(b) The Company shall have transferred to one or more of the
Stockholders the 520 acre Saye timber farm and certain equipment located
thereon, the two parcels of land (Riverside and Creekside) constituting 750
acres known as the "Homeplace" and certain equipment located thereon, and the
Downtown Store Building located in Madison, Georgia (the "Downtown Store
Building").
(c) The Estate shall have transferred to the Company the Greenfield,
Missouri bird seed plant and surrounding property and certain equipment located
thereon, the vacant lots in Madison, Georgia and the seed production packaging
facility and storage barn in Madison, Georgia; and
(d) The Pennington Children's Partnership shall have transferred to
the Company the shop building and storage shed in Madison, Georgia.
VI.
CENTRAL'S AND MERGER SUB'S CONDITIONS PRECEDENT
The following shall be conditions precedent to the obligations of
Central and Merger Sub to consummate the transactions contemplated by this
Agreement:
6.01. CONSENTS. All material consents, authorizations, orders and
--------
approvals of (or filings or registrations with) any governmental authority or
other regulatory body required in connection with the execution, delivery and
performance of this Agreement, shall have been obtained. All authorizations,
consents, waivers and approvals from parties to contracts or other agreements to
which any of Company or Central (or their respective subsidiaries) is a party,
or by which either is bound, as may be required to be obtained by them in
connection with the performance of this Agreement, the failure to obtain which
would prevent the consummation of the Merger or have, individually or in the
aggregate, a Material Adverse Effect on Company or, individually or in the
aggregate, a Material Adverse Effect on Central, shall have been obtained.
6.02. REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties made by the Company and the Stockholders contained in this Agreement
or in any written document (including the Exhibits and Schedules referred to
herein) delivered to Central pursuant hereto, shall be true and correct in all
material respects on and as of the date of Closing.
6.03. LEGAL OPINION. Central shall have been furnished with the
-------------
opinion of King & Spalding, counsel to the Company and the Stockholders, dated
as of the Closing, as to the matters set forth in Schedule II hereto.
22
<PAGE>
6.04. COVENANTS. The Company and the Stockholders shall have
---------
complied in all material respects with all of their respective obligations under
this Agreement which are required to be performed on or before the date of
Closing.
6.05. HSR WAITING PERIOD. The waiting period imposed by the HSR Act
------------------
shall have expired or been terminated.
6.06. ABSENCE OF STATUTES. There shall not be in effect any statute,
-------------------
rule or regulation which makes it illegal to consummate the transactions
contemplated herein or any order, decree or judgment which enjoins the
consummation of the transactions contemplated herein.
6.07. ABSENCE OF LITIGATION. No suit, action or other proceeding
---------------------
shall be pending or threatened before any court or governmental agency seeking
to restrain, to prohibit or to obtain material damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated herein, and there shall have been no investigation by a
governmental authority threatened or commenced in connection with this Agreement
or the transactions contemplated herein and this Agreement.
6.08. NO MATERIAL ADVERSE CHANGE. During the period from the date
--------------------------
hereof to the Closing there shall not have been any material adverse change in
the business, properties, financial position, results of operations or net worth
of the Company the Subsidiaries except for changes with an industrywide effect.
6.09. ANCILLARY AGREEMENTS. The Ancillary Agreements shall have been
--------------------
duly executed and delivered by the Company and the Stockholders, as the case may
be, except for the Seeds West Purchase Agreement which shall be executed
immediately following the Closing.
6.10. REPAYMENT OF LOANS. All loans from the Company or any
------------------
Subsidiary to stockholders or past or present employees shall have been repaid,
except for loans to non-Stockholder employees which in the aggregate do not
exceed $100,000.
6.11. OFFICER CERTIFICATE. Central shall have received a certificate
-------------------
dated the date of the Closing, signed by the President of the Company and the
Stockholders, respectively, to the effect that the representations and
warranties of the Company and the Stockholders set forth herein are true and
correct in all material respects on the date of Closing and that the Company and
the Stockholders have complied with Section 6.04 as of the date of Closing.
6.12. TAX OPINION. Central shall have been furnished with the
-----------
opinion of Orrick, Herrington & Sutcliffe LLP dated as of the Closing to the
effect that the Merger qualifies as a reorganization under Section 368(a)(2)(D)
of the Code.
6.13. OTHER TRANSACTIONS. The following transactions shall have been
------------------
consummated in a manner reasonably satisfactory to counsel for Central:
23
<PAGE>
(a) The Company shall have purchased all of the interest in Mid-
South, Inc., owned by the Estate for $842,000;
(b) The Company shall have transferred to one or more of the
Stockholders the 520 acre Saye timber farm and certain equipment located
thereon, the two parcels of land (Riverside and Creekside) constituting 750
acres known as the "Homeplace" and certain equipment located thereon, and the
Downtown Store Building;
(c) The Estate shall have transferred to the Company the
Greenfield, Missouri bird seed plant and surrounding property and certain
equipment located thereon, the vacant lots in Madison, Georgia and the seed
production packaging facility and storage barn in Madison, Georgia; and
(d) The Pennington Children's Partnership shall have transferred to
the Company the shop building and storage shed in Madison, Georgia.
6.14. DISSENTER'S RIGHTS. None of the Stockholders shall have
------------------
dissented to the transactions contemplated herein or will have refused to sign
the Agreement or any Ancillary Agreements.
6.15. PURCHASE OF PREFERRED STOCK. On or before the Closing, the
---------------------------
Company shall have repurchased the Preferred Stock for aggregate consideration
of $395,390.
6.16. CERTIFICATION OF NON-FOREIGN STATUS. Central shall have been
------------------------------------
furnished with a certificate from each Stockholder under penalty of perjury in
accordance with Section 1445(b) of the Code which provides the Stockholder's
taxpayer identification number and states that the Stockholder is not a foreign
person.
VII.
OTHER AGREEMENTS
In addition to the covenants and agreements contained elsewhere
herein, the parties hereto agree as follows:
7.01. ELECTION OF DIRECTOR. As of the date of the later of (i) the
--------------------
Closing or (ii) Central's 1998 Annual Meeting of Shareholders, Central shall
increase the size of its Board of Directors (the "Board") by one member. The
Board shall appoint Brooks Pennington III, the nominee of the Stockholders (the
"Stockholder Nominee"), to fill the vacancy created by the increase in the
number of directors and serve as a director of Central until the next annual
meeting of the shareholders of Central at which the Stockholder Nominee is due
for election and until his successor has been duly elected and qualified. At
each subsequent meeting of the shareholders at which the Stockholder Nominee is
due for election and the Stockholders or their Affiliates continue to own at
least 33% of the Shares of Central Common Stock to be issued to them in the
Merger, the Stockholder Nominee shall be included in the slate of nominees
recommended by the Board to the shareholders of Central for election as
directors, and Central shall undertake to cause
24
<PAGE>
the election of the Stockholder Nominee at such election. If the Stockholder
Nominee shall be unable or unwilling to serve as a nominee or a director for any
reason or, after appointment as a director of Central, ceases to be a director
by reason of death, disability or resignation, the Stockholders shall be
entitled to select a person to be included on the slate of nominees recommended
by the Board to the shareholders of Central or to fill the vacancy on the Board,
as the case may be. The covenant in this Section 7.01 shall terminate on the
fifth anniversary of the Closing.
7.02. FEES AND EXPENSES. Regardless of whether the transactions
-----------------
contemplated by this Agreement are consummated, each party shall pay all fees
and expenses incurred by such party in connection herewith; provided, however,
that in the event the Closing occurs, each party shall pay all fees and expenses
incurred by such party, except that (i) the Stockholders will pay the investment
banking fees of the Company in excess of $650,000 arising out of, relating to,
or incurred in connection with the transaction, (ii) the Company will pay all
other fees and expenses, excluding attorneys' fees, reasonably incurred by the
Company or the Stockholders (including fees and expenses of accountants) arising
out of, relating to, or incurred in connection with the transaction. Central
will pay the filing fees associated with the Hart-Scott-Rodino filings.
7.03. EMPLOYEE BENEFITS. Central shall take, and shall cause the
------------------
Surviving Corporation to take, the following actions: (i) waive any limitations
regarding pre-existing conditions under any welfare or other employee benefit
plan maintained by Central or the Surviving Corporation for the benefit of the
employees of the Company or any of the Subsidiaries ("Company Employees") or in
which Company Employees participate after the Effective Time, and grant credit
under such plans for payments made by Company Employees during the current plan
year for purposes of satisfying deductibles, coinsurance and maximum out-of-
pocket provisions for the current plan year, (ii) for purposes of compensation
and benefit plans and policies applicable to employees of Central or the
Surviving Corporation, treat all continuous and vested service by Company
Employees with the Company or any of the Subsidiaries before the Effective Time
as service with the Surviving Corporation and its subsidiaries.
7.04. EMPLOYEE BONUSES. Immediately following the Closing, the
----------------
Surviving Corporation shall pay to certain key employees of the Company listed
on Schedule 7.04 bonuses in the amount set forth after their respective names.
Such bonuses shall be paid 55% in cash and 45% in Central Common Stock which
shall have a value equal to the Average Central Trading Price (as hereinafter
defined). The stock to be received by such key employees will be restricted
stock and will vest in the name of such key employee 50% on the first
anniversary of the Closing and 50% on the second anniversary pursuant to an
agreement to be entered into between the Surviving Corporation and such key
employee.
7.05. EMPLOYEE STOCK OPTION. Within 60 days following the Closing,
---------------------
the Surviving Corporation shall issue to certain employees of the Company
designated by Brooks Pennington III options to purchase in the aggregate
148,000 shares of Central Common Stock.
25
<PAGE>
VIII.
TERMINATION
8.01. MUTUAL AGREEMENT. This Agreement may be abandoned or
----------------
terminated on or before the Closing by mutual agreement of Central and the
Company.
8.02. LAPSE OF TIME. If the Closing shall not have taken place on or
-------------
prior to February 27, 1998, this Agreement may be terminated by written notice
from Central to the Company or from the Company to Central.
8.03. DUE DILIGENCE INVESTIGATION
---------------------------
(a) If, during the 15 day period following the date hereof (but
prior to the Closing) Central learns of any information directly relating to
the Company (excluding any general industry or market conditions) that was not
previously known to Central and which has had or will result in a Material
Adverse Effect on the Company, then Central may terminate this Agreement by
notice to the Stockholders prior to the expiration of such 15 day period.
(b) If during, the 15 day period following the date hereof (but
prior to the Closing), the Stockholders and the Company learn of any
information directly relating to Central (excluding any general industry or
market conditions) that was not previously known to the Stockholders and the
Company and which has had or will result in a Material Adverse Effect on
Central, then the Stockholders and the Company may terminate this Agreement by
notice to Central prior to the expiration of such 15 day period.
8.04. EFFECT OF TERMINATION. If this Agreement is abandoned or
---------------------
terminated as provided in Sections 8.01, 8.02 or 8.03, it shall forthwith become
wholly void and of no effect, without liability of any party to the other
parties, and no party shall have the right to bring or maintain any action
hereunder; provided, however, that such abandonment or termination shall not
relieve any party of its liability for breach of its obligation to consummate
the transactions contemplated by this Agreement upon satisfaction or waiver of
the conditions precedent to such obligation.
IX.
THE MERGER; CLOSING
9.01. CERTIFICATE OF MERGER. As soon as possible following the
---------------------
execution of this Agreement and the satisfaction or waiver of the conditions set
forth herein, the Stockholders will approve the Certificate of Merger in the
form attached as Exhibit IV hereto (the "Certificate of Merger"), pursuant to
which Company shall merge into Merger Sub in accordance with the laws of the
States of Delaware and Georgia.
26
<PAGE>
9.02. CLOSING. The closing of the transactions contemplated herein
-------
(the "Closing") shall take place at the offices of King & Spalding in Atlanta,
Georgia or at such other place as is mutually agreed upon, on or before February
27, 1998, or as soon as reasonably practicable thereafter upon the satisfaction
or waiver of all conditions of Closing, unless this Agreement shall have been
terminated as herein provided. Each party agrees to use its or his reasonable
best efforts to cause the Closing to be consummated on or before February 27,
1998, and, to the extent not closed on such date, as soon as is reasonably
practicable thereafter.
9.03. DELIVERIES. (a) At the Closing, in exchange for Central
----------
Common Stock, the Stockholders shall deliver to Central the following:
(i) certificates representing all of the Shares registered
in the names of the Stockholders, together with duly executed stock
powers;
(ii) a statement from each of the Stockholders that, except
for any rights that may inure to such Stockholder under this Agreement or
any of the Ancillary Agreements, each such Stockholder either waives or
has no claim, as may be appropriate, against the Company for unpaid
dividends, bonuses, profit sharing or rights or other claims of
whatsoever kind, nature or description, except in the cases of the
stockholders who are officers and directors only salaries and fringe
benefits normally accrued and described in such statement; and
(iii) such investment representations as may be reasonably
required by Central to assure compliance of the transactions contemplated
hereby with the Securities Act of 1933.
(b) At the Closing, in exchange for the Shares from the
Stockholders, Central shall deliver to the Stockholders the following:
(i) certificates representing the shares of Central Common
Stock issuable pursuant to Section 9.10 hereto in exchange for the
Shares, together with the cash to be paid in lieu of fractional shares;
and
(ii) cash and other consideration payable pursuant to Section
9.10 hereto in exchange for the Shares.
9.04. BEST EFFORTS. Subject to the terms and conditions of this
------------
Agreement, each party agrees to use its or his reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, as soon as reasonably practicable, the
transactions contemplated by this Agreement; provided, however, that neither
Central nor Merger Sub shall have any obligation to agree to any material
condition to obtain expiration or termination of the waiting period under the
HSR Act.
9.05. SEPARATE EXISTENCE. At the Effective Time (as defined in
------------------
Section 9.06) and subject to and upon the terms and conditions of this Agreement
and Delaware and Georgia
27
<PAGE>
Law, the Company shall be merged with and into Merger Sub, the separate
corporate existence of the Company shall cease and the Subsidiary shall continue
as the surviving corporation. The subsidiary as the surviving corporation after
the Merger is sometimes referred to herein as the "Surviving Corporation."
9.06. EFFECTIVE TIME. As promptly as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Articles V and VI, the
parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger with the Secretary of State of the States of Delaware and
Georgia, executed in accordance with the relevant provisions of Delaware and
Georgia Law (the date and time of such filing being the "Effective Time").
9.07. EFFECT OF THE MERGER. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in the applicable provisions of Delaware and Georgia
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
9.08. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) At the Effective
-------------------------------------
Time the Certificate of Incorporation of Merger Sub, as in effect immediately
prior to the effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation.
(b) The By-Laws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by Delaware Corporation Law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
9.09. DIRECTORS AND OFFICERS. The directors of Merger Sub
----------------------
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
9.10. EFFECT ON CAPITAL STOCK. (a) Purchase Price. The purchase
----------------------- --------------
price to be paid by Central to the Stockholders shall be equal to $150,343,541
(such amount is equal to $150,000,000 plus $1,960,345 aggregate value of the
Regions Financial Corporation, Premier Bankshares, Inc. and Madison Bank
Corporation common stock owned by the Company reduced by (i) $395,390 to reflect
the purchase of the Preferred Stock by the Company from certain Stockholders,
(ii) $721,520 (the sum of the Stockholder Tax Liability (as hereinafter defined)
estimated by Central and the Stockholders), (iii) $324,894 to reflect the after-
tax cost of the bonuses paid pursuant to Section 7.04 and (iv) $175,000 (one-
half of the fees and expenses of the attorneys of the Company)). At the
Effective Time, by virtue of the Merger and without any action on the part of
Merger Sub, the Company or the Stockholders, such purchase price shall be paid
to the Stockholders in the manner set forth in Section 9.10(b).
28
<PAGE>
(b) Conversion of Company Common Stock. Each share of Common Stock
----------------------------------
issued and outstanding immediately prior to the Effective Time (other than any
shares of Common Stock to be cancelled pursuant to Section 9.10(c)) will be
converted automatically into (a) $81,610,758 in cash divided by 10,000 and (b)
that number of shares of Central Common Stock as is equal to the "Exchange
Ratio," which shall be determined in the manner provided below, upon surrender
of the certificate representing such share of Common Stock in the manner
provided elsewhere in this Article IX. In addition, each Stockholder shall
receive, as additional consideration for his or her Common Stock the number of
shares of Regions Financial Corporation, Premier Bankshares, Inc. and Madison
Bank Corporation common stock owned by the Company that is indicated beside such
Stockholder's name on Schedule 9.10.
(i) For purposes of this Agreement, the "Exchange Ratio" shall
be calculated as follows:
(1) if the Average Central Trading Price (as defined below)
is at least equal to $27.00 but not greater than $33.00, the Exchange
Ratio shall equal the quotient, calculated to the nearest one-one
thousandth of a share, of (A) $66,772,438 divided by (B) the product
of (i) the Average Central Trading Price multiplied by (ii) 10,000;
(2) if the Average Central Trading Price is greater than
$33.00, then the Exchange Ratio shall equal the quotient, calculated
to the nearest one-one thousandth of a share, of (A) $66,772,438
divided by (B) the product of (i) $33.00 multiplied by (ii) 10,000; or
(3) if the Average Central Trading Price is less than
$27.00, then the Exchange Ratio shall equal the quotient, calculated
to the nearest one-one thousandth of a share, of (A) $66,772,438
divided by (B) the product of (i) $27.00 multiplied by (ii) 10,000.
(ii) As used in this Agreement, the term "Average Central Trading
Price" shall mean the arithmetic mean, calculated to the nearest one-one
thousandth of a share, of the average daily high and low prices per share
of Central Common Stock on the NASDAQ/National Market System for each of
(a) ten most recent days that shares of Central Common Stock have traded
thereon ending on the trading day immediately prior to the date hereof and
(b) the ten most recent days that shares of Central Common Stock have
traded thereon ending on the trading day immediately preceding the last
business day before the Effective Time. In the event that there are less
than ten trading days between the date prior to the date hereof and the
trading day immediately preceding the last business day before the
Effective Time, such lesser number of days, together with the ten trading
days prior to the date hereof, shall be used in calculating the Average
Central Trading Price.
(c) Cancellation of Treasury Stock. Each share of Common Stock held
------------------------------
in the treasury of the Company immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof.
29
<PAGE>
(d) Capital Stock of Merger Sub. Each share of common stock of
---------------------------
Merger Sub issued and outstanding immediately prior to the Effective Time
shall remain outstanding and be unaffected by the transactions contemplated
hereby. Each stock certificate of Merger Sub evidencing ownership of any such
shares shall continue to evidence ownership of such shares of capital stock of
the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Central Common Stock or Common Stock), reorganization, recapitalization or other
like change with respect to Central Common Stock or Company Common Stock
occurring after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Central Common
-----------------
Stock will be issued, but in lieu thereof each holder of shares of Common
Stock who would otherwise be entitled to a fraction of a share of Central
Common Stock (after aggregating all fractional shares of Central Common Stock
to be received by such holder) shall receive from Central an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction
multiplied by (ii) the Average Central Trading Price.
X.
INDEMNIFICATION
10.01. STOCKHOLDER INDEMNITY. (a) Except as provided in Section
---------------------
10.01(b), the Stockholders shall jointly and severally indemnify, defend and
hold harmless on an after-tax basis Central and Merger Sub and their successors
and assigns and its and their respective officers, directors, shareholders,
employees, agents and representatives (the "Central Indemnified Parties")
against, and in respect of, any and all damages, claims, losses, liabilities and
expenses, including, without limitation, reasonable legal, accounting and other
expenses, which may arise out of: (i) any breach or violation of any covenant
in this Agreement by the Company or the Stockholders or (ii) any breach of any
of the representations, warranties or covenants made in this Agreement by the
Company or the Stockholders, except for representations, warranties and
covenants contained in Article II and Section 4.01(h) (collectively, "Direct
Losses").
(b) Each of the Stockholders shall individually indemnify,
defend and hold harmless, on an after-tax basis, the Central Indemnified
Parties against, and in respect of, any and all damages, claims, losses
liabilities and expenses, including, without limitation, reasonably legal,
accounting and other expenses, which may arise out of any breach by such
individual Stockholder of any of the representations, warranties and covenants
contained in Article II and Section 4.01 ("Article II Losses") (the Article II
Losses together with the damages, claims, losses, liabilities and expenses
referred to in paragraph (a) above, "Central Losses").
(c) The Central Indemnified Parties shall be entitled to
indemnification pursuant to this Section 10.01 only to the extent that the
aggregate of all Central Losses incurred
30
<PAGE>
by the Central Indemnified Parties exceeds $2,500,000 (plus, any reserves for
particular items established on the Company's balance sheet consistent with past
practice).
(d) The Stockholders may satisfy, pay or otherwise discharge up
to 45% of their indemnification obligation pursuant to this Section 10.01
through the delivery of the shares of Central Common Stock acquired by them in
the Merger (the value of Central Common Stock for purposes of satisfying such
obligation would be deemed to equal the average during the twenty trading days
immediately preceding the last business day before the satisfaction of such
obligation of the average daily high and low prices per share of Central
Common Stock).
10.02. CENTRAL INDEMNITY. Central and Merger Sub shall jointly and
-----------------
severally indemnify, defend and hold harmless on an after-tax basis the
Stockholders against, and in respect of, any and all damages, claims, losses,
liabilities and expenses, including, without limitation, reasonable legal,
accounting and other expenses, which may arise out of: (i) any breach or
violation of this Agreement by Central or (ii) any breach of any of the
representations, warranties or covenants made in this Agreement by Central
(collectively, "Stockholder Losses"); provided however, that the Stockholders
shall be entitled to indemnification hereunder only if the aggregate of all such
Stockholder Losses incurred by the Stockholders exceeds $2,500,000.
10.03. SPECIAL STOCKHOLDER INDEMNITY. The Stockholders shall jointly
-----------------------------
and severally indemnify, defend and hold harmless on an after-tax basis the
Central Indemnified Parties, without regard to the limitations set forth in
Section 10.01 hereof, against any and all tax liabilities of any kind imposed on
the Company, or the Central Indemnified Parties, related directly or indirectly
to the distribution by the Company to the Stockholders of the Regions Financial
Corporation, Premier Bankshares, Inc. and Madison Bank Corporation common stock
owned by the Company (the "Stockholder Tax Liability") in excess of $721,520
(which amount represents an estimate of the federal and state income liability
to the Company resulting from such distribution and is reducing the purchase
price under Section 9.10), including without limitation, reasonable legal,
accounting and other expenses incurred by the Company or Central Indemnified
Parties in order to minimize the amount of such tax liabilities. In the event
that the aggregate value used (i.e., $1,960,345) to calculate the estimated
----
federal and state income tax liability of the Company for the distribution of
the Regions Financial Corporation, Premier Bankshares, Inc. and Madison Bank
Corporation common stock to the Stockholders is subsequently reduced as a result
of an administrative or other tax proceeding of the Company, Central shall pay
to the Stockholders an amount equal to 39% of such reduction; provided, however,
that the aggregate amount of any such payments by Central shall not exceed
$729,523.
10.04. CEILING. In no event shall the aggregate liabilities of
-------
Central to the Stockholders or the Stockholders to the Central Indemnified
Parties pursuant to this Article X exceed the aggregate amount of $30,000,000.
10.05. ORLANDO PROPERTY INDEMNIFICATION. Notwithstanding any
--------------------------------
limitations set forth in Sections 10.01 or 10.04, the Stockholders shall jointly
and severally indemnify, defend and hold harmless on an after-tax basis the
Central Indemnified Parties against any and all damages, claims, losses,
liabilities and expenses, including, without limitation, reasonable legal,
accounting and other expenses, relating to the environment or public health
resulting, in whole or
31
<PAGE>
in part, from the use or operation of the facility owned by the Estate in
Orlando, Florida by the Company prior to the Closing.
10.06. NOTICE. Upon obtaining knowledge thereof, the indemnified
------
party shall promptly notify the indemnifying party in writing of any damage,
claim, loss, liability or expense which the indemnified party has determined has
given or could give rise to a claim under Sections 10.01, 10.02 or 10.03 (such
written notice being hereinafter referred to as a "Notice of Claim"); provided,
however, that the failure to so notify shall not relieve the indemnifying party
from liability for such claim arising otherwise than under this Agreement and
such failure to so notify the indemnifying party shall relieve the indemnifying
party from liability under this Agreement with respect to such matter only if,
and only to the extent that, such failure to notify the indemnifying party
results in the forfeiture by the indemnifying party of rights and defenses
otherwise available to the indemnifying party with respect to such matter. A
Notice of Claim shall contain a brief description of the nature and estimated
amount of any such claim giving rise to a right of indemnification. As promptly
as possible after the indemnified party has given such Notice of Claim, such
indemnified party and the appropriate indemnifying party shall establish the
merits and amount of such claim (by mutual agreement, litigation, arbitration or
otherwise) and, within five business days of the final determination of the
merits and amount of such claim, the indemnifying party shall pay to the
indemnified party immediately available funds (or, if applicable, shall provide
notice to the escrow agent regarding disbursement of the appropriate portion of
the escrow fund) in an amount equal to such claim as determined hereunder.
10.07. RIGHT TO DEFEND.
---------------
(a) The indemnifying party shall have the right, upon written
notice delivered to the indemnified party within twenty (20) days after
receipt of a Notice of Claim, to assume the defense of such matter set forth
in such Notice of Claim, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of the fees and
disbursements of such counsel. In the event, however, that the indemnifying
party declines or fails to assume the defense of the matter or to employ
counsel reasonably satisfactory to the indemnified party, in either case
within such twenty (20) day period, then such indemnified party may employ
counsel to represent or defend it in any such action or proceeding and the
indemnifying party shall pay the reasonable fees and disbursements of such
counsel as incurred; provided, however, that the indemnifying party shall not
be required to pay the fees and disbursements of more than one counsel for all
indemnified parties in any jurisdiction in any single action or proceeding. In
any action or proceeding with respect to which indemnification is being sought
hereunder, the indemnified party or the indemnifying party, whichever is not
assuming the defense of such action, shall have the right to participate in
such matter and to retain its own counsel at such party's own expense. The
indemnifying party or the indemnified party, as the case may be, shall at all
times use reasonable efforts to keep the indemnifying party or the indemnified
party, as the case may be, reasonably apprised of the status of the defense of
any action the defense of which they are maintaining and to cooperate in good
faith with each other with respect to the defense of any such action.
(b) No indemnified party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without
32
<PAGE>
the prior written consent of the indemnifying party, unless (i) the indemnifying
party fails to assume and maintain the defense of such claim pursuant to this
Article X, or (ii) such settlement, compromise or consent includes an
unconditional release of the indemnifying party from all liability arising out
of such claim. An indemnifying party may not, without the prior written consent
of the indemnified party, settle or compromise any claim or consent to the entry
of any judgment with respect to which indemnification is being sought hereunder
unless such settlement, compromise or consent includes an unconditional release
of the indemnified party from all liability arising out of such claim and does
not contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the indemnified party or any of the
indemnified party's respective affiliates.
10.08. TIME TO ASSERT CLAIM. Except as hereinafter provided in this
--------------------
Section 10.08 to the contrary, any claim for indemnification by a Central
Indemnified Party or the Stockholders under this Article X shall be asserted by
written notice to the Stockholders or to Central, as the case may be, on or
before eighteen months following the date of the Closing (the "Indemnification
Termination Date"). Any matters as to which a claim has been asserted under
this Article X on or before the Indemnification Termination Date and which are
pending or unresolved as of the Indemnification Termination Date shall continue
to be covered by this Article X until finally terminated or resolved; provided,
however, notwithstanding the foregoing, the time limitation contained in the
preceding sentence shall not be applicable with respect to a claim for
indemnification based upon the breach or inaccuracy of a representation or
warranty contained in Sections 1.03, 1.15, 2.01, 2.02, 3.03 and 3.06 or based
upon a claim under Section 10.03; and provided, further, the Indemnification
Termination Date for claims for indemnification relating to the breach or
inaccuracy of the representation and warranty contained in Section 1.26 shall be
five years following the date of the Closing; and provided further that the
Indemnification Termination Date for claims for indemnification relating to the
breach or inaccuracy of any representation or warranty contained in Sections
1.07, 1.28, 1.29, 1.30, or 10.05 shall be the expiration of the applicable
statute of limitations with respect to the underlying liability for which
indemnification is sought.
10.09. SOLE REMEDY. The indemnification provided for in this Article
-----------
X constitutes the sole remedy available to any party for claims arising out of
the transactions contemplated by this Agreement.
XI.
GENERAL
11.01. SHAREHOLDER REPRESENTATIVE. By the execution and delivery of
--------------------------
this Agreement, including counterparts hereof, each Stockholder hereby
irrevocably constitutes and appoints Brooks Pennington III as the true and
lawful agent and attorney-in-fact (referred to in this Agreement as the
"Representative") of such Stockholder with full powers of substitution to act in
the name, place and stead of such Stockholder with respect to the performance on
behalf of such Stockholder under the terms and provisions of this Agreement, as
the same may be from time to time amended, and to do or refrain from doing all
such further acts and things, and to execute all such documents, as the
Representative shall deem necessary or appropriate in
33
<PAGE>
connection with any of the transactions contemplated under this Agreement,
including without limitation the power:
(i) to receive, hold and deliver to Central any of the
certificates representing the Shares and any other documents relating
thereto on behalf of such Stockholder;
(ii) to receive on behalf of such Stockholder any shares of
Central Common Stock issued or cash paid to such Stockholder pursuant to
this Agreement;
(iii) to execute and deliver all Ancillary Agreements,
certificates, and documents which the Representative deems necessary or
appropriate in connection with the consummation of the transactions
contemplated by the terms and provisions of this Agreement;
(iv) to act for such Stockholder with respect to all
indemnification matters referred to in this Agreement, including the right
to compromise or settle any such claims on behalf of such Stockholder;
(v) to amend or waive any provision of this Agreement
(including any condition to Closing) in any manner which does not
differentiate among the Stockholders;
(vi) to employ and obtain the advice of legal counsel,
accountants and other professional advisors as the Representative, in his
sole discretion, deems necessary or advisable in the performance of his
duties as Representative and to rely on their advice and counsel;
(vii) to incur any expenses, to liquidate and withhold assets
received on behalf of the Stockholders prior to their distribution to the
Stockholders to the extent of any amount which the Representative deems
necessary for payment of or as a reserve against expenses, and to pay such
expenses or to deposit the same in an interest-bearing bank account
established for such purpose;
(viii) to receive all notices, communications and deliveries
hereunder on behalf of such Stockholder under this Agreement; and
(ix) to do or refrain from doing any further act or deed on
behalf of such Stockholder which the Representative deems necessary or
appropriate in his sole discretion relating to the subject matter of this
Agreement as fully and completely as any of the Stockholders could do if
personally present and acting and as though any reference to a Stockholder
or the Stockholders in this Agreement were a reference to the
Representative.
The appointment of the Representative shall be deemed coupled with an
interest and shall be irrevocable, and Central and any other person may
conclusively and absolutely rely, without inquiry, upon any action of the
Representative as the act of the Stockholders in all
34
<PAGE>
matters referred to in this Agreement. Each Stockholder hereby ratifies and
confirms all that the Representative shall do or cause to be done by virtue of
his appointment as Representative of such Stockholder. The Representative shall
act for the Stockholders on all of the matters set forth in this Agreement in
the manner the Representative believes to be in the best interest of the
Stockholders, but the Representative shall not be responsible to any Stockholder
for any loss or damage any Stockholder may suffer by reason of the performance
by the Representative of his duties under this Agreement, other than loss or
damage arising from willful misconduct in the performance of his duties under
this Agreement.
Each of the Stockholders hereby expressly acknowledges and agrees that
the Representative is authorized to act on behalf of such Stockholder
notwithstanding any dispute or disagreement among the Stockholders, and that
Central shall be entitled to rely on any and all action taken by the
Representative under this Agreement without liability to, or obligation to
inquire of, any of the Stockholders. If the Representative resigns or ceases to
function in such capacity for any reason whatsoever, then the Stockholder which
held a majority of the Shares on the date hereof shall appoint a successor;
provided, however, that if for any reason no successor has been appointed within
thirty (30) days, then any Stockholder shall have the right to petition a court
of competent jurisdiction for appointment of a successor. The Stockholders do
hereby jointly and severally agree to indemnify and hold the Representative
harmless from and against any and all liability, loss, cost, damage or expense
(including without limitation attorneys' fees) reasonably incurred or suffered
as a result of the performance of its duties under this Agreement except for
willful misconduct.
11.02. ENTIRE AGREEMENT. This Agreement (including the Exhibits and
----------------
Schedules referred to herein) constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
implied or be binding (including, without limitation, any alleged waiver based
on a party's knowledge of a breach or inaccuracy in a representation or warranty
contained herein) unless in writing and signed by the party against which such
amendment, supplement, modification, waiver or termination is asserted.
11.03. ASSIGNMENT. All of the terms and provisions of this Agreement
----------
by or for the benefit of the parties shall be binding upon and inure to the
benefit of their successors, assigns, heirs and personal representatives. The
rights and obligations provided by this Agreement shall not be assignable,
except, by Central and Merger Sub to a subsidiary or an affiliate or to a
successor to its business, and, except as expressly provided herein, nothing
herein is intended to confer upon any person other than the parties and their
successors, any right or remedy under or by reason of this Agreement; provided,
however, that any assignment of this Agreement by Central or Merger Sub shall
not relieve or release Central or Merger Sub from its obligations to keep and be
bound by the terms, conditions and covenants of this Agreement.
35
<PAGE>
11.04. NO THIRD-PARTY BENEFICIARIES. Except for the rights to
----------------------------
indemnification set forth in Article X hereof, this Agreement will not confer
any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
11.05. WAIVERS. No waiver by any party of any default,
-------
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence, and
no waiver will be effective unless set forth in writing and signed by the party
against whom such waiver is asserted.
11.06. GOVERNMENTAL LAW. This Agreement shall be construed,
----------------
interpreted and the rights of the parties determined in accordance with the laws
of the State of Georgia
11.07. COUNTERPARTS. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same agreement.
11.08. NOTICES. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given (except as may otherwise be specifically provided herein to the
contrary) if delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed or mailed by certified or
registered mail with postage prepaid:
(a) If to Central or Central Garden & Pet Company
Subsidiary to: 3697 Mt. Diablo Boulevard
Lafayette, CA 94107-0933
Attention: William E. Brown
with a copy to: Orrick, Herrington & Sutcliffe LLP
The Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Attention: John F. Seegal
(b) If to Stock- Brooks Pennington III
holders to: as Representative of the Stockholders
Pennington Seed, Inc.
1280 Atlanta Highway
Madison, Georgia 30650
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Michael J. Egan III
36
<PAGE>
Brooks Pennington III
Pennington Seed, Inc.
1280 Atlanta Highway
Madison, Georgia 30650
(c) If to the Pennington Seed, Inc.
Company to: 1280 Atlanta Highway
Madison, Georgia 30650
With a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Michael J. Egan III
37
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
PENNINGTON SEED, INC.
By: /s/ Brooks Pennington III
---------------------------
Brooks Pennington III
President
CENTRAL GARDEN & PET COMPANY
By: /s/ Neill J. Hines
--------------------
PS SUB, INC
By: /s/ Neill J. Hines
--------------------
THE STOCKHOLDERS
Pennington Partners, L.P.
By: Pennington Management Company LLC
as General Partner
By: /s/ Brooks Pennington III
---------------------------
Brooks Pennington III
President
/s/ Brooks Pennington III
-------------------------
Brooks M. Pennington III, Trustee under the
Trust Agreement of Jacquelyn C. Pennington
dated January 29, 1998
38
<PAGE>
/s/ Brooks Pennington III
-------------------------
Brooks Pennington III
/s/ Penny O'Callaghan
---------------------
Penny O'Callaghan
/s/ Robert Pennington
---------------------
Robert Pennington
/s/ Dan Pennington
------------------
W. Dan Pennington
Ben O'Callaghan, Jr. (Deceased)
By: /s/ Penny O'Callaghan
---------------------
Penny O'Callaghan as executrix of
the estate of Ben O'Callaghan, Jr.
Christian Pennington, a minor
By: /s/ Brooks Pennington III
-------------------------
Name: Brooks Pennington III Guardian
--------------------- ---------
W. Dan Pennington, Jr., a minor
By: /s/ Dan Pennington
------------------
Name: Dan Pennington "Guardian"
---------------------------
Brooks Pennington IV, a minor
By: /s/ Brooks Pennington III
-------------------------
Name: Brooks Pennington III Guardian
--------------------- ---------
Jacquelyn B. O'Callaghan, a minor
By: /s/ Penny O'Callaghan, guardian
-------------------------------
39
<PAGE>
Name:
-------------------------------
Ben O'Callaghan, III, a minor
By: /s/ Penny O'Callaghan, guardian
-------------------------------
Name:
------------------------------
Robert Pennington, Jr., a minor
By: /s/ Robert Pennington guardian
------------------------------
Name:
------------------------------
Mary Lucile Pennington, a minor
By: /s/ Robert Pennington guardian
------------------------------
Name:
------------------------------
Partricia C. Pennington
-----------------------
Patricia Pennington
40
<PAGE>
Exhibit 99.2
AMENDMENT NO. 1 TO AGREEMENT
AND PLAN OF REORGANIZATION
This Amendment No. 1 (this "Amendment") to the Agreement and Plan of
Reorganization dated as of February 17, 1998 (the "Agreement"), among Central
Garden & Pet Company, a Delaware corporation ("Central"), PS Sub., Inc., a
Delaware corporation and a wholly-owned subsidiary of Central ("Merger Sub"),
Pennington Seed, Inc., a Georgia corporation (the "Company"), and the persons
and entities who own all of the stock of the Company ("Stockholders") is dated
as of February 27, 1998.
NOW, THEREFORE, in consideration of the agreements hereinafter set
forth the parties hereto agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
-----------
specifically defined herein, have the meanings given to them in the Agreement.
2. Amendments. Notwithstanding anything to the contrary contained in
----------
the Agreement, the parties hereby agree to the following amendments to the
Agreement:
2.1 Section 3.05(c) shall be deleted in its entirety.
2.2 Section 9.10 is hereby amended by adding the following at the
end of paragraph (a):
"Central will deliver to the Stockholders shares ("Restricted Shares")
of Central Common Stock which have not been registered under the
Securities Act in satisfaction of its obligation to deliver Central
Common Stock pursuant to Section 9.10 of the Agreement."
2.3 Section 4.02 shall be amended by adding the following:
"(f) Secondary Shelf. Within seven days of the Effective Time,
---------------
Central will file a Shelf Registration Statement on Form S-3 with the
Securities and Exchange Commission (the "Registration Statement")
registering all of the Restricted Shares to facilitate the sale of the
Restricted Shares by the Stockholders in the secondary market. Central
will use its best efforts to keep the Registration Statement effective
until the expiration of 12 months from the Effective Time."
1
<PAGE>
2.4 Article II is hereby amended by adding the following:
"2.04 Securities Act: The Stockholders each acknowledge and
--------------
understand that the offering and sale of the Restricted Shares
pursuant to the Merger are intended to be exempt from registration
under the Securities Act by virtue of Section 4(2) thereof and the
provisions of Regulation D promulgated thereunder and, therefore,
cannot be resold unless they are registered under the Securities Act
or unless an exemption from registration is available.
2.05 Investment Representation. The Stockholders are acquiring the
-------------------------
Restricted Shares to be issued in the Merger for investment purposes
and not with a view to distribution and have been afforded an
opportunity to review the annual reports, proxy statements and reports
on Forms 8-K, 10-K and 10-Q of Central filed under the Exchange Act
since January 1, 1997.
2.06 Plan or Intention. There is no plan or intention by the
-----------------
Stockholders to sell, exchange or otherwise dispose of the Restricted
Shares received by them in the transactions contemplated hereby.
2.07 Financial Ability. Such Stockholder has the financial ability
-----------------
to bear the economic risk for this investment, has adequate means for
providing for its current needs and contingencies and has no need for
liquidity with respect to the investment in such Restricted Shares.
2.08 Accredited Investor. Such Stockholder is an "accredited
-------------------
investor" as that term is defined in Rule 501(a) of Regulation D under
the Securities Act.
2.09 Knowledge and Experience. Such Stockholder has such knowledge
------------------------
and experience in financial and business matters as to be capable of
evaluating the merits and risks of an acquisition of such Restricted
Shares and of making an informed investment decision with respect
thereto."
2
<PAGE>
2.5 Section 4.02(e) is hereby deleted in its entirety and amended
to read as follows:
"Form 8-K. Following the Closing, Central shall file a Form 8-K under
--------
the Exchange Act with the SEC in compliance with the Securities Act
and the Exchange Act and the rules and regulations promulgated
thereunder."
PENNINGTON SEED, INC.
By: /s/ Brooks Pennington III
---------------------------------------------
Brooks Pennington III
President
CENTRAL GARDEN & PET COMPANY
By: /s/ Robert B. Jones
----------------------------------------------
PS SUB, INC
By: /s/ Robert B. Jones
--------------------------------------------
3
<PAGE>
THE SHAREHOLDERS
Pennington Partners, L.P.
By: Pennington Management Company LLC
as General Partner
By: /s/ Brooks Pennington III
--------------------------------
Brooks Pennington III
President
/s/ Brooks Pennington III
-------------------------------------------------
Brooks M. Pennington III, Trustee under the Trust
Agreement of Jacquelyn C. Pennington dated
January 29, 1998
/s/ Brooks Pennington III
-------------------------------------------------
Brooks Pennington III
Penny O'Callaghan
By: *
-------------------------------------------
Name:
------------------------------------------
Robert Pennington
By: *
------------------------------------------
Name:
------------------------------------------
W. Dan Pennington
By: *
------------------------------------------
Name:
------------------------------------------
Ben O'Callaghan, Jr. (Deceased)
By: *
------------------------------------------
Name:
------------------------------------------
Christian Pennington, a minor
By: *
------------------------------------------
Name:
------------------------------------------
4
<PAGE>
W. Dan Pennington, Jr., a minor
By: *
------------------------------------------
Name:
------------------------------------------
Brooks Pennington IV, a minor
By: *
------------------------------------------
Name:
------------------------------------------
Jacquelyn B. O'Callaghan, a minor
By: *
------------------------------------------
Name:
------------------------------------------
Ben O'Callaghan, III, a minor
By: *
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Name:
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Robert Pennington, Jr., a minor
By: *
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Name:
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Mary Lucile Pennington, a minor
By: *
------------------------------------------
Name:
------------------------------------------
Patricia Pennington
By: *
------------------------------------------
Name:
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*By: /s/ Brooks Pennington III
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Brooks Pennington III, as Attorney-in-Fact
pursuant to Section 11.01 of the Agreement
5
<PAGE>
EXHIBIT 99.3
STOCKHOLDER VOTING AGREEMENT
THIS STOCKHOLDER VOTING AGREEMENT dated as of February 27, 1998, by and
between the Stockholders of Central Garden & Pet Company, a Delaware corporation
("Central"), identified on Schedule I hereto (the "Pennington Stockholders"),
and William E. Brown, an individual ("Brown").
WHEREAS, Brown is the beneficial owner of approximately 1,606,359 shares of
Class B stock, par value $.01 per share, of Central ("Class B Shares");
WHEREAS, Central, the Pennington Stockholders, Pennington Seed, Inc., a
Georgia corporation ("PSI"), and PS Sub, Inc., a Delaware corporation and wholly
owned subsidiary of Central ("Merger Sub"), have entered into an Agreement and
Plan of Reorganization dated as of February 17, 1998 (the "Merger Agreement"),
which provides for the merger of PSI with and into Merger Sub;
WHEREAS, as a condition to the willingness of the Pennington Stockholders
to consummate the transactions contemplated by the Merger Agreement, Central
agreed to place a nominee of the Pennington Stockholders on the Board of
Directors of Central (the "Board") and Brown agreed to vote all Class B Shares
and all shares of common stock of Central, par value $.01 per share ("Central
Common Stock," together with the Class B Shares, "Central Stock"), owned by
Brown as of the date hereof and any such shares of Common Stock of Central
acquired by Brown after the date hereof (the "Shares") as provided in this
Agreement;
NOW THEREFORE, the parties hereby agree as follows:
1. Board of Directors. During the term of this Agreement as set forth in
------------------
Section 9 Brown shall (i) take all action necessary to nominate for election to
the Board and vote his Shares at any annual or special meeting of stockholders
at which directors are being elected for the nominee of the Pennington
Stockholders (the "Pennington Nominee") and (ii) take action necessary to
prevent and vote his Shares against at any annual or special meeting any
proposals designed to remove or replace the Pennington Nominee on the Board.
The Pennington Nominee shall be selected by a majority vote of the Pennington
Stockholders, determined on the basis of their respective ownership interests in
the Central Common Stock.
2. Representations, Warranties and Covenants of Brown. Brown represents
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and warrants to, and agrees with, the Pennington Stockholders that:
(a) this Agreement has been duly executed and delivered by Brown and
constitutes a valid and legally binding obligation of Brown
enforceable in accordance with its terms;
(b) he is not subject to, or obligated under any provisions of, (i)
any contract, (ii) any license, franchise or permit or (iii) any law,
regulation, order, judgment or
<PAGE>
decree that would be breached or violated by the execution, delivery
and performance of this Agreement;
(c) no authorization, consent or approval of, or any filing with, any
public body or authority is necessary for Brown's performance of this
Agreement;
(d) he has the unrestricted power to vote the Shares.
3. Amendment. This Agreement may not be modified, amended, altered or
---------
supplemented except upon the execution and delivery of a written agreement
executed by the Pennington Stockholders and Brown.
4. Assignment. This Agreement shall be binding upon, inure to the benefit
----------
of, and be enforceable by the heirs, personal representatives, successors and
permitted assigns of the parties hereto. Nothing expressed or referred to in
this Agreement is intended or shall be construed to give any person other than
the parties of this Agreement, or their respective heirs, personal
representatives, successors or assigns, any legal or equitable right, remedy or
claim under or in respect to this Agreement or any provision contained herein.
The rights and obligations provided by this Agreement shall not be assignable
except through the prior written consent of the other party hereto.
5. Governing Law. This Agreement shall be construed, interpreted and the
-------------
rights of the parties determined in accordance with the laws of the State of
Delaware.
6. Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given
(except as may otherwise be specifically provided herein to the contrary) if
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed or mailed by certified or registered mail
with postage prepaid:
If to Brown: Central Garden & Pet Company
3697 Mt. Diablo Boulevard
Lafayette, California 94107-0933
Attention: William E. Brown
with a copy to: Orrick, Herrington & Sutcliffe LLP
The Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
Attention: John F. Seegal
2
<PAGE>
If to the Pennington
Stockholders: Pennington Seed, Inc.
1280 Atlanta Highway
Madison, Georgia 30650
Attention: Brooks Pennington III
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Michael J. Egan III
8. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto with respect to the subject matter hereof.
9. Termination. This Agreement shall become effective upon execution by
-----------
the parties hereto and cease and terminate and have no further force or effect
on the earlier of (i) the date as of which the Pennington Stockholders own of
record less than 33% of the shares of Central Common Stock issued to them
pursuant to the Merger Agreement or (ii) the date which is five years from the
date of this Agreement.
10. Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
11. Further Assurances. Brown will, upon the reasonable request of the
------------------
Pennington Stockholders, execute and deliver such documents and take such action
deemed by the Pennington Stockholders to be necessary or desirable to effectuate
the purposes of this Agreement.
12. Remedies. Brown agrees that, for any violation of this Agreement, the
--------
Pennington Stockholders shall have the option, in addition to any remedies
available at law, of seeking equitable relief in any court of competent
jurisdiction to require that Brown comply with the terms of this Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE PENNINGTON STOCKHOLDERS
By: /s/ Brooks Pennington III
-------------------------
Name: Brooks Pennington, III
Title: As attorney-in-fact for the
Stockholders pursuant to Section
11.01 of the Merger Agreement
WILLIAM E. BROWN
/s/ William E. Brown
------------------------
4
