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SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
[ ] Preliminary Information Statement [_] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
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GREAT PINES WATER COMPANY, INC.
(Name of Registrant as specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which the transaction applies:
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Common shares, $.01 per share par value, of Great Pines Water Company, Inc. ("Great Pines Common Stock")
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(2) Aggregate number of securities to which the transaction applies:
Common Shares
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(3) Per unit price or other underlying value of the transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
One-fiftieth of one percent of $5,155,501 ($5,155,501 is the product of (1) the
average of the high and low prices of Great Pines Common Stock quoted on the
Nasdaq Over-the-Counter Electronic Bulletin Board on April 1, 1999 ($5.90625)
and (2) the total number of outstanding shares of Great Pines Common Stock to be
received in the transaction (872,889)).
(4) Proposed maximum aggregate value of transaction: $5,155,501
(5) Total fee paid: $ 1,032
[X] Fee paid previously with preliminary materials.
[_] Check Box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------
(3) Filing Party:
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(4) Date Filed:
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GREAT PINES WATER COMPANY, INC.
600 N. SHEPHERD, SUITE #303
HOUSTON, TEXAS 77007
(713) 864-6688
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 4, 1999
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of Great
Pines Water Company, Inc. (the "Company") will be held on June 4, 1999 at
10:00 a.m. (Central Standard Time) at Great Pines Water Company, Inc., 600 N.
Shepherd, Suite #303, Houston, Texas 77007 for the following purposes (such
meeting, including any adjournment or postponement thereof, the "Special
Meeting"):
1. To consider and vote upon a proposal to approve an Agreement and Plan
of Merger (the "Merger Agreement") dated as of April 1, 1999 among
Suntory Water Group, Inc., a Delaware corporation ("Suntory"), Suntory
Acquisition Corp., a Texas corporation and a wholly owned subsidiary
of Suntory ("Merger Sub"), and the Company pursuant to which (i)
Merger Sub will merge with and into the Company (the "Merger") with
the Company being the surviving corporation, (ii) each issued and
outstanding share of common stock of the Company, par value $.01 per
share (the "Shares"), other than Shares owned by Suntory, Merger Sub,
the Company or any of their respective subsidiaries or held in the
Company's treasury and Shares as to which the holders thereof have
exercised their dissenters' rights under Texas law, will be converted
into the right to receive $5.87 in cash, without interest, plus a
portion of the net proceeds, if any, received by the Company from a
trust established to hold a lawsuit involving the Company, (iii) each
outstanding option to purchase Shares will be converted into the right
to receive an amount in cash equal to the excess, if any, of $5.87
plus a portion of said net proceeds, if any, over the exercise price
of the option multiplied by the number of Shares subject to the
option; and (iv) the issued and outstanding shares of common stock of
Merger Sub will be converted into shares of common stock of the
Company; and
2. To consider and act on any matters incidental to the foregoing and to
transact such other business as may properly come before the Special
Meeting.
For a description of the calculation of said net proceeds, and the portion
thereof to be received by shareholders and optionholders, if any, see "THE
MERGER--LITIGATION TRUST" in the accompanying Information Statement and the
Litigation Trust Agreement attached as Exhibit B to the Merger Agreement, which
is attached to the Information Statement as Annex A, and the Merger Agreement.
The Board of Directors has fixed the close of business on May 19, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Special Meeting. The stock transfer book of the Company will not
be closed for purposes of determining shareholders of record.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER AGREEMENT IS
IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY
RECOMMENDS A VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
If the Merger Agreement is approved by the shareholders of the Company and
the Merger is consummated, shareholders will have certain rights to dissent and
demand the appraisal of, and the payment in cash at the "fair value" of, their
Shares pursuant to the Texas Business Corporation Act, provided that such
dissenting holders comply with the appropriate procedures for appraisal rights
required by such Act. In order to exercise those rights, among other
requirements, a shareholder must file, prior to the Special Meeting, a written
objection to the Merger stating that the shareholder's right to dissent will be
exercised and giving the shareholder's address to which notice of the approval
of the Merger can be delivered or mailed in such event. For a more complete
description of such rights, duties and procedures, see "THE MERGER -- RIGHTS OF
DISSENTING SHAREHOLDERS" in the accompanying Information Statement.
Please carefully read the enclosed Information Statement, which provides
you with a summary of the terms of the proposed Merger and the Merger Agreement,
which is attached to the Information Statement as Annex A.
The affirmative vote of holders of at least two-thirds of the outstanding
Shares entitled to vote thereon present in person or represented by proxy at the
Special Meeting is required to approve the proposed Merger. Suntory owns, or on
exercise of options it holds to purchase Shares, will own, at least two-thirds
of the Shares entitled to vote at the Special Meeting. As a result, the Company
anticipates that the Merger Agreement and the Merger will be approved. See "THE
MERGER--INTERESTS OF CERTAIN PERSONS IN THE MERGER -- STOCK PURCHASE AGREEMENTS"
and "-- STOCK OPTION AGREEMENT" in the accompanying Information statement. WE
ARE NOT REQUESTING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
By Order of the Board of Directors
Robert A. Hammond, Jr.
Chairman of the Board, President and Chief
Executive Officer
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GREAT PINES WATER COMPANY, INC.
INFORMATION STATEMENT
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FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1999
This Notice of Special Meeting of Shareholders and Information Statement is
furnished in connection with a special meeting of shareholders of Great Pines
Water Company, Inc., a Texas corporation (the "Company"), to be held on June 4,
1999, at the time and place and for the purposes set forth in the Notice and at
any adjournment or postponement thereof (such meeting, including any adjournment
or postponement thereof, the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon a proposal
that is unanimously recommended by the Board of Directors to approve the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of April 1,
1999, among Suntory Water Group, Inc., a Delaware corporation ("Suntory"),
Suntory Acquisition Corp., a Texas corporation and a wholly owned subsidiary of
Suntory ("Merger Sub"), and the Company pursuant to which (i) Merger Sub will
merge with and into the Company, with the Company being the surviving
corporation (the "Surviving Corporation"), such that the Company will become a
wholly owned subsidiary of Suntory (the "Merger"), (ii) each issued and
outstanding share of common stock of the Company, par value $.01 per share (the
"Shares"), other than Shares owned by Suntory, Merger Sub, the Company or any of
their respective subsidiaries or held in the Company's treasury and Shares as to
which the holders thereof have exercised their dissenters' rights under Texas
law, will be converted into the right to receive $5.87 in cash, without interest
(the "Base Consideration"), plus the Additional Consideration (as hereinafter
defined), if any, which is an amount per share equal to a portion of the Net
Proceeds (as hereinafter defined), if any, received by the Company from a trust
established to hold the LiquiBox Lawsuit (as hereinafter defined; the Base
Consideration together with the Additional Consideration, the "Merger
Consideration"), and (iii) each outstanding option to purchase Shares will be
converted into the right to receive an amount in cash equal to the excess, if
any, of the Base Consideration plus the Additional Consideration, if any, over
the exercise price of the option multiplied by the number of Shares subject to
the option; and (iv) the issued and outstanding shares of common stock of Merger
Sub will be converted into shares of common stock of the Company. For a more
complete description of the Merger Agreement and the terms of the Merger, see
"THE MERGER -- THE MERGER AGREEMENT" and the Merger Agreement, which is attached
as Annex A to this Information Statement. For a description of the calculation
of the Additional Consideration and the Net Proceeds, see "THE MERGER--
LITIGATION TRUST" and the Litigation Trust Agreement, which is attached as
Exhibit B to the Merger Agreement, and the Merger Agreement, which is attached
as Annex A to this Information Statement.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER AGREEMENT IS
IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY
RECOMMENDS A VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
Upon the issuance of a Certificate of Merger by the Secretary of State of
the State of Texas in accordance with the Texas Business Corporation Act, as
amended (the "TBCA"), or on such later date as may be specified in the Articles
of Merger (the "Effective Time"), each Share, other than Shares owned by
Suntory, Merger Sub, the Company or any of their respective subsidiaries or held
in the Company's treasury and Shares as to which the holders thereof have
exercised their dissenters' rights in accordance with the TBCA, will be
converted into the right to receive the Merger Consideration. Each option to
purchase Shares that is outstanding at the Effective Time and has not been
exercised will be converted into the right to receive an amount in cash equal to
the excess, if any, of the Base Consideration plus the Additional Consideration,
if any, over the exercise price applicable to such option multiplied by the
number of Shares that were subject to such option. See "THE MERGER -- PAYMENT OF
MERGER CONSIDERATION FOR THE SHARES," "-- LITIGATION TRUST" and "-- THE MERGER
AGREEMENT -- General" and "-- Payment for Shares."
Only holders of record of Shares at the close of business on May 19, 1999
(the "Record Date") will be entitled to notice of and to vote at the Special
Meeting. On such date there were 2,775,262 Shares issued and outstanding, which
were
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This Information Statement is first being sent to shareholders on May 25, 1999
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held by approximately 109 shareholders of record (approximately 734 beneficial
owners). All issued and outstanding Shares are entitled to one vote per Share on
each matter properly submitted at the Special Meeting. Shareholders have no
cumulative voting rights.
The presence of the holders of at least 50% of the issued and outstanding
Shares entitled to vote at the Special Meeting, either in person or represented
by a properly executed proxy, is necessary to constitute a quorum for the
transaction of business at the Special Meeting. Approval of the Merger
Agreement requires the affirmative vote of the holders of at least two-thirds of
the outstanding Shares entitled to vote thereon. The obligations of the Company
and Suntory to consummate the Merger are subject, among other things, to the
condition that the shareholders of the Company approve the Merger Agreement.
As of the date of the Merger Agreement, Robert A. Hammond, Sr., Robert A.
Hammond, Jr., Cynthia Hammond, as trustee of the Joshua Slocum Hammond Trust,
and Nick A. Baki owned, in the aggregate, 1,887,973 Shares, which was at least
two-thirds of the then outstanding Shares. Contemporaneously with the execution
of the Merger Agreement, Messrs. Hammond, Sr., Hammond, Jr. and Baki and Ms.
Hammond, as trustee, each entered into a separate Stock Purchase Agreement
(collectively, the "Stock Purchase Agreements") with Suntory. Pursuant to the
Stock Purchase Agreements, Messrs. Hammond, Sr., Hammond, Jr. and Baki and Ms.
Hammond, as trustee, sold all of their respective Shares to Suntory for a
purchase price of $5.87 per Share plus an amount per share equal to the
Additional Consideration, if any, which amount shall be payable only if and when
any Additional Consideration is paid to shareholders of the Company. The sale
of the Shares was consummated on April 1, 1999. In addition, contemporaneously
with the execution of the Merger Agreement, the Company and Suntory entered into
a Stock Option Agreement (the "Stock Option Agreement") pursuant to which the
Company granted to Suntory an irrevocable option (the "Suntory Option") to
purchase up to 470,000 Shares at a purchase price of $5.87 per Share. By the
terms of the Stock Option Agreement, Suntory is not entitled to receive, in
respect of any Share it purchases upon exercise of the Option, any of the
proceeds attributable to the LiquiBox Lawsuit and is obligated to return, and
cause any transferee of such Share to return, to the Company any such proceeds.
The Stock Option Agreement also provides that, in the event additional Shares
are issued or otherwise become outstanding, the number of Shares subject to the
Suntory Option will be increased so that the aggregate number of Shares subject
thereto will be 10% of the then issued and outstanding Shares without giving
effect to any Shares subject or issued pursuant to the Stock Option Agreement.
As a result of the sale by Messrs. Hammond, Sr., Hammond, Jr. and Baki and Ms.
Hammond, as Trustee, to Suntory of all of their respective Shares pursuant to
the Stock Purchase Agreements and Suntory's right to acquire Shares pursuant to
the Stock Option Agreement, Suntory owns, or upon exercise of the Suntory
Option, will own, at least two-thirds of the Shares entitled to vote at the
Special Meeting and, as a result, the Company anticipates that the Merger
Agreement and the Merger will be approved. See "THE MERGER -- INTERESTS OF
CERTAIN PERSONS IN THE MERGER -- STOCK PURCHASE AGREEMENTS" and "-- STOCK OPTION
AGREEMENT".
Shareholders may vote their Shares for or against the proposal or may
abstain from voting at the Special Meeting. WE ARE NOT REQUESTING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Votes will be tabulated by Kevin F. Vigneaux, the Company's Chief Financial
Officer and Treasurer, and the results will be certified by Mr. Vigneuax who
will act as election inspector and will resolve impartially any interpretive
questions as to the conduct of the vote.
Pursuant to Texas law, shareholders of record on the Record Date have the
right to dissent from the Merger and, if the Merger is consummated, to have an
appraisal of the fair value of their shares and payment therefor. In order to
exercise those rights, among other requirements, a shareholder must file, prior
to the Special Meeting, a written objection to the Merger stating that the
shareholder's right to dissent will be exercised and giving the shareholder's
address to which notice of the approval of the Merger can be delivered or mailed
in such event. For information regarding the procedures which must be followed
to exercise and protect such rights, see "THE MERGER -- RIGHTS OF DISSENTING
SHAREHOLDERS."
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TABLE OF CONTENTS
PAGE
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SUMMARY.......................................................................1
Date, Time and Place of the Special Meeting..............................1
Purpose of the Special Meeting...........................................1
The Company, Suntory and Merger Sub......................................1
The Merger; Merger Consideration.........................................2
Litigation Trust.........................................................2
Regulatory Approvals.....................................................2
Record Date; Shareholders Entitled to Vote; Quorum; Vote Required........2
Recommendation of the Board of Directors.................................2
Opinion of the Company's Financial Advisor...............................2
Payment of Merger Consideration for the Shares...........................3
Rights of Dissenting Shareholders........................................3
Interests of Certain Persons in the Merger...............................3
Certain Federal Income Tax Consequences..................................4
Price Range of the Shares; Dividends.....................................4
Selected Financial Information...........................................4
INTRODUCTION..................................................................5
General..................................................................5
Voting...................................................................5
THE MERGER....................................................................6
Background of and Reasons for the Proposed Merger........................6
Recommendation of the Board of Directors.................................7
Opinion of the Company's Financial Advisor...............................8
Interests of Certain Persons in the Merger..............................10
Payment of Merger Consideration for the Shares..........................12
Litigation Trust........................................................12
Regulatory Approvals....................................................13
The Merger Agreement....................................................13
Treatment of Employees and Employee Benefits............................17
Rights of Dissenting Shareholders.......................................17
Certain Federal Income Tax Consequences.................................19
FINANCING OF THE MERGER......................................................20
BUSINESS OF THE COMPANY......................................................20
PRICE RANGE OF THE SHARES; DIVIDENDS.........................................20
BUSINESS OF SUNTORY AND MERGER SUB...........................................21
SELECTED COMPANY FINANCIAL DATA..............................................21
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..................23
INDEPENDENT PUBLIC ACCOUNTANTS...............................................23
OTHER BUSINESS...............................................................23
INCORPORATION BY REFERENCE...................................................23
Agreement and Plan of Merger............................................Annex A
Howard Frazier Barker Elliot, Inc. Opinion..............................Annex B
Articles 5.12 and 5.13 of the Texas Business Corporation Act............Annex C
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SUMMARY
The following is a summary of certain information contained in this
Information Statement. This summary does not purport to be complete and is
qualified in its entirety by the more detailed information contained elsewhere
in this Information Statement, including the Annexes hereto. Unless defined
herein, capitalized terms used in this summary have the meanings ascribed to
them elsewhere in this Information Statement. Shareholders are urged to read
this Information Statement, including the Annexes hereto, in its entirety.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting will be held on June 4, 1999, at 10:00 a.m. (Central
Standard Time) at Great Pines Water Company, Inc., 600 N. Shepherd, Suite #303,
Houston, Texas 77007.
PURPOSE OF THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon a proposal
that is unanimously recommended by the Board of Directors to approve the Merger
Agreement pursuant to which (i) Merger Sub will merge with and into the Company,
with the Company being the Surviving Corporation such that the Company will
become a wholly owned subsidiary of Suntory, (ii) each Share, other than Shares
owned by Suntory, Merger Sub, the Company or any of their respective
subsidiaries or held in the Company's treasury and Shares as to which the
holders thereof have exercised their dissenters' rights under Texas law, will be
converted into the right to receive the Base Consideration plus the Additional
Consideration, if any, (iii) each option to purchase Shares that is outstanding
at the Effective Time and has not been exercised will be converted into the
right to receive an amount in cash equal to the excess, if any, of the Base
Consideration plus the Additional Consideration, if any, over the exercise price
applicable to such option multiplied by the number of Shares subject to such
option, and (iv) the issued and outstanding shares of common stock of Merger Sub
will be converted into shares of common stock of the Company, all on and subject
to the terms and conditions contained in the Merger Agreement. See "THE MERGER
- -- PAYMENT OF MERGER CONSIDERATION FOR THE SHARES," "--LITIGATION TRUST" and "--
THE MERGER AGREEMENT -- General" and "-- Payment for Shares" and the Merger
Agreement, which is attached as Annex A to this Information Statement.
THE COMPANY, SUNTORY AND MERGER SUB
The Company processes, delivers and sells bottled water to homes and
businesses in the greater Houston and Dallas-Fort Worth ("DFW") metropolitan
areas under the brand name "Texas Premium Waters." The Company's principal
offices are located at 600 N. Shepherd, Suite #303, Houston, Texas 77007. The
Company's telephone number at that address is (713) 864-6688. See "BUSINESS OF
THE COMPANY."
Suntory and its subsidiaries bottle, sell and distribute water and related
products under several trade names, including Hinckley & Schmitt, Sierra Springs
Water Company, Mountain Fresh Drinking Water Systems, Belmont Springs Water
Company, Crystal Springs Water Company, Kentwood Spring Water and Polar Water
Company. Suntory is also a producer and distributor of an isotonic beverage
product under the brand name 10-K Thirst Quencher. Suntory also provides coffee
services which include the distribution of coffee to commercial consumers, along
with the related brewing equipment and supplies. For bottled water, point-of-
use filtration systems and coffee products, the Company rents dispensing and
filtration equipment, such as coolers and brewing machines, under cancelable
operating leases. Suntory sells and distributes its products throughout the
United States and its corporate headquarters are located in Atlanta.
Merger Sub is a newly formed Texas corporation that is a wholly owned
subsidiary of Suntory. To date, Merger Sub has not conducted any business other
than the business conducted in connection with its formation and capitalization
and the transactions contemplated by the Merger Agreement.
The principal executive offices of Suntory and Merger Sub are located at
5660 New Northside Drive, Atlanta, Georgia 30328. The telephone number of
Suntory and Merger Sub at that address is (770) 933-1400.
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THE MERGER; MERGER CONSIDERATION
Upon approval of the Merger Agreement and satisfaction of the other
conditions to the Merger specified therein, Merger Sub will be merged with and
into the Company with the Company being the surviving corporation. At the
Effective Time, each issued and outstanding Share (other than Shares owned by
Suntory, Merger Sub, the Company or any of their respective subsidiaries or held
in the Company's treasury and Shares held by shareholders who properly exercise
and perfect their dissenters' rights under Texas law) will be converted into the
right to receive the Base Consideration plus the Additional Consideration, if
any, and the holders of such Shares will thereafter have no remaining equity
interest in the Company, and each outstanding option to purchase Shares of the
Company will be converted into the right to receive an amount in cash equal to
the excess, if any, of the Base Consideration plus the Additional Consideration,
if any, over the exercise price applicable to such option multiplied by the
number of Shares that were subject to such option. Also at the Effective Time,
each issued and outstanding share of common stock of Merger Sub will be
converted into shares of common stock of the Company. See "THE MERGER --PAYMENT
OF MERGER CONSIDERATION FOR THE SHARES," "-- LITIGATION TRUST" and "--THE MERGER
AGREEMENT -- General" and "-- Payment for Shares."
LITIGATION TRUST
Prior to the date of the Merger Agreement, in contemplation of the Merger,
the Company established a trust (the "Litigation Trust"), the sole beneficiary
of which is the Company, to hold and pursue all of the Company's right and
interest in the lawsuit styled LiquiBox Corporation v. Great Pines Water
Company, Inc., No. 98-20198, currently on appeal to the U.S. Court of Appeal for
the Fifth Circuit (the "LiquiBox Lawsuit"). Promptly following the settlement or
resolution of the LiquiBox Litigation and the discharge of all Litigation Trust
obligations, the Litigation Trust will liquidate its remaining assets, if any,
and distribute the cash to the Company, and the Litigation Trust will terminate.
See "THE MERGER -- LITIGATION TRUST."
REGULATORY APPROVALS
No federal or state regulatory requirements must be complied with or
approvals obtained in connection with the Merger.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE; QUORUM; VOTE REQUIRED
Only shareholders of record at the close of business on the Record Date
will be entitled to notice of and to vote at the Special Meeting. On such date
there were 2,775,262 Shares issued and outstanding, which were held by
approximately 109 shareholders of record (approximately 734 beneficial owners).
All issued and outstanding Shares are entitled to one vote per Share on each
matter properly submitted at the Special Meeting. Shareholders have no
cumulative voting rights. The presence of the holders of at least 50% of the
issued and outstanding Shares entitled to vote, either in person or represented
by a properly executed proxy, is necessary to constitute a quorum for the
transaction of business at the Special Meeting. Approval of the Merger Agreement
will require the affirmative vote of the holders of at least two-thirds of the
outstanding Shares entitled to vote thereon. The obligations of the Company and
Suntory to consummate the Merger are subject, among other things, to the
condition that the shareholders of the Company approve the Merger Agreement. As
a result of the sale by Robert A. Hammond, Sr., Robert A. Hammond, Sr., Cynthia
Hammond, as trustee of the Joshua Slocum Hammond Trust, and Nick A. Baki to
Suntory of all of their respective Shares (totaling 1,887,973 in the aggregate)
pursuant to the Stock Purchase Agreements and Suntory's right to acquire Shares
pursuant to the Stock Option Agreement, Suntory owns, or on exercise of the
Suntory Option, will own, at least two-thirds of the Shares entitled to vote at
the Special Meeting, and, as a result, the Company anticipates that the Merger
Agreement and the Merger will be approved. See "THE MERGER -- INTERESTS OF
CERTAIN PERSONS IN THE MERGER --Stock Purchase Agreements" and "-- Stock Option
Agreement."
Shareholders may vote their Shares for or against the proposal or may
abstain from voting at the Special Meeting. WE ARE NOT REQUESTING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors approved the Stock Purchase Agreements, the Stock
Option Agreement and the Merger Agreement by unanimous consent dated as of
March 31, 1999 and recommended that shareholders vote FOR the approval of the
Merger Agreement. The Board of Directors, after careful consideration of the
terms and conditions of the Merger Agreement and many other factors, determined
the Merger to be fair to and in the best interests of the Company's
shareholders. See "THE MERGER -- RECOMMENDATION OF THE BOARD OF DIRECTORS."
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
Howard Frazier Barker Elliot, Inc. ("HFBE") acted as financial advisor to
the Company in connection with the Merger and delivered a written opinion to the
Board of Directors dated March 31, 1999 to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
Merger Consideration to be received by the Company's
2
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shareholders, other than Suntory, under the Merger Agreement is fair to the
shareholders of the Company from a financial point of view. See "THE MERGER --
OPINION OF THE COMPANY'S FINANCIAL ADVISOR." THE FULL TEXT OF THE WRITTEN
OPINION OF HFBE, DATED AS OF MARCH 31, 1999 AND SETTING FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS IN THE REVIEW UNDERTAKEN, IS ATTACHED
AS ANNEX B TO THIS INFORMATION STATEMENT AND SHOULD BE READ CAREFULLY IN THEIR
ENTIRETY.
PAYMENT OF MERGER CONSIDERATION FOR THE SHARES
Promptly after consummation of the Merger, a transmittal letter and
instructions for surrendering certificates formerly representing Shares will be
mailed to each shareholder of record of the Company at the Effective Time.
Because no interest will be paid on the Merger Consideration, it is recommended
that certificates representing the Shares be surrendered promptly after
consummation of the Merger and receipt of a transmittal letter and instructions
for surrendering the certificates are received by the Shareholder in order to
obtain payment as quickly as possible. See "THE MERGER -- PAYMENT OF MERGER
CONSIDERATION FOR THE SHARES" and "-- THE MERGER AGREEMENT -- Payment for
Shares."
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to the TBCA, shareholders of record on the Record Date have the
right to dissent from the Merger and, if the Merger is consummated, to have an
appraisal of the "fair value" of their Shares and receive payment therefor. Any
shareholder desiring to exercise such dissenters' rights will have the rights
and duties and must strictly follow the procedures set forth in Articles 5.12
and 5.13 of the TBCA in order to perfect such rights. IN ORDER TO EXERCISE THOSE
RIGHTS, AMONG OTHER REQUIREMENTS, A SHAREHOLDER MUST FILE, PRIOR TO THE SPECIAL
MEETING, A WRITTEN OBJECTION TO THE MERGER STATING THAT THE SHAREHOLDER'S RIGHT
TO DISSENT WILL BE EXERCISED AND GIVING THE SHAREHOLDER'S ADDRESS TO WHICH
NOTICE OF THE APPROVAL OF THE MERGER CAN BE DELIVERED OR MAILED IN SUCH EVENT.
See "THE MERGER -- RIGHTS OF DISSENTING SHAREHOLDERS." The full text of
Articles 5.12 and 5.13 of the TBCA is included herein as Annex C to this
Information Statement and should be read in its entirety. SHAREHOLDERS WHO WISH
TO EXERCISE DISSENTERS' RIGHTS MUST STRICTLY FOLLOW THE PROCEDURES DESCRIBED
THEREIN.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders should be aware that certain members of the Company's
management and Board of Directors have the following interests in connection
with the Merger.
No options to purchase Shares are held by officers or directors of the
Company.
Pursuant to the Merger Agreement, Suntory has agreed to indemnify each
present and former director and officer of the Company determined as of the
Effective Time for four years after the Effective Time.
Contemporaneously with the execution of the Merger Agreement, Robert A.
Hammond, Sr., Robert A. Hammond, Jr., Cynthia Hammond, as trustee of the Joshua
Slocum Hammond Trust, and Nick A. Baki each entered into a separate Stock
Purchase Agreement with Suntory. Pursuant to the Stock Purchase Agreements,
Messrs. Hammond, Sr., Hammond, Jr. and Baki and Ms. Hammond, as trustee, sold
all of their respective shares of Suntory for a purchase price per Share equal
to the Base Consideration plus an amount equal to the Additional Consideration,
which amount will be payable if and when any Additional Consideration becomes
payable to shareholders of the Company.
Contemporaneously with the execution of the Merger Agreement, the Company
and Suntory entered into the Stock Option Agreement pursuant to which the
Company granted Suntory an irrevocable option to purchase up to 470,000 Shares
at a purchase price per Share equal to the Base Consideration. By the terms of
the Stock Option Agreement, Suntory is not entitled to receive, in respect of
any Share it purchases upon exercise of the Option, any of the proceeds
attributable to the LiquiBox Lawsuit and is obligated to return, and cause any
transferee of such Share to return, to the Company any such proceeds it
receives. The Stock Option Agreement also provides that, in the event additional
Shares are issued by the Company, the number of Shares subject thereto will be
increased so that the aggregate number of Shares subject thereto will be 10% of
the then issued and outstanding Shares without giving effect to any Shares
subject or issued pursuant to the Stock Option Agreement.
Contemporaneously with the execution of the Merger Agreement, Robert A.
Hammond, Sr. and Robert A. Hammond, Jr. each entered into a separate Non-
Disclosure, Non-Solicitation and Non-Competition Agreement with Suntory and the
Company prohibiting them from competing with the Company or employing any of its
employees for five years following the date thereof.
3
<PAGE>
See "THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In general, the receipt of cash for Shares pursuant to the terms of the
Merger Agreement will be a taxable transaction for federal income tax purposes
and may be a taxable transaction for state, local and other purposes as well.
Shareholders are urged to consult their own tax advisors to consider the
particular tax consequences to them of the Merger. See "THE MERGER -- CERTAIN
FEDERAL INCOME TAX CONSEQUENCES."
PRICE RANGE OF THE SHARES; DIVIDENDS
The Shares are traded on the Nasdaq Over-the-Counter Electronic Bulletin
Board ("OTCEBB") under the symbol "GPWC." On March 31, 1999, the last full
trading day prior to the announcement of the execution of the Merger Agreement,
the high and low sales price per Share on the OTCEBB were $5.875 and $6.25,
respectively. On May 19, 1999, the last full trading day prior to the
date of this Information Statement, the high and low sales price per Share on
the OTCEBB were $5.5625 and $5.5625, respectively. See "PRICE RANGE OF THE
SHARES; DIVIDENDS." SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THEIR SHARES.
SELECTED FINANCIAL INFORMATION
The following table sets forth certain summary financial information with
respect to the Company. More comprehensive financial information is included in
other documents filed by the Company with the Securities and Exchange Commission
(the "Commission"), and the following summary is qualified in its entirety by
reference to such documents (which may be inspected and obtained as described
herein), including the financial statements and related notes contained therein.
GREAT PINES WATER COMPANY, INC.
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
------- ------ ------ ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................................................... $ 9,214 $8,769 $7,495 $7,121 $ 6,076
Operating costs................................................... 1,595 1,744 1,391 1,284 950
Transportation costs.............................................. 2,114 2,171 1,745 1,802 1,534
Depreciation and amortization..................................... 961 988 1,064 1,149 822
Commissions and other selling costs............................... 1,675 1,874 1,231 1,141 1,487
General and administrative costs.................................. 2,603 2,190 2,084 2,091 2,239
------- ------ ------ ------ -------
Gain (loss) from operations....................................... 266 (198) (21) (345) (955)
Other income (expense)............................................ 636 (387) (623) 433 343
------- ------ ------ ------ -------
Gain (loss) before income taxes................................... 902 (585) (644) (778) (1,297)
Income tax expense (benefit)...................................... 0 0 0 (44) (317)
------- ------ ------ ------ -------
Income (loss) after income taxes.................................. 902 (585) (644) (734) (980)
Dividends on Preferred Stock...................................... 189 135 25 0 0
------- ------ ------ ------ -------
Income (loss) attributable to Common Stock........................ 713 (720) (669) (734) (980)
======= ====== ====== ====== =======
Income (loss) per common share Basic............................. $.27 $(.29) $(.28) $(.31) $(.41)
======= ====== ====== ====== =======
Income (loss) per common share Diluted........................... $.31 $(.29) $(.28) $(.31) $(.41)
BALANCE SHEET DATA:
Total Assets...................................................... $ 6,824 $7,479 $6,263 $6,606 $ 7,760
Current and long-term debt and capital lease obligations.......... $ 2,590 $3,953 $3,480 $4,295 $ 4,979
OTHER DATA:
EBITDA (1)........................................................ $ 2,225 $ 797 $ 830 $ 811 $ (112)
Net cash provided by (used in) operating activities............... $ 1,802 $ 486 $ 704 $ 707 $ (213)
Net cash used in investing activities............................. $ (23) $ (490) $ (354) $ (185) $ (411)
Net cash provided by (used in) financing activities............... $(1,040) $ 31 $ (95) $ (638) $ (698)
</TABLE>
- ------------------------------
(1) EBITDA is defined as the sum of (i) gain or loss before income taxes; (ii)
interest; and (iii) depreciation and amortization, as reported on the
Company's income statement. EBITDA is presented not as an alternative
measure of operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles), but rather to
provide additional information related to the debt servicing ability of the
Company. This information may not be comparable to similarly titled
amounts presented by other companies.
4
<PAGE>
INTRODUCTION
The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement, describes the material aspects of the
Merger but does not purport to be a complete description and is qualified in its
entirety by the Merger Agreement, which is incorporated herein by reference and
attached hereto as Annex A. Shareholders are urged to read the Merger Agreement
carefully.
GENERAL
This Information Statement is being furnished to shareholders of the Company
in connection with the Special Meeting. At the Special Meeting, shareholders
will be asked to approve the Merger Agreement, pursuant to which Merger Sub will
merge with and into the Company with the Company being the surviving
corporation, all on and subject to the terms and conditions contained in the
Merger Agreement. The Merger Agreement is attached as Annex A to this
Information Statement.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER AGREEMENT IS IN
THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS
A VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
At the Effective Time, each issued and outstanding Share, other than Shares
owned by Suntory, Merger Sub, the Company or any of their respective
subsidiaries or held in the Company's treasury and Shares as to which the
holders have exercised their dissenters' rights in accordance with Articles 5.12
and 5.13 of the TBCA, will be converted into the right to receive the Base
Consideration plus the Additional Consideration, if any. Each outstanding
option granted by the Company to purchase Shares will be converted into the
right to receive an amount in cash computed by multiplying the excess, if any,
of the Base Consideration over the exercise price applicable to such option by
the number of Shares that were subject to such option, which amount will be
payable timely by the Surviving Corporation following the Effective Time. In
addition, if any Additional Consideration becomes payable, each former holder of
an option outstanding at the Effective Time will receive, (i) if the Base
Consideration is equal to or greater than the per Share exercise price of such
option, the Additional Consideration, or (ii) if the per Share exercise price
exceeds the Base Consideration (such excess being the "Remaining Purchase
Price"), the excess, if any, of the Additional Consideration over the Remaining
Exercise Price, which amounts will be payable timely by the Surviving
Corporation following the Liquidation Date (as hereinafter defined). At the
Effective Time, the stock transfer books of the Company will be closed. See
"THE MERGER -- PAYMENT OF MERGER CONSIDERATION FOR THE SHARES," "-- LITIGATION
TRUST" and "-- THE MERGER AGREEMENT -- General" and "-- Payment for Shares."
The Company has established the Litigation Trust to hold and pursue all of the
Company's right and interest in the LiquiBox Lawsuit. Promptly following the
final resolution of the LiquiBox Litigation and the discharge of all Litigation
Trust obligations, the Litigation Trust will liquidate its remaining assets, if
any, and distribute the cash to the Company, and the Litigation Trust will
terminate. Promptly following receipt of said distribution, each former holder
of a Share that was outstanding at the Effective Time will be entitled to
receive the Additional Consideration, each former holder of an option to
purchase Shares outstanding at the Effective Time will be entitled to receive
the Additional Consideration (if the exercise price of such option was equal to
or greater than the Base Consideration) or the excess, if any, of the Additional
Consideration over the Remaining Exercise Price (if the Base Consideration was
less than the exercise price of such option), as appropriate, pursuant to the
Merger Agreement, and Suntory will pay to Robert A. Hammond, Sr., Robert A.
Hammond, Jr., Cynthia Hammond, as trustee of the Joshua Slocum Hammond Trust,
and Nick A. Baki an amount equal to the Additional Consideration for each Share
sold by said individuals to Suntory pursuant to the Stock Purchase Agreements.
See "THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Stock Purchase
Agreements," "-- PAYMENT OF MERGER CONSIDERATION FOR THE SHARES," "-- LITIGATION
TRUST" and "-- THE MERGER AGREEMENT -- General" and "-- Payment for Shares."
VOTING
The Board of Directors has fixed the close of business on May 19, 1999 as the
Record Date for the determination of shareholders entitled to notice of and to
vote at the Special Meeting. At the close of business on such date there were
2,775,262 issued and outstanding Shares, which were held by approximately 109
shareholders of
5
<PAGE>
record (approximately 734 beneficial owners). Each issued and outstanding Share
is entitled to one vote per share on each matter properly submitted at the
Special Meeting.
The presence of the holders of at least 50% of the issued and outstanding
Shares entitled to vote at the Special Meeting, either in person or represented
by a properly executed proxy, is necessary to constitute a quorum for the
transaction of business at the Special Meeting. Approval of the Merger
Agreement requires the affirmative vote of the holders of at least two-thirds of
the outstanding Shares entitled to vote thereon. As a result of the sale by
Robert A. Hammond, Sr., Robert A. Hammond, Jr., Cynthia Hammond, as trustee of
the Joshua Slocum Hammond Trust, and Nick A. Baki to Suntory of all of their
respective Shares pursuant to the Stock Purchase Agreements and Suntory's right
to acquire Shares pursuant to the Stock Option Agreement, Suntory owns, or on
exercise of the Suntory Option, will own, at least two-thirds of the Shares
entitled to vote at the Special Meeting, and as a result, the Company
anticipates that the Merger Agreement will be approved. See "THE MERGER --
INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Stock Purchase Agreements" and "--
Stock Option Agreement."
Votes may be cast in favor or against the approval of the Merger Agreement at
the Special Meeting. WE ARE NOT REQUESTING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
Shareholders have the right to dissent from the Merger and to be paid the fair
value of their Shares by strictly following the procedures prescribed in
Articles 5.12 and 5.13 of the TBCA. In order to exercise those rights, among
other requirements, a shareholder must file, prior to the Special Meeting, a
written objection to the Merger stating that the shareholder's right to dissent
will be exercised and giving the shareholder's address to which notice of the
approval of the Merger can be delivered or mailed in such event. See ANNEX C
and "THE MERGER -- RIGHTS OF DISSENTING SHAREHOLDERS."
INSTRUCTIONS WITH REGARD TO THE SURRENDER OF SHARE CERTIFICATES TO THE
EXCHANGE AGENT APPOINTED BY SUNTORY, TOGETHER WITH A LETTER OF TRANSMITTAL TO BE
USED FOR THIS PURPOSE, WILL BE FORWARDED TO THE COMPANY'S SHAREHOLDERS AS
PROMPTLY AS PRACTICABLE FOLLOWING THE EFFECTIVE TIME. SHAREHOLDERS SHOULD
SURRENDER SHARE CERTIFICATES ONLY AFTER RECEIVING A LETTER OF TRANSMITTAL.
SHAREHOLDERS SHOULD NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
THE MERGER
BACKGROUND OF AND REASONS FOR THE PROPOSED MERGER
The bottled water business is capital intensive. Despite various efforts over
the years, the Company has not been successful in securing sources of capital
sufficient to allow it to take advantage of growth opportunities. The Company
became concerned that increased competition in its market plus these capital
constraints would make it difficult for the Company to compete with the other,
better capitalized companies that already had a significant presence in its
markets.
The Company received several inquiries regarding the Company's interest in
merging with or being acquired by another company. On April 1, 1998, the Board
of Directors resolved that it would be appropriate to pursue the various
inquires. To obtain the optimum number of buyers, the Board authorized the
Company's officers to search for an investment banker experienced in
transactions within the beverage industry that would provide assistance to the
Company in finding potential merger partners or purchasers. On April 20, 1998
the Company entered into a contract with Capital Formation Group ("Capital
Formation") to represent the Company in finding potential purchasers.
The Company entered into preliminary negotiations with several companies. On
June 3, 1998, the Company executed a confidentiality agreement with one of these
companies. This purchaser made a preliminary non-binding offer of approximately
$5.21 per Share. On August 12, 1998, the Company terminated negotiations with
that company because of concern that the purchaser would not be able to fund the
acquisition.
6
<PAGE>
On August 19, 1998, the Company initiated preliminary discussions with
Suntory. On October 7, 1998, Suntory and the Company executed a confidentiality
agreement. The parties agreed to an extension of this agreement until
December 12, 1998 to allow Suntory to complete its due diligence. On
December 16, 1998 Suntory submitted an offer of $3.50 per Share, but the Board
of Directors rejected this offer as inadequate.
On December 18, 1998, the Company entered into a confidentiality agreement
with a third potential purchaser. On January 13, 1999, that potential purchaser
submitted a non-binding offer of $5.48 per Share, which was subsequently
increased to $5.94 per Share. The Company began negotiations with that
potential purchaser; however, that potential purchaser was not able to provide a
draft of a definitive agreement by the time that it had committed to do so.
Based on discussions with this purchaser, the Company's Board of Directors
determined that this failure was due to this purchaser's indecision as to
whether it should structure the transaction as a merger or a tender offer. This
purchaser also indicated that it would require personal indemnities from Robert
A. Hammond, Sr., Robert A. Hammond, Jr. and the Joshua Slocum Hammond Trust, as
the principal shareholders of the Company. Robert A. Hammond, Sr. and Robert A.
Hammond, Jr., who are also members of the Company's Board of Directors,
indicated that, as shareholders of the Company, they were not willing to provide
personal indemnities and thus incur potential liabilities not shared by the
Company's other shareholders. Preliminary discussions with Cynthia Hammond,
trustee of the Joshua Slocum Hammond Trust, indicated that she was not willing
to provide an indemnity on behalf of the trust. In addition, based on
discussions with this purchaser, the Company's Board of Directors was concerned
that this purchaser was not firmly committed to its nonbinding offer of $5.94
per Share but was considering decreasing this price in light of the substantial
due diligence that it still intended to conduct.
On February 4, 1999, Suntory submitted a non-binding offer of $20,400,00 or
$5.90 per Share, subject to several contingencies.
The Company's Board of Directors met on February 8, 1999, to review the two
competing offers. Although the Suntory price per Share was less than the offer
submitted by the competing potential purchaser, the Board decided to pursue the
Suntory offer because the Board believed that the form of the transaction
proposed by Suntory gave the Company's shareholders greater assurance that the
transaction would be successfully completed and that the shareholders would
receive the offered price. The Board's belief was based on the fact that
Messrs. Hammond, Sr. and Hammond, Jr. and Ms. Hammond, as trustee, were
unwilling to give personal indemnities, a requirement of the third purchaser
that the Board believed was not negotiable. In addition, the Board believed
that the third purchaser's indecision on a transaction structure would
substantially delay consummation of the transaction and make it less likely to
occur. Also, the Company's Board of Directors believed that Suntory was more
firmly committed to its bid price and to consummating the transaction in light
of the fact that it had conducted extensive due diligence prior to making its
offer. As discussed above, the third purchaser's offer was contingent on a
significant amount of due diligence still to be completed that likely would have
substantially delayed the transaction or, based upon the results thereof,
potentially could have caused the third purchaser to decrease its offer price or
terminate its offer entirely.
On February 21, 1999, the Board of Directors retained the firm of Howard
Frazier Barker Elliott, Inc. to advise it on the fairness of the Suntory
transaction to Company's shareholders. On March 29, 1999, Suntory decreased its
offer to $5.87 per share. By written letter to the Board of Directors dated
March 31, 1999, Howard Frazier Barker Elliott, Inc. provided the Board its
opinion that Suntory's offered price for the Shares was fair to the
shareholders.
By unanimous consent dated as of March 31, 1999, the Company's Board of
Directors approved the Stock Purchase Agreements, the Stock Option Agreement and
the Merger Agreement and recommended that the Board of Directors accept
Suntory's offer.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER AGREEMENT IS IN
THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS
A VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
The Board of Directors approved the Stock Purchase Agreements, the Stock
Option Agreement and the Merger Agreement and the Merger Agreement and the
Merger by unanimous consent dated as of March 31, 1999 and resolved
7
<PAGE>
to recommend to the shareholders that they vote FOR approval of the Merger
Agreement. The Board determined that the Merger was in the best interests of the
shareholders of the Company.
In reaching its conclusion, the Board considered a number of factors
including, but not limited to, the following:
1. The current and prospective environment in which the Company operates,
including national and local economic conditions, the competitive environment
for bottled water companies generally and the trend toward consolidation in
the bottled water industry;
2. The terms of the Merger Agreement, including the Base Consideration
plus the Additional Consideration, if any, to be paid to the Company's
shareholders for each outstanding Share, as reviewed by the Board with its
legal and financial advisors;
3. The fact that the Base Consideration alone represents a substantial
multiple of the earnings per Share of the Shares for 1998 and constitutes a
price equal to 6.1 times the net tangible book value at December 31, 1998;
4. The Base Consideration to be received by the Company's shareholders in
the Merger compared to (i) historical and recent market prices for the Shares
preceding the announcement of the Merger, (ii) market prices for other
companies believed to be comparable to the Company, and (iii) prices paid in
other transactions believed to be comparable;
5. The Board's review with its legal and financial advisors of
alternatives to the Merger (including the alternatives of remaining
independent and growing internally and remaining independent for a period of
time and then selling the Company), the range of possible values to holders of
the Shares obtainable through implementation of such alternatives and the
timing and likelihood of actually receiving such values;
6. The opinion of HFBE as to the fairness, from a financial point of view,
to the shareholders of the Company of the consideration to be received by the
Company's shareholders, except Suntory, in the Merger;
7. The fact that the terms of the Merger Agreement were determined through
arms' length negotiations;
8. The Board's assessment that Suntory had the financial capability to
acquire the Company for the Merger Consideration and therefore is likely to
consummate the Merger;
9. The failure of any other bidder who the Board believed could be
reasonably assured of consummating a transaction to submit a proposal having
terms more favorable than the terms proposed by Suntory;
10. The business, financial condition and recent results of operations of
the Company (see "SELECTED CONSOLIDATED FINANCIAL DATA"); and
11. The compatibility of the respective businesses and management
philosophies of the Company and Suntory.
The foregoing list of factors considered by the Board is not intended to be
exhaustive. In view of the variety of factors considered in connection with its
evaluation of the Merger, the Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the Board may
have given different weights to different factors.
8
<PAGE>
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
HFBE acted as financial advisor to the Company in connection with the Merger
and delivered a written opinion to the Board of Directors dated March 31, 1999
to the effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the Merger Consideration to be received by the
Company's shareholders, other than Suntory, under the Merger Agreement is fair
to the shareholders of the Company from a financial point of view.
In connection with its opinion, HFBE: (i) reviewed the Company's Annual
Report, Form 10-KSB and related financial information for 1993 through 1997,
and Form 10-QSB and related financial information for the quarter ended
September 30, 1998; (ii) reviewed the Agreement; (iii) analyzed the nature and
financial terms of certain business combinations involving companies in lines of
business it believed to be generally comparable to those of the Company; (iv)
visited the Company's facilities and conducted discussions with members of
senior management of the Company; (v) reviewed the historical market prices and
trading activity for the Company's Common Stock and compared them with that of
certain companies which HFBE deemed to be reasonably similar to the Company;
(vi) compared the results of operations of the Company with that of certain
companies deemed to be reasonably similar to the Company; (vii) reviewed the
various briefs filed by the Company in connection with the LiquiBox Litigation;
and (viii) considered such other matters as HFBE deemed relevant, including an
assessment of general economic, market and momentary conditions.
In preparing its opinion, HFBE relied on the accuracy and completeness of all
information supplied or otherwise made available to HFBE by the Company. HFBE
did not independently verify such information. HFBE's opinion is based upon
market, economic, financial and other conditions as they exist and can be
evaluated as of the date of the opinion. To the extent a vote of the Company's
stockholders is required or sought, HFBE's opinion does not constitute a
recommendation to any stockholder of the Company as to how any such stockholder
should vote on the Merger. The opinion does not address the relative merits of
the Merger and any other transaction or business strategies discussed by the
board of directors of the Company as alternatives to the Merger or the decision
of the Company's board to proceed with the Merger. HFBE was not requested to
and did not solicit third party indications of interest in acquiring all or any
part of the Company.
HFBE assumed that there had been no material change in the Company's financial
condition, results of operations, business or prospects since the date of the
last financial statements made available to HFBE. HFBE relied on advice of
counsel to the Company as to all legal matters with respect to the Company, the
Merger and the Agreement. In addition, HFBE did not make an independent
evaluation appraisal or physical inspection of the assets or individual
properties of the Company, nor was it furnished with any such appraisals.
Selected Comparable Public Company Analysis.
Using public information, HFBE compared selected historical financial and
operating results of the Company to the corresponding data of certain publicly
traded companies which are deemed to be similar to the Company with regard to
their business and operations. The comparable companies which, in the opinion
of HFBE, are the most appropriate consist of Vermont Pure Holding Ltd., Echo
Springs Water Co., Hawaiian Natural Water Inc., Clearly Canadian Beverage Corp.,
Saratoga Beverage Group, and PL Brands Inc. (the "Comparable Companies"). In
order to measure the Company's operating performance with the operating
performance of the Comparable Companies, HFBE considered among other factors,
the Company; (i) gross profit margins; (ii) operating expenses levels; (iii)
operating earnings (i.e., earnings before interest and taxes) margins; (iv)
operating cash flow (i.e., cash flow before interest and taxes) margins; (v)
profit margins on, before and after tax net income; and (vi) cash flow, compared
to similar data for the Comparable Companies. In order to measure the Company's
capital structure against those of the Comparable Companies, HFBE considered,
among other factors, the Company's; (i) ratio of total debt to total capital,
and (ii) ratio of total debt to total assets, compared to similar data for the
Comparable Companies.
These comparisons, among other things, showed that: (i) the Company's net
profit margin for the latest twelve month period ended September 30, 1998
("LTM") was 4.8 percent, compared to an average of negative 41.8 percent and a
median of negative 15.6 percent for the Comparable Companies; (ii) the Company's
return on assets for the fiscal year ended December 31, 1997 ("FYE") was
negative 10.5 percent, compared to an average of negative 23.5 percent and a
median of negative 28.2 percent of the Comparable Companies; (iii) the Company's
FYE return on equity was
9
<PAGE>
negative 52.4 percent, compared to an average of negative 45.4 percent and a
median of negative 6.2 percent for the Comparable Companies; (iv) the Company's
ratio of long-term debt to assets at the end of the LTM period was 27.3 percent,
compared to an average of 16.9 percent and a median of 13.7 percent for the
Comparable Companies; (v) at March 29, 1999, the Company's price per share to
book value per share at the end of the LTM period was 4.8 times, compared to an
average of 4.9 times and a median of 3.1 times for the Comparable Companies;
(vi) at March 29, 1999, the Company's price per share to earnings per share for
the LTM period was 29.4 times, compared to an average of 17.9 times and a median
of 18.4 times for the Comparable Companies; and (vii) the consideration to be
received by the Company's shareholders in connection with the Merger reflects a
premium of approximately 17 percent over the trading price of the Company's
shares as of March 29, 1999 and a premium of approximately 27 percent over the
average trading price of the Company's shares for the period of January 1, 1999
through March 29, 1999.
Selected Comparable Transaction Analysis.
HFBE researched various merger and acquisition databases to review
transactions involving the sale of companies comparable to the Company within
the past two years. Financial disclosure was available for three transactions
of such Comparable Companies. The analysis yielded ratios of the comparable
transactions' purchase price as a multiple of: (i) EBITDA (earnings before
depreciation, interest and taxes) ranging from 10.8 times to 15.5 times with an
average of 12.9 times and a median of 12.4 times; (ii) net income ranging from
36.1 times to 128.2 times with an average of 69.5 times and a median of 44.3
times; and (iii) book value ranging from 2.3 times to 28.0 times with an average
of 10.9 times and a median of 2.4 times. The purchase price for the Company was
above the median in two cases (EBITDA and book value multiples) and slightly
below the median for the multiple of net income. The purchase price for the
Company equates to the following multiples: EBITDA--18.1 times LTM result; book
value--6.6 times LTM result; and net income--40.2 times LTM result.
THE FULL TEXT OF THE WRITTEN OPINION OF HFBE, DATED AS OF MARCH 31, 1999 AND
SETTING FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS IN THE
REVIEW UNDERTAKEN, ARE ATTACHED AS ANNEX B TO THIS INFORMATION STATEMENT AND
SHOULD BE READ CAREFULLY IN THEIR ENTIRETY.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders should be aware that certain members of the Company's
management and Board may be deemed to have certain interests in the Merger in
addition to their interests, if any, as shareholders of the Company generally.
Stock Options
There are no outstanding options held by directors and officers of the
Company.
Directors and Officers Indemnification
The Merger Agreement provides that, for four years after the Effective Time,
Suntory will cause the Surviving Corporation to indemnify and hold harmless the
present and former directors and officers of the Company (the foregoing persons
and entities, collectively, "Indemnified Parties"), against all losses,
expenses, claims, damages or liabilities arising out of actions or omissions
occurring on or prior to the Effective Time to the extent permitted or required
under federal and Texas law and the Company's Amended Articles of Incorporation
or Amended Bylaws in effect on the date of the Merger Agreement except to the
extent the Indemnified Party knowingly causes a representation or warranty of
the Company in the Merger Agreement to be false or inaccurate and the claim
arises principally from such falsity or inaccuracy. In addition, Suntory has
agreed to cause the Surviving Corporation to advance expenses to an Indemnified
Party to the fullest extent permitted under Texas and federal law, the Company's
Amended Articles of Incorporation or Amended Bylaws if the Indemnified Party
undertakes to repay the advance on a determination that the Indemnified Party is
not entitled to indemnification. If the Surviving Corporation consolidates or
merges with another entity and is not the surviving entity or transfers all or
substantially all of its assets to another entity, then proper provisions must
be made so that the successor entity or transferee assumes the Surviving
Corporation's foregoing indemnity obligations.
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Stock Purchase Agreements
Contemporaneously with the execution of the Merger Agreement, Robert A
Hammond, Sr., Robert A. Hammond, Jr., Cynthia Hammond, as trustee of the Joshua
Slocum Hammond Trust, and Nick A. Baki (collectively, the "Sellers" and
individually, a Seller") each entered into a Stock Purchase Agreement with
Suntory. Pursuant to the Stock Purchase Agreements, the Sellers sold all of
their respective Shares (totaling 1,887,973 in the aggregate) to Suntory for a
purchase price per Share equal to the Base Consideration plus an amount per
Share equal to the Additional Consideration, if any. The sale of the Shares was
consummated on April 1, 1999, at which time an amount per Share equal to the
Base Consideration was paid by Suntory to the Sellers. If any Additional
Consideration becomes payable, an amount equal to the Additional Consideration
multiplied by the number of Shares sold by a Seller will be paid to such Seller
promptly following the Liquidation Date. If (a) the Merger Agreement is
terminated before consummation of the Merger, (b) the Liquidation Date has
occurred and (c) Suntory has received any Net Proceeds from the Company, Suntory
must promptly pay to each Seller in lieu of Additional Consideration (i) an
amount per Share sold by such Seller equal to the Net Proceeds actually received
by Suntory, less (ii) any taxes paid by Suntory in connection with such receipt,
less (iii) any expenses incurred by Suntory in complying the payment of said
amounts. Each Stock Purchase Agreement requires the applicable Seller to vote
all Shares owned by him or her (i) in favor of the Merger and for approval of
the Merger Agreement; (ii) against an election of new members of the Company's
board of directors, except in favor of nominees of a majority of the existing
directors; (iii) against any other Acquisition Event (as defined in the Merger
Agreement); (iv) against any change in the Company's present capitalization,
except as contemplated in the Merger Agreement; (v) against any amendment to the
Company's Articles of Incorporation, except as contemplated in the Merger
Agreement; (vi) against any other action or agreement that could reasonably be
expected to or is intended to result in a breach by the Company of the Merger
Agreement; and (vii) against any other action that could reasonably be expected
to or is intended to interfere with, delay or adversely affect the Merger or any
action contemplated by the Merger Agreement or the Stock Purchase Agreements.
Each Stock Purchase Agreement contains a provision giving Suntory an irrevocable
proxy to vote the Shares covered thereby in accordance with the requirements
described in the preceding sentence.
Stock Option Agreement
Contemporaneously with the execution of the Merger Agreement, the Company and
Suntory entered into the Stock Option Agreement pursuant to which the Company
granted to Suntory the Suntory Option to purchase up to 470,000 Shares at a
purchase price equal to the Base Consideration. By the terms of the Stock
Option Agreement, Suntory is not entitled to receive, in respect of any Share it
purchases upon exercise of the Suntory Option, any of the proceeds attributable
to the LiquiBox Lawsuit and is obligated to return, and cause any transferee of
such Share to return, to the Company any such proceeds. The Stock Option
Agreement also provides that, in the event additional Shares are issued by the
Company or otherwise become outstanding, the number of Shares subject to the
Suntory Option will be increased so that the aggregate number of Shares subject
thereto will be 10% of the then issued and outstanding Shares without giving
effect to any Shares subject or issued pursuant to the Stock Option Agreement.
The Stock Option Agreement terminates on the earlier of (i) the Effective Time
or (ii) termination of the Merger Agreement. Pursuant to the Stock Option
Agreement, the Company agreed (i) to maintain, free from preemptive rights,
sufficient authorized but unissued Shares or treasury shares so that the Suntory
Option may be exercised without additional authorization of Shares after giving
effect to all other outstanding options, warrants, convertible securities or
other rights to purchase Shares; (ii) not to avoid or seek to avoid the
performance of any of its agreements under the Stock Option Agreement; (iii)
promptly to take all actions required in order to permit Suntory to exercise the
Suntory Option and the Company to issue the Shares covered thereby; and (iv)
promptly to take all action provided therein to protect Suntory against
dilution. If any change occurs in the outstanding Shares as a result of a stock
dividend, merger, recapitalization, subdivision, conversion, exchange or similar
event, the type and number of Shares subject to the Suntory Option will be
appropriately adjusted and if additional Shares are issued or become outstanding
as a result of such change, the aggregate number of Shares subject to the
Suntory Option will be increased to equal 10% of the issued and outstanding
Shares without giving effect to any Shares subject or issued pursuant to the
Stock Option Agreement, and the exercise price of the Suntory Option will be
proportionately adjusted.
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Non-Disclosure, Non-Solicitation and Non-Competition Agreements
Contemporaneously with the execution of the Merger Agreement, Robert A.
Hammond, Sr. and Robert A. Hammond, Jr. each entered into a separate Non-
Disclosure, Non-Solicitation and Non-Competition Agreement with Suntory and the
Company (collectively, the "Noncompete Agreements"). The Noncompete Agreements
prohibit Messrs. Hammond, Sr. and Hammond, Jr. from disclosing certain
confidential information of Suntory, its subsidiaries and the Company, except
for disclosures required by applicable law or in a judicial or administrative
proceeding. In addition, during the five year period following the date thereof
(the "Restriction Period"), the Noncompete Agreements prohibit Messrs. Hammond,
Sr. and Hammond, Jr. from, directly or indirectly, competing with, becoming
employed by, engaging in business with, serving as an agent or consultant with
or becoming a sole proprietor, partner, member, principal or stockholder (except
for holding less than 5% of the voting shares of a publicly held company) of any
person or entity that competes with the Company Business (as hereinafter
defined) in the State of Texas or in any other area in the United States in
which Suntory, the Company or any of their respective affiliates engage in the
Company Business (the "Restricted Territory"). The Noncompete Agreements also
prohibit Messrs. Hammond, Sr. and Hammond, Jr. during the Restriction Period
from, directly or indirectly, soliciting customers of the Company in the
Restricted Territory to induce them to enter an agreement or conduct business in
the Restricted Territory in competition with the Company Business or to induce
them to terminate or refrain from entering into their relationship with the
Company. During the Restriction Period, the Noncompete Agreements prohibit
Messrs Hammond, Sr. and Hammond, Jr. from, directly or indirectly, for
themselves or any other person or entity in the Restricted Territory, soliciting
for employment or interfering with the employment relationship of the Company
with any person who is or was employed by the Company during the six-month
period preceding the solicitation or interference. As used in the Noncompete
Agreements, "Company Business" means the processing, marketing, sale and
distribution of bottled water or coffee, or the sale or leasing of water
filtration systems, coolers, dispensers, cups and related products, as conducted
by the Company or Suntory as of the date of the Noncompete Agreements.
PAYMENT OF MERGER CONSIDERATION FOR THE SHARES
As soon as practicable after the Effective Time, the bank or trust company
selected by Suntory (the "Paying Agent") will send a transmittal letter and
instructions to each person that was a record holder of Shares immediately prior
to the Effective Time advising such holder of the procedure for surrendering
such holder's certificate or certificates representing formerly outstanding
Shares (the "Certificate") in exchange for the Merger Consideration for each
formerly outstanding Share. To receive the payment to which they are entitled
pursuant to the terms of the Merger Agreement, shareholders must carefully
comply with the instructions on such transmittal letter and return it, along
with their Certificate, to the Paying Agent pursuant to the terms thereof.
Interest will not be paid on the amounts payable upon surrender of Certificate;
therefore, it is recommended that you surrender your Certificate promptly after
you receive a letter of transmittal from the Paying Agent informing you of the
consummation of the Merger. Following surrender to the Paying Agent of a
Certificate, together with said letter of transmittal duly executed, the holder
of said Certificate will be paid in exchange therefor (i) an amount in cash
equal to the product of the number of Shares represented by such Certificate
multiplied by the Base Consideration, which will be payable timely after said
surrender, and (ii) an amount equal to the product of the number of Shares
represented by said Certificate multiplied by the Additional Consideration, if
any, which will be payable promptly after the Liquidation Date. If, with
respect to any Shares, the Merger Consideration is to be paid to a person who is
not the holder of record of such Shares, the amount of any applicable stock
transfer taxes will be required to be paid by the record holders or such other
person prior to the payment of the Merger Consideration unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted to
the Paying Agent.
Six months after the Effective Time, with respect to cash funds representing
Base Consideration, and six months after the Liquidation Date, with respect to
cash funds representing any Additional Consideration, the Paying Agent will
deliver to the Surviving Company any such cash funds not theretofore disbursed
to holders of Certificates, and thereafter the holders of such Certificates must
look to the Surviving Company (subject to applicable abandoned property, escheat
or other similar laws and laws affecting creditors' rights generally) for any
cash payments due as a result of the Merger for the Shares formerly represented
by such Certificates. Neither the Paying Agent, Suntory, nor the Surviving
Company will be liable to a holder of Shares for any cash delivered pursuant to
the Merger Agreement to any public official pursuant to applicable abandoned
property, escheat and similar laws.
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LITIGATION TRUST
Prior to the date of the Merger Agreement and in contemplation of the Merger,
the Company established the Litigation Trust to hold and pursue all of the
Company's right and interest in the LiquiBox Lawsuit pursuant to a Litigation
Trust Agreement (the "Trust Agreement"), dated as of March 31, 1999, among the
Company, as Settlor, and Robert A. Hammond, Sr., Robert A. Hammond, Jr. and
Stephen A. Lee, as trustees. The Company transferred all of its right and
interest in the LiquiBox Lawsuit to the Litigation Trust by an Assignment dated
as of March 31, 1999. The Company is the sole beneficiary of the Litigation
Trust.
The Trust Agreement provides that, promptly following (a) the irrevocable
settlement or resolution of the LiquiBox Lawsuit by a final, nonappealable
judgment, and (b) the discharge by the Litigation Trust of all of its
obligations, the Litigation Trust will liquidate its remaining assets, if any,
and distribute any remaining cash (the "Gross Proceeds") to the Company (the
date of such distribution being the "Liquidation Date") and the Litigation Trust
will thereupon be terminated. The Merger Agreement provides that, the "Net
Proceeds" are the Gross Proceeds multiplied by (i) 100% minus the highest
marginal tax rate that could be applicable to the Company, as part of the
consolidated group of Suntory, on the Liquidation Date, less (ii) the sum of all
unreimbursed expenses incurred by the Company in connection with the LiquiBox
Lawsuit. The Merger Agreement provides that the "Additional Consideration" will
be an amount per Share equal to the Net Proceeds divided by the number of shares
equal to the sum of (i) the aggregate number of Shares outstanding immediately
prior to the Effective Time, plus (ii) the aggregate number of Shares subject to
options that are outstanding and exercisable immediately prior to the Effective
Time.
Pursuant to the Trust Agreement, the Litigation Trust will indemnify the
Company and its affiliates from any losses, claims, costs, expenses and
liabilities related to the establishment or administration of the Litigation
Trust, excluding legal fees and related expenses incurred to the date of the
Trust Agreement in connection with the establishment of the Trust and the
assignment thereto of the LiquiBox Lawsuit; provided that any amounts payable as
a result of the indemnity will be payable (a) solely out of (i) the proceeds of
any settlement or resolution of the LiquiBox Lawsuit and (ii) any other trust
assets held after said settlement or resolution and (b) prior to making any
distribution to the Company.
REGULATORY APPROVALS
No federal or state regulatory requirements must be complied with or approval
must be obtained in connection with the Merger.
THE MERGER AGREEMENT
All references to and summaries of the Merger Agreement in this Information
Statement are qualified in their entirety by reference to the text of the Merger
Agreement, which is attached to the Information Statement as Annex A.
Shareholders are urged to read carefully the Merger Agreement.
General
The Merger Agreement provides that, subject to the approval by the
shareholders of the Company and the satisfaction or waiver of certain other
conditions, Merger Sub will be merged with and into the Company with the Company
being the Surviving Corporation. At the Effective Time, each issued and
outstanding Share, other than Shares owned by Suntory, Merger Sub, the Company
or their respective subsidiaries or held in the Company's treasury and Shares
as to which the holders have exercised their dissenters' rights in accordance
with Articles 5.12 and 5.13 of the TBCA, will be converted into the right to
receive the Base Consideration plus the Additional Consideration, if any. Each
outstanding, unexercised option to purchase Shares will be converted into the
right to receive an amount in cash equal to (a) the excess, if any, of the Base
Consideration over the exercise price applicable to such option multiplied by
the number of Shares that were subject to such option, such excess to be paid
timely by the Surviving Corporation following the Effective Time and (b) (i) if
the Base Consideration is equal to or greater than the per Share exercise price
of the option, the Additional Consideration, or (ii) if the per share exercise
price of the option exceeds the exercise price of the option, the excess, if
any, of the Additional Consideration over the Remaining Exercise Price, such
amounts to be paid timely by the Surviving Corporation following the Liquidation
Date. Shareholders who do not vote in favor
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of the Merger Agreement and who comply with Articles 5.12 and 5.13 of the TBCA
have the right to seek a judicial determination of the fair value of their
Shares and to be paid such fair value. See "THE MERGER -- RIGHTS OF DISSENTING
SHAREHOLDERS." After the Merger, holders of Shares will possess no interest in
or rights as shareholders of the Surviving Corporation, except for the right to
receive payment as above described.
Effective Time
The Merger will occur at such time as a Certificate of Merger is issued by the
Secretary of State of the State of Texas in accordance with the TBCA or on such
later date as may be specified in the Articles of Merger. The required filing
is expected to be made as soon as practicable after the approval of the Merger
Agreement by the Company's shareholders at the Special Meeting and the
satisfaction or waiver of all other conditions to the consummation of the
Merger, including required approvals of governmental authorities.
Payment for Shares
The Merger Agreement provides that Suntory will choose a bank or trust company
as the Paying Agent for the purpose of exchanging the Certificates for the
Merger Consideration to be paid for each Share pursuant to the Merger. The
Merger Agreement further provides the procedure by which such Certificates will
be exchanged for the Merger Consideration by the Paying Agent. After the
Effective Time and until the shareholder surrenders the Certificates, each
Certificate will represent for all purposes only the right to receive the cash
consideration pursuant to the Merger Agreement and no other rights with regard
to the Company, Suntory, Merger Sub or the Surviving Corporation. There will
also be no further registration of transfers of Shares. Further, during such
time, there will be no transfers of any Shares on the stock transfer records of
the Company.
At or prior to the Effective Time, Suntory will deposit with the Paying Agent
the Base Consideration, and promptly following the Liquidation Date, Suntory
will deposit the Additional Consideration, for the benefit of the shareholders
of the Company for exchange. As soon as practicable after the Effective Time,
the Paying Agent will mail to each shareholder of the Company a letter of
transmittal specifying that delivery will be effected, and risk of loss and
title to the Certificates will pass, only upon delivery of the Certificates to
the Paying Agent and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration.
Upon the proper surrender of a Certificate to the Paying Agent, together with
a properly completed and duly executed letter of transmittal, the holder of such
Certificate will be entitled to receive in exchange therefor a check
representing the Base Consideration and, promptly following the Liquidation
Date, a check representing the Additional Consideration, if any, which such
holder has the right to receive in respect of the Certificate surrendered, and
the Certificate so surrendered will be canceled. If payment is to be made other
than to the person in whose name the surrendered Certificate is registered,
checks for the Base Consideration and the Additional Consideration, if any, may
be issued to the transferee if the certificate representing such Shares is
presented to the Paying Agent, accompanied by documents sufficient to evidence
and effect such transfer and evidence that all applicable stock transfer taxes
have been paid. In the event any Certificate is lost, stolen or destroyed, the
shareholder must provide to the Paying Agent an affidavit of that fact and, if
required by the Paying Agent, post a bond as indemnity against any claim that
may be made against the Paying Agent with respect to such Certificate in order
to receive checks for the Base Consideration and the Additional Consideration,
if any, in exchange for the Shares.
The Merger Agreement provides that any portion of the aggregate Base
Consideration or the proceeds of any investments thereof that remains unclaimed
by the shareholders of the Company for six months after the Effective Time, and
any portion of the aggregate Additional Consideration or the proceeds of any
investments thereof that remains unclaimed by the shareholders of the Company
for six months after the Liquidation Date, will be repaid by the Exchange Agent
to the Surviving Company. Any shareholder who has not properly surrendered his
or her Certificates to the Paying Agent will thereafter be entitled to look only
to the Surviving Company for payment of the Merger Consideration. If
Certificates are not properly surrendered or the payment for them is not claimed
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental unit or agency, the unclaimed items will, to
the extent permitted by applicable law, become the property of the Surviving
Company. See "THE MERGER -- PAYMENT OF MERGER CONSIDERATION FOR THE SHARES."
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SHAREHOLDERS SHOULD NOT SURRENDER THEIR COMMON STOCK CERTIFICATES BEFORE
RECEIVING TRANSMITTAL MATERIALS FROM THE PAYING AGENT.
Appointment of Directors
Pursuant to the Merger Agreement, if the Effective Time has not occurred on or
before September 30, 1999, Suntory is entitled to designate a number of
directors of the Company, rounded up to the next whole number, equal to the
product of the number of directors on the Company's board of directors and the
percentage that the number of Shares purchased by Suntory pursuant to the Stock
Purchase Agreement bears to the number of outstanding Shares. On such event,
the Company will either increase the size of the board of directors or use its
best efforts to secure the resignation of the number of directors necessary to
provide Suntory with the required representation on the board. The Company must
use its best efforts to cause the persons designated by Suntory to constitute
the same percentage of members of each board committee as is on the entire board
of directors. The Company's obligations to appoint designees to the board is
subject to Section 14(f) of the Exchange Act. Following the election or
appointment of Suntory's designees to the board of directors and prior to the
Effective Time, any amendment to the Merger Agreement, any extension of time for
performance of any of the obligations of Suntory or Merger Sub under the Merger
Agreement, and any waiver of compliance with any of the agreements or conditions
thereunder for the benefit of the Company will require the concurrence of a
majority of the directors of the Company then in office who are directors of
Company on the date of the Merger Agreement.
Conditions to Each Party's Obligations
Under the Merger Agreement, the respective obligations of the Company, Suntory
and Merger Sub to effect the Merger are subject to the satisfaction or waiver at
or before the Effective Time of certain conditions, including (i) the receipt of
the approval of the shareholders of the Company, and (ii) the absence of any
statute, rule, judgment, executive order, decree or injunction of a court or
governmental authority that prohibits or restricts the consummation of the
Merger or makes such consummation illegal.
Suntory Conditions
The obligations of Suntory and Merger Sub to effect the Merger are subject to
the satisfaction or waiver at or before the Effective Time of certain
conditions, including (i) the Company shall have performed in all material
respects its agreements, obligations and conditions contained in the Merger
Agreement and each of the representations and warranties of the Company
contained in the Merger Agreement that are qualified as to materiality shall
have been true and correct, and each such representations and warranties that
are not so qualified shall have been true in all material respects, on the date
of the Merger Agreement and on the Effective Date, (ii) Suntory shall have
received certificates executed by Company officers evidencing compliance by the
Company with the conditions set forth in the preceding clause (i), (iii) no
action shall have been taken, or any statute, rule, regulation, judgment, order
or injunction been promulgated, enacted, entered, enforced or deemed applicable
to the Merger Agreement or the Merger that would or would be reasonably likely
to (a) require Merger Sub, Suntory, its subsidiaries or the Company to dispose
or hold separately any material portion of their assets or impose material
limitations on their ability to conduct their respective businesses or on the
ability of the Parent or Merger Sub to conduct the Company's business or (b)
impose material limitations on the ability of Suntory, Merger Sub or their
respective subsidiaries effectively to control the business of the Company, (iv)
no action, proceeding or counterclaim shall have been threatened, instituted or
pending by or before any governmental, administrative or regulatory agency or
before any court or other tribunal challenging the Merger or seeking damages in
relation thereto, (v) none of the following shall have occurred: (a) any
general suspension of, or limitation on prices for, trading of securities on any
national securities exchange or over-the-counter market in the United States,
(b) the declaration of any banking moratorium or suspension of bank payments or
limitation on extensions of credit in the United States, (c) any war, armed
hostilities or other national or international calamity involving the United
States, (d) a material adverse change in the United States currency exchange
rates or a suspension of or limitation on markets therefor; or (e) in the case
of any of the foregoing matters existing on the date of the Merger Agreement, a
material acceleration or worsening thereof; (vi) right to dissent pursuant to
Article 5.11 of the TBCA shall not have been validly exercised by stockholders
having, in the aggregate, more than 5% of the outstanding Shares, (vii) the
Company shall have given notice of redemption to the holders of the Company's
Series A, B and C Preferred Stock
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specifying a redemption date of two business days after the Effective Time, and
(viii) the Company shall not have suffered any Material Adverse Effect (as
defined in the Merger Agreement).
The Company Conditions
The obligations of the Company to effect the Merger are subject to the
satisfaction or waiver at or before the Effective Time of certain conditions,
including (i) Suntory and Merger Sub shall have performed in all material
respects their agreements and obligations contained in the Merger Agreement
and each of the representations and warranties of Suntory and Merger Sub
contained in the Merger Agreement that are qualified as to materiality shall
have been true and correct, and such representations and warranties that are
not so qualified shall have been true in all material respects, on the date of
the Merger Agreement and on the Effective Date, and (ii) the Company shall have
received certificates executed by Suntory officers evidencing compliance by
Suntory and Merger Sub with the conditions set forth in the preceding
clause (i).
Conduct of the Company Pending the Merger
The Merger Agreement contains certain restrictions on the conduct of the
Company's business pending consummation of the Merger. In particular, prior to
the Effective Time, the Merger Agreement requires the Company to, among other
requirements, (i) conduct its business in the usual and ordinary course
consistent with past practice, (ii) use its best efforts to preserve intact its
business organization and the goodwill of, and maintain satisfactory
relationships with, its business relationships and retain the services of its
officers and employees, and (iii) advise Suntory and Merger Sub of any material
change in the Company's condition, properties, customer or supplier
relationships, assets, liabilities, business, prospects or results of
operations.
In addition, pursuant to the terms of the Merger Agreement, without the prior
written consent of Suntory, the Company may not (i) other than as required by
outstanding options and preferred stock, issue, sell, grant options or rights to
purchase, pledge or authorize, or propose any of the foregoing, with respect to
any Company securities or grant or accelerate any right to convert or exchange
any Company securities or any other securities in substitution for outstanding
Shares; (ii) acquire or redeem, directly or indirectly, or amend any Company or
subsidiary securities; (iii) split, combine or reclassify its capital stock or
declare, set aside or pay any dividend (other than mandatory dividends on
outstanding preferred stock); (iv) (a) make any acquisitions, by merger or
otherwise, of assets or securities or any disposition or encumbrance of assets
or securities, of $100,000 or more in the aggregate, except purchases of
inventory in the ordinary course of business consistent with past practice, or
(b) enter into a material contract or amend any Material Contract (as defined in
the Merger Agreement) or release any rights under any Material Contract; (v)
incur or assume any long-term or short-term debt except for short-term debt
incurred in the ordinary course of business consistent with past practice; (vi)
assume, guaranty or become liable for, directly, contingently or otherwise, the
obligations of any other person, (vii) make any loans, advances or capital
contributions to, or investments in, any other person; (viii) change any of the
accounting principles or practices used by it; (ix) except for the claims set
forth in the Company Disclosure Letter (as defined in the Merger Agreement),
make any tax election or settle or compromise any material income tax liability;
(x) propose or adopt any amendments to its Articles of Incorporation or Bylaws;
(xi) grant any stock related, performance or similar awards or bonuses; (xii)
forgive any loans to employees, officers or directors; (xiii) enter into any new
or amend any existing employment, severance or consulting agreements or increase
the compensation or benefits of officers, directors and employees, other than
increases to persons who are not officers or directors in the ordinary course of
business consistent with past practice and that, in the aggregate, do not result
in a material increase in benefits or compensation expenses to the Company;
(xiv) make any deposits or contributions to any employee benefit plan; (xv)
enter into, amend or extend any collective bargaining or labor agreements; (xvi)
adopt, amend or terminate any employee benefit plan; (xvii) settle any lawsuit,
claim or investigation or pay any claim, liability or obligation other than the
payment of liabilities reflected or reserved against in its December 31, 1998
financial statements, those incurred in the ordinary course of business
subsequent to December 31, 1998 or liabilities in the amount of $25,000
individually or $50,000 in the aggregate; (xviii) use any Company resources with
respect to the Litigation Trust; (xix) create any subsidiaries of the Company;
or (xx) agree or take any of the foregoing actions or any action which would
make any representation or warranty in the Merger Agreement untrue or incorrect
as of the date made or as of a future date or which would result in any of the
conditions to Suntory's and Merger Sub's obligation to close not being
satisfied. In addition, the Company may not make a general announcement to its
employees relating to the Merger without the prior written consent of Suntory.
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Termination
The Merger Agreement may be terminated and the Merger abandoned prior to the
Effective Time regardless of whether it has been approved by the Company's
shareholders, by (i) the mutual consent of the board of directors of the Company
and Suntory, (ii) the Company or Suntory on or after five business days
following September 30, 1999 if the Effective Time has not occurred by such date
unless the failure of the Effective Time to occur by such time is due to the
failure to fulfill any obligation in the Merger Agreement by the party seeking
to terminate, (iii) by Suntory or the Company if a court issues an order, decree
or ruling restraining, enjoining or prohibiting the Merger or the transactions
contemplated by the Stock Purchase Agreements or the Stock Option Agreement,
(iv) by Suntory if the Company's board of directors or any committee thereof
withdraws or adversely amends its approval or determination that the Merger is
in the best interest of the shareholders, resolves to do any of the foregoing or
fails to reiterate such approval or determination within five business days
after Suntory or Merger Sub requests it to do so or if the Company or its board
of directors approves, recommends, proposes or publicly announces its intention
to enter into, enters into or files a Schedule 14D not opposing any other
Acquisition Transaction, (v) by Suntory if the Company has discussions or
negotiations with, or provides information or access to its books and records
to, or assists any person or entity with any other Acquisition Transaction, (vi)
by Suntory if the Company materially breaches any of its obligations, covenants
or agreements in the Merger Agreement, or any of its representations or
warranties qualified as to materiality are not true and correct, or any such
representation or warranty not so qualified is not true and correct in all
material respects, when made or prior to the Effective Time and the Company does
not cure the breach within 15 days, or (vii) by the Company if Suntory or Merger
Sub materially breaches any of its obligations, covenants or agreements in the
Merger Agreement, or any of its representations or warranties qualified as to
materiality are not true and correct, or any such representation or warranty not
so qualified is not true and correct in all material respects, when made or
prior to the Effective Time and Suntory or Merger Sub does not cure the breach
within 15 days.
Offers
In addition, the Company and its officers, directors, employees and agents may
not, directly or indirectly, encourage, solicit, initiate or participate in any
discussions or negotiations with, or provide nonpublic information to, or
provide access to its properties, books or records, or otherwise assist or
facilitate any person or entity (other than Suntory, Merger Sub or any of their
affiliates) concerning any Acquisition Transaction (as defined in the Merger
Agreement); provided that the Company and its board of directors are not
prohibited from furnishing information or discussing or negotiating with any
person that makes an unsolicited bona fide proposal for an Acquisition
Transaction that the Company's board of directors determines is financially
superior for the Company's shareholders compared to the Merger if the board of
directors determines that the failure to take such action would be a breach of
its fiduciary duties to the Company's shareholders under applicable law; and
provided that the Company and its board of directors are not prohibited from
taking or disclosing to the shareholders a position with respect to a tender
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) under the Exchange
Act. The Company must notify Suntory if any information is requested from it or
any such negotiations or discussions are sought to be initiated with the Company
which notice must include the terms of any proposal or inquiry and the identity
of the party making the proposal or inquiry. Except as required by the
fiduciary duties of the board of directors under applicable law, the Company may
not release any third party from any confidential or standstill agreement
without Suntory's consent and must take all steps deemed necessary or
appropriate by Suntory to enforce those agreements. As of the date of the
Merger Agreement, the Company and its officers, directors, employees,
representatives and agents are required to cease any existing activities,
discussions or negotiations with any parties other than Suntory, Merger Sub or
any of their respective affiliates or associates being conducted with respect to
any Acquisition Transaction.
TREATMENT OF EMPLOYEES AND EMPLOYEE BENEFITS
Each person employed by the Company prior to the Effective Time who remains an
employee of the Surviving Corporation or its subsidiaries following the
Effective Time (a "Continued Employee") will be entitled to participate in
whatever employee benefit plans or fringe benefit programs are in effect
generally for employees of Suntory's subsidiaries if the employee is eligible
for participation therein. Suntory will, solely for the purposes of vesting and
eligibility to participate in the benefit programs, recognize credit for the
Continued Employee's term of service with the Company. However, no Continued
Employee will be eligible to participate in any defined benefit pension plan
maintained by Suntory or its subsidiaries until the Continued Employee has
completed one year of full service with
17
<PAGE>
Suntory. With regard to its health and dental plans, Suntory will waive all pre-
existing condition limitations for the Continued Employees who, prior to the
Effective Time, participated in any similar health or dental plans of the
Company.
RIGHTS OF DISSENTING SHAREHOLDERS
If the Merger is consummated, shareholders of the Company who did not vote in
favor of the Merger will have certain rights to dissent and demand the appraisal
of and payment in cash for the fair value of their Shares pursuant to the TBCA.
Under the TBCA, such rights, if the statutory procedures are complied with,
could lead to a judicial determination of the fair value, which will be the
value as of the day immediately preceding the Special Meeting (excluding any
depreciation or appreciation in anticipation of the Merger), required to be paid
in cash to such dissenting holders for their Shares. The value so determined
could be more or less than the purchase price per Share pursuant to the Merger
Agreement.
ANY SHAREHOLDER CONTEMPLATING THE EXERCISE OF APPRAISAL RIGHTS IS URGED TO
REVIEW CAREFULLY THE PROVISIONS OF ARTICLES 5.12 AND 5.13 OF THE TBCA (A COPY OF
WHICH IS ATTACHED AS ANNEX C TO THIS INFORMATION STATEMENT), PARTICULARLY WITH
RESPECT TO THE PROCEDURAL STEPS REQUIRED TO PERFECT THE RIGHT OF APPRAISAL. IF
THE RIGHT OF APPRAISAL IS LOST DUE TO THE SHAREHOLDER'S FAILURE TO COMPLY WITH
THE PROCEDURAL REQUIREMENTS OF ARTICLES 5.12 AND 5.13 OF THE TBCA, THE
SHAREHOLDER WILL RECEIVE THE MERGER CONSIDERATION WITHOUT INTEREST FOR EACH
SHARE OWNED AS OF THE EFFECTIVE TIME. SET FORTH BELOW IS A SUMMARY OF THE
PROCEDURES RELATING TO THE EXERCISE OF THE RIGHT OF APPRAISAL, WHICH SHOULD BE
READ IN CONJUNCTION WITH THE FULL TEXT OF ARTICLES 5.12 AND 5.13 OF THE TBCA.
Article 5.12 of the TBCA provides that a shareholder wishing to exercise such
shareholder's rights for appraisal with respect to the Merger must file, prior
to the Special Meeting, a written objection to the Merger stating that the
shareholder's right to dissent will be exercised if the Merger becomes effective
and giving the shareholder's address, to which notice of the approval of the
Merger will be delivered or mailed in such event. If the Merger is effected and
the shareholder did not vote in favor of the Merger, the Surviving Corporation
will, within ten days after the Effective Time, deliver or mail to the
shareholder written notice that the Merger has been effected. In order to
exercise the right of appraisal, a shareholder must, within ten days from the
delivery or mailing of the notice from the Surviving Corporation, make a written
demand ("Demand") on the Surviving Corporation for payment of the fair value of
the shareholder's Shares. The Demand must state the number of Shares owned by
such shareholder, and the shareholder's estimate of the fair value of such
Shares. Any shareholder failing to make the Demand within the ten-day period
will be bound by the Merger.
The Demand should be executed by or for the shareholder of record, fully and
correctly, as such shareholder's name appears on the certificate(s) formerly
representing the Shares. If Shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the Demand should be
made in such capacity. If Shares are owned of record by more than one person,
as in a joint tenancy or tenancy in common, the Demand should be executed by or
for all joint owners. Any shareholder who has made a Demand may withdraw the
Demand at any time before payment for the Shares is made or before any petition
asking for a determination of the fair value of the Shares is filed.
Within 20 days after making a Demand, the shareholder must submit the
certificates representing the Shares to the Surviving Corporation for notation
thereon that a Demand has been made. The failure of a shareholder to submit the
certificates will terminate the shareholder's rights of appraisal.
Within 20 days after receipt of a Demand, the Surviving Corporation must
deliver or mail to the shareholder a written notice that either (1) accepts the
amount claimed in the Demand and agrees to pay such amount within 90 days after
the Effective Time upon the surrender of the duly endorsed certificates formerly
representing such shareholder's Shares, or (2) contains an estimate by the
Surviving Corporation of the fair value of the Shares together with an offer to
pay such amount within 90 days after the Effective Time. If the Surviving
Corporation responds to the Demand with an estimate of the fair value of the
Shares and the shareholder wishes to accept the Surviving Corporation's
estimate,
18
<PAGE>
the Surviving Corporation must receive written notice from the shareholder
accepting such estimate within 60 days after the shareholder receives the
estimate from the Surviving Corporation and surrendering the duly endorsed
certificates formerly representing such shareholder's Shares. If, within 60 days
after the Effective Time, the value of the Shares is agreed upon between the
shareholder and the Surviving Corporation, payment for the Shares will be made
within 90 days after the Effective Time and upon surrender of the certificates
duly endorsed. Upon payment of the agreed value, the shareholder will cease to
have any interest in the Shares or the Company.
If, within the period of 60 days after the Effective Time, the shareholder and
the Surviving Corporation do not agree on the fair value of the Shares, then the
shareholder or the Surviving Corporation may, within 60 days following the
expiration of such 60 day period, file a petition in any court of competent
jurisdiction in the county in which the principal office of the Surviving
Corporation is located, to obtain a judicial finding and determination of the
fair value of the shareholder's Shares. Upon filing such petition, the
shareholder must serve the Surviving Corporation with a copy of such petition.
Within 10 days after being served with a copy of the petition, the Surviving
Corporation must file with the court a list of the names and addresses of
shareholders who have demanded payment for their Shares and with whom agreements
as to the value of their shares have not been reached. If the petition is filed
by the Surviving Corporation, the petition must contain such a list. All
shareholders will be notified by registered mail as to the time and place of the
hearing of the petition. All shareholders so notified and the Surviving
Corporation will then be bound by the final judgement of the court. After the
hearing of the petition, the court will determine the shareholders who have
complied with the provisions of Article 5.12 and appoint one or more qualified
appraisers who will determine the fair value of the Shares and will file a
report of that value with the clerk of the court. Each party will have
reasonable opportunity to submit to the appraisers pertinent evidence as to the
value of the Shares. Either party may make exceptions to the appraiser's
report. The court will then determine the fair value of the Shares and will
direct the Surviving Corporation, upon receipt of the duly endorsed certificates
formerly representing such Shares, to pay the value together with interest
thereon beginning on the 91st day after the Effective Time to the date of the
judgment to such shareholders entitled to payment. Upon payment of the
judgment, the dissenting shareholders will cease to have any interest in the
Shares or the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences of
the Merger to shareholders whose Shares are converted into the right to receive
the Base Consideration and the Additional Consideration. This discussion is
based upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the applicable Treasury Regulations promulgated and proposed
thereunder, judicial authority and administrative rulings and practice.
Legislative, judicial or administrative rules and interpretations are subject to
change, possibly on a retroactive basis, at any time and therefore could alter
or modify the statements and conclusions set forth below. It is assumed for
purposes of this summary that the Shares are held as capital assets by a United
States person (i.e., a citizen or resident of the United States or a domestic
corporation). This discussion does not address all aspects of federal income
taxation that may be relevant to a particular shareholder in light of such
shareholder's personal investment circumstances, or those shareholders subject
to special treatment under the federal income tax laws (e.g., life insurance
companies, tax-exempt organizations, foreign corporations and nonresident alien
individuals), shareholders who hold Shares as part of a conversion transaction
(within the meaning of Section 1258 of the Code), shareholders who acquired
their Shares through the exercise of employee stock options or other
compensation arrangements, or shareholders who hold the Shares other than for
investment. In addition, the discussion does not address any aspect of foreign,
state, local or estate and gift taxation that may be applicable to the
shareholder.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES.
Consequences of Merger and Characterization of the Additional Consideration
The receipt of the Base Consideration and the Additional Consideration will be
a taxable transaction for federal income tax purposes (and may also be a taxable
transaction under applicable state, local or other income tax laws). In general,
a shareholder will recognize gain or loss equal to the difference between such
shareholder's adjusted tax basis in the Shares exchanged
19
<PAGE>
in the Merger and the amount realized in exchange therefor. The amount realized
in exchange for such Shares will be the sum of (i) the cash received and (ii)
the fair market value, as of the Effective Time, of the contractual right to
receive Additional Consideration ("Additional Consideration Right"), if any, if
such Additional Consideration Right has an ascertainable fair market value (see
discussion of the "Open Transactions Doctrine" below). Such gain or loss will be
capital gain or loss, and will be long-term gain or loss if, on the date of the
Merger, the Shares were held for more than one year.
In general, the fair market value of the Additional Consideration Right would
be the price at which such Additional Consideration Right would change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or sell, and both having reasonable knowledge of relevant facts, assuming
there are no restrictions on transfer. The Company is unable to express an
opinion as to the fair market value of such Additional Consideration Right.
Shareholders are referred to the description of the Litigation Trust contained
elsewhere in this Information Statement (including the Litigation Trust
Agreement attached as Exhibit B to the Merger Agreement, which is attached as
Annex A to this Information Statement) and the Company's Form 10-KSB for more
details, and are urged to consult their own tax advisors to determine the tax
treatment of such Additional Consideration Right. A shareholder will take a
basis in its Additional Consideration Right equal to the fair market value
thereof, as determined above.
Open Transaction Doctrine. The Internal Revenue Service has ruled that, except
in rare and extraordinary cases, it will require valuation of claims to receive
indefinite amounts, such as the contractual claim that shareholders will have
against the Company to receive any Additional Consideration. It is possible that
the Internal Revenue Service might take the position that the contingent right
to receive any Additional Consideration is not capable of valuation as of the
Effective Time because of the uncertainty regarding the amount and timing of the
receipt of any proceeds from the Litigation Trust. If the Additional
Consideration Right cannot be valued, the transaction would be treated as
remaining "open" and a shareholder might not be permitted to recognize a loss at
the Effective Time but instead would be required to defer the recognition of
loss until the amount and timing of the payment of any Additional Consideration
was resolved. Gain, however, would not be similarly deferred but would be
required to be recognized at the Effective Time except that the Additional
Consideration Right would not be included in calculating the gain.
Additional Consideration. The Company intends to treat its shareholders as
though they will receive, at the Effective Time, a contingent contractual right
to receive payments from the Company with respect to their Shares. The Company
intends, under current law, that payments made with respect to the Additional
Consideration Right will be treated as payments under a contract for the sale or
exchange of Shares, subject to Section 483 of the Code. Given the wholly
contingent nature of the Additional Consideration Right, it is not anticipated
that the Additional Consideration Right will be treated as a debt instrument for
federal income tax purposes.
If the Additional Consideration is paid to the shareholders more than six
months after the Effective Time of the Merger, Section 483 of the Code requires
the shareholder to treat a portion of the Additional Consideration as interest
income, which is ordinary income to the shareholder. The interest amount will
equal the excess of the amount received over its present value as of the
Effective Date, calculated using as the discount rate the applicable federal
rate ("AFR"). The AFR is a rate reflecting an average of market yields on
Treasury debt obligations for different ranges of maturities that is published
monthly by the Internal Revenue Service. The Section 483 interest must be
included in income by a holder under its regular method of accounting (e.g., the
accrual method or the cash method). If interest is imputed under Section 483,
the Company will issue a Form 1099 to each of the shareholders indicating the
amount of interest income required to be included in shareholders' gross income
under the Internal Revenue Code and the applicable regulations.
When any payment of Additional Consideration is made to a shareholder, the
shareholder should recognize gain equal to the difference between the amount of
the payment, net of imputed interest under Section 483, and the basis such
shareholder has in the Additional Consideration Right (generally, the fair
market value ascribed to such right at the Effective Time). If multiple payments
of Additional Consideration may be made, the shareholder may be required to
allocate such basis among those payments. The method for making such allocation
is unclear. If a shareholder receives a payment that is less than such basis,
the shareholder may not be allowed a loss until it is determined that no further
payments will be made. Such gain or loss attributable to the payment generally
should be capital gain or loss.
Backup Tax Withholding
Under the federal income tax backup withholding rules, unless an exemption
applies, the Paying Agent will be required to withhold, and will withhold, 31
percent of all payments to which a shareholder or other payee is entitled
pursuant to the Merger, unless the shareholder or other payee provides a tax
identification number (social security number, in the case of an individual, or
employer identification number in the case of another shareholders) and
certifies under penalties of perjury that such number is correct. Each
shareholder and, if applicable, each other payee, should complete and sign the
substitute Form W-9 which will be included as part of the latter of transmittal
to be returned to the Paying Agent in order to provide the information and
certification necessary to avoid backup withholding, unless an applicable
execution exists and is proved in a manner satisfactory to the Paying Agent.
The exceptions provide that certain shareholders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, however, such shareholder must submit a signed
statement (i.e., Certificate of Foreign Status on Form W-8) attesting to such
individual's exempt status. Any amounts withheld will be allowed as a credit
against the holder's federal income tax liability for such year.
FINANCING OF THE MERGER
The total funds required to pay the Base Consideration for each Share
outstanding immediately prior to the Effective Time will be approximately $5.3
million if all outstanding options are exercised, or approximately $5.1 million
if none of the outstanding options are exercised and such options are terminated
and cash in lieu thereof is paid by
20
<PAGE>
Suntory (see "THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER -- STOCK
OPTIONS"). It is not possible to calculate the amount, if any, of the aggregate
Additional Consideration payable following final resolution of the LiquiBox
Litigation. Suntory intends to finance the aggregate Merger Consideration with
its existing funds.
BUSINESS OF THE COMPANY
The Company, processes, delivers and sells bottled water to homes and
businesses in the greater Houston and DFW metropolitan areas under the brand
name "Texas Premium Waters." The Company offers three types of water--spring
water, drinking water and purified water, and four types of dispensers--one that
offers both room temperature and chilled water, one that offers both room
temperature and heated water, one that offers both heated and chilled water and
has a small built-in refrigerator, and one that offers room temperature water
only. As of December 31, 1998, the Company owned approximately 36,000 water
dispensers, owned or leased 25 "ten-bay" trucks that it uses to deliver full
water bottles to customers and to pick up empty bottles and owned approximately
120,000 five-gallon bottles. The Company also owns or leases 26 cube vans for
special deliveries and new account setups. The Company's customers are
segregated geographically and placed on one of the routes that are maintained by
the Company. At the present time, the Company maintains approximately 350
separate routes and serves approximately 16,000 customers in the Houston area
and 12,200 customers in the DFW area. The Company's principal offices are
located at 600 N. Shepherd, Suite 303, Houston, Texas 77007. The Company's
telephone number at that address is (713) 864-6688.
PRICE RANGE OF THE SHARES; DIVIDENDS
The Shares are traded on the OTCEBB under the symbol "GPWC." Prior to
July 29, 1998, the Shares were listed for quotation on the Nasdaq Small Capital
Market System. On August 22, 1997 the Commission approved new listing standards
for companies listed on the Nasdaq Small Capital Market System. Companies had
until February 23, 1998 to comply with the new continuing inclusion
requirements. The new requirements include, among other things (i) net tangible
assets of $2 million (net tangible assets means total assets, excluding
goodwill, minus total liabilities); (ii) public float of 500,000 shares; and
(iii) $1 per share bid price. The Company was not able to meet the new
requirements. On July 28, 1998, the Shares were delisted from the Nasdaq Small
Capital Market System.
As of March 11, 1999, there were 2,760,862 outstanding Shares held by
approximately 500 shareholders of record. The following table sets forth the
high and low bid price per Share for the periods presented. The prices
represent inter-dealer quotations, without adjustments for retail mark-ups,
mark-downs or commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
----------------- ----------------
Fiscal Year Ended December 31, 1996
<S> <C> <C> <C> <C>
Quarter ended March 31, 1996................................... $ 4 1/2 $ 2 1/4
Quarter ended June 30, 1996.................................... 4 5/8 3 3/8
Quarter ended September 30, 1996............................... 4 9/16 2 1/8
Quarter ended December 31, 1996................................ 6 5/8 3 5/8
Fiscal Year Ended December 31, 1997
Quarter ended March 31, 1997................................... $ 7 7/8 $ 6 1/8
Quarter ended June 30, 1997.................................... 7 1/2 4 3/4
Quarter ended September 30, 1997............................... 7 1/2 5 3/8
Quarter ended December 31, 1997................................ 7 13/16 3 9/16
Fiscal Year Ended December 31, 1998
Quarter ended March 31, 1998................................... $ 4 5/8 $ 2 1/2
Quarter ended June 30, 1998.................................... 4 7/16 2 5/8
Quarter ended September 30, 1998............................... 4 1/8 7/8
Quarter ended December 31, 1998................................ 5 1/2 2
Period beginning January 1, 1999 to May 19, 1999.................. $ 6 1/8 $ 3 9/16
</TABLE>
21 v
<PAGE>
On May 19, 1999, the last full trading day prior to the date of this
Information Statement, the high and low prices for the Shares reported on the
OTCEBB, were $5.5625 and $5.5625, respectively.
The Company has not paid any cash dividends on the Shares since inception and
the board of directors does not contemplate the payment of cash dividends in the
foreseeable future. Further, the Company's agreements with its current lenders
prohibit the payment of dividends. It is the present policy of the board of the
directors to retain earnings, if any, for use in developing and expanding the
Company's business.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET PRICES FOR THEIR SHARES.
BUSINESS OF SUNTORY AND MERGER SUB
Suntory and subsidiaries bottle, self and distribute water and related
products under several trade names, including Hinckley & Schmitt, Sierra Springs
Water Company, Mountain Fresh Drinking Water Systems, Belmont Springs Water
Company, Crystal Springs Water Company, Kentwood Spring Water and Polar Water
Company. Suntory is also a producer and distributor of an isotonic beverage
product under the brand name 10-K Thirst Quencher. Suntory also provides coffee
services which include the distribution of coffee to commercial consumers, along
with the related brewing equipment and supplies. For bottled water, point-of-
use filtration systems and coffee products, the Company rents dispensing and
filtration equipment, such as coolers and brewing machines, under cancelable
operating leases. Suntory sells and distributes its products throughout the
United States and its corporate headquarters are located in Atlanta.
Merger Sub is a newly formed Texas corporation that is a wholly owned
subsidiary of Suntory. To date, Merger Sub has not conducted any business other
than the business conducted in connection with its formation and capitalization
and the transactions contemplated by the Merger Agreement.
The principal executive offices of Suntory and Merger Sub are located at 5660
New Northside Drive, Atlanta, Georgia 30328. The telephone number of Suntory and
Merger Sub at that address is (770) 933-1400.
SELECTED COMPANY FINANCIAL DATA
The following table sets forth certain summary financial information with
respect to the Company excerpted or derived from the audited financial
statements contained in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998. More comprehensive financial information is included
in such report and other documents filed by the Company with the Commission, and
the following summary is qualified in its entirety by reference to such
documents (which may be inspected and obtained as described herein), including
the financial statements and related notes contained therein.
GREAT PINES WATER COMPANY, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
----------------------------------------------
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenues........................................ $9,214 $8,769 $7,495 $7,121 $ 6,076
Operating costs................................. 1,595 1,744 1,391 1,284 950
Transportation costs............................ 2,114 2,171 1,745 1,802 1,534
Depreciation and amortization................... 961 988 1,064 1,149 822
Commissions and other selling costs............. 1,675 1,874 1,231 1,141 1,487
General and administrative costs................ 2,603 2,190 2,084 2,091 2,239
------ ------ ------ ------ -------
Gain (loss) from operations..................... 266 (198) (21) (345) (955)
- ------------------------------------------------- --- ---- ---- ----
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Other income (expense).......................... 636 (387) (623) 433 343
------ ------ ------ ------ -------
Gain (loss) before income taxes................. 902 (585) (644) (778) (1,297)
Income tax expense (benefit).................... 0 0 0 (44) (317)
------ ------ ------ ------ -------
Income (loss) after income taxes................ 902 (585) (644) (734) (980)
Dividends on Preferred Stock.................... 189 135 25 0 0
------ ------ ------ ------ -------
Income (loss) attributable to Common Stock...... 713 (720) (669) (734) (980)
====== ====== ====== ====== =======
Income (loss) per common share Basic........... $.27 $(.29) $(.28) $(.31) $(.41)
====== ====== ====== ====== =======
Income (loss) per common share Diluted......... $.31 $(.29) $(.28) $(.31) $(.41)
====== ====== ====== ====== =======
BALANCE SHEET DATA:
Total Assets.................................... $6,824 $7,479 $6,263 $6,606 $ 7,760
Current and long-term debt and capital lease
obligations.............................. $2,590 $3,953 $3,480 $4,295 $ 4,979
- ---------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
OTHER DATA:
<S> <C> <C> <C> <C> <C>
EBITDA (1)...................................... $ 2,225 $ 797 $ 830 $ 811 $(112)
Net cash provided by (used in) operating
activities................................ $ 1,802 $ 486 $ 704 $ 707 $(213)
Net cash used in investing activities........... $ (23) $(490) $(354) $(185) $(411)
Net cash provided by (used in) financing
activities................................ $(1,040) $ 31 $ (95) $(638) $(698)
</TABLE>
- -----------------------------
(1) EBITDA is defined as the sum of (i) gain or loss before income taxes; (ii)
interest; and (iii) depreciation and amortization, as reported on the
Company's income statement. EBITDA is presented not as an alternative
measure of operating results or cash flow from operations (as determined
in accordance with generally accepted accounting principles), but rather
to provide additional information related to the debt servicing ability of
the Company. This information may not be comparable to similarly titled
amounts presented by other companies.
24
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 5, 1999 regarding
the beneficial ownership of Shares by each person or entity known by the Company
to beneficially own five percent or more of the outstanding Shares, each
director of the Company, and the directors, advisory directors and executive
officers of the Company as a group. The persons named in the table have sole
voting and investment power with respect to all Shares owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED PERCENT OF CLASS
<S> <C> <C>
Suntory Water Group, Inc. 1,887,973 68.4%
Robert A. Hammond, Jr. 0 *
Robert A. Hammond, Sr. (2) 0 *
Nick A. Baki 0 *
Kevin F. Vigneaux 3,992 *
Stephen A. Lee 4,752 *
All Executive Officers and Directors
as a Group (5 persons) 8,744 *
</TABLE>
- -----------------------------
* Less than 1%.
(1) The business address of each beneficial owner is the same as the address of
the Company's principal executive office, except that the business address
of Suntory Water Group, Inc. is the same as its principal executive office.
(2) Mr. Hammond, Sr. is the father of Robert A. Hammond, Jr.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Deloitte & Touche LLP, the Company's independent
auditors for the fiscal year ended December 31, 1998, are not expected to be at
the Special Meeting.
OTHER BUSINESS
Management of the Company does not know of any other matters that are
likely to be brought before the Special Meeting for action.
INCORPORATION BY REFERENCE
The following documents or portions of documents filed by the Company are
hereby incorporated by reference in this Information Statement:
1. Annual Report on Form 10-KSB for the year ended December 31, 1998,
which includes portions of the Company's 1998 Annual Report to
Shareholders;
2. Current Report on Form 8-K filed on April 2, 1999; and
3. Current Report on Form 8-K/A-1 filed on April 14, 1999.
25
<PAGE>
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
subsequent to the date hereof and prior to the earlier of the Effective Time or
the termination of the Merger Agreement are hereby incorporated by reference
into this Information Statement and shall be deemed a part hereof from the date
of filing of such documents.
THIS INFORMATION STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE IS AVAILABLE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM AN INFORMATION STATEMENT IS DELIVERED,
UPON WRITTEN OR ORAL REQUEST TO: ROBERT A. HAMMOND, SR., CORPORATE SECRETARY,
GREAT PINES WATER COMPANY, INC.,600 N. SHEPHERD, SUITE #303, HOUSTON, TEXAS
77007, TELEPHONE NUMBER (713) 864-6688
The Company is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is required to file with the Commission
periodic reports, proxy statements and other informational filings relating to
its business, financial condition and other matters. The Company is required to
disclose in such proxy statements, reports and other informational filings
certain information as of particular dates concerning the Company's operating
results, financial condition, directors and officers, their remuneration, stock
options and other equity based compensation granted to them, the principal
holders of the Company's securities, material interests of such persons in
transactions with the Company and other matters. Such reports, proxy statements
and other informational filings required by the Exchange Act are available for
inspection at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices in New York at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Chicago at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may also
be obtained by mail, upon payment of the Commission's customary fees, from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549.
May 20, 1999
/s/ Robert A. Hammond, Sr.
----------------------------------------
ROBERT A. HAMMOND, SR.
SECRETARY
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
SUNTORY WATER GROUP, INC.,
SUNTORY ACQUISITION CORP.
AND
GREAT PINES WATER COMPANY, INC.
Dated as of April 1, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
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<CAPTION>
<S> <C> <C>
SECTION 1.01 The Merger......................................................................... 2
SECTION 1.02 Consummation of the Merger......................................................... 2
SECTION 1.03 Effects of the Merger.............................................................. 2
SECTION 1.04 Certificate of Incorporation and Bylaws............................................ 2
SECTION 1.05 Directors and Officers............................................................. 2
SECTION 1.06 Conversion of Shares............................................................... 2
SECTION 1.07 Conversion of Common Stock of the Sub.............................................. 3
SECTION 1.08 Stockholders' Meeting.............................................................. 3
SECTION 1.09 Withholding Taxes.................................................................. 3
SECTION 1.10 Directors.......................................................................... 4
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 2.01 Dissenting Shares.................................................................. 5
SECTION 2.02 Payment for Shares................................................................. 5
SECTION 2.03 Closing of the Company's Transfer Books............................................ 6
SECTION 2.04 Options............................................................................ 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization and Qualification..................................................... 8
SECTION 3.02 Capitalization..................................................................... 8
SECTION 3.03 Corporate Actions and Authority.................................................... 9
SECTION 3.04 Absence of Certain Changes......................................................... 9
SECTION 3.05 Reports............................................................................ 10
SECTION 3.06 Information Statement.............................................................. 11
SECTION 3.07 Consents and Approvals; No Violation............................................... 11
SECTION 3.08 Brokers............................................................................ 12
SECTION 3.09 Employee Benefit Matters........................................................... 12
SECTION 3.10 Litigation......................................................................... 16
SECTION 3.11 Tax Matters........................................................................ 16
SECTION 3.12 Compliance with Law................................................................ 18
SECTION 3.13 Environmental Matters.............................................................. 19
SECTION 3.14 Intellectual Property.............................................................. 22
SECTION 3.15 Real Property; Personal Property................................................... 24
SECTION 3.16 Insurance.......................................................................... 25
SECTION 3.17 Material Contracts................................................................. 26
SECTION 3.18 Related Party Transactions......................................................... 26
SECTION 3.19 Liens.............................................................................. 27
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.20 State Takeover Statute Inapplicable................................................ 27
SECTION 3.21 Required Vote of Company Stockholders.............................................. 27
SECTION 3.22 Employee Relations................................................................. 27
SECTION 3.23 Customers and Suppliers............................................................ 28
SECTION 3.24 Inventory and Accounts Receivable.................................................. 28
SECTION 3.25 Debt............................................................................... 28
SECTION 3.26 Insolvency Proceedings............................................................. 29
SECTION 3.27 Net Sales and Total Assets......................................................... 29
SECTION 3.28 No Subsidiaries.................................................................... 29
SECTION 3.29 Litigation Trust Documents......................................................... 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB
SECTION 4.01 Organization and Qualification..................................................... 29
SECTION 4.02 Authority Relative to this Agreement............................................... 29
SECTION 4.03 Information Statement.............................................................. 30
SECTION 4.04 Consents and Approvals; No Violation............................................... 30
SECTION 4.05 Interim Operation of the Sub....................................................... 30
SECTION 4.06 Financing.......................................................................... 31
ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business of the Company................................................. 31
SECTION 5.02 No Solicitation.................................................................... 33
SECTION 5.03 Access to Information.............................................................. 34
SECTION 5.04 Reasonable Best Efforts............................................................ 34
SECTION 5.05 Indemnification.................................................................... 35
SECTION 5.06 Certain Employee Matters........................................................... 35
SECTION 5.07 State Takeover Statutes............................................................ 36
SECTION 5.08 Information Statement.............................................................. 36
SECTION 5.09 Notification of Certain Matters.................................................... 36
SECTION 5.10 Subsequent Filings................................................................. 36
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 Conditions to Each Party's Obligation to Effect the Merger......................... 37
SECTION 6.02 Conditions to the Obligations of the Parent and the Sub to Effect the
Merger........................................................................... 37
SECTION 6.03 Conditions to the Obligations of the Company to Effect the Merger.................. 38
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
<S> <C> <C>
SECTION 7.01 Termination........................................................................ 39
SECTION 7.02 Effect of Termination.............................................................. 40
SECTION 7.03 Amendment.......................................................................... 40
SECTION 7.04 Extension; Waiver.................................................................. 40
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Representations and Warranties......................................... 41
SECTION 8.02 Entire Agreement; Assignment....................................................... 41
SECTION 8.03 Enforcement of the Agreement....................................................... 41
SECTION 8.04 Validity........................................................................... 41
SECTION 8.05 Notices............................................................................ 41
SECTION 8.06 Governing Law...................................................................... 42
SECTION 8.07 Descriptive Headings............................................................... 42
SECTION 8.08 Parties in Interest................................................................ 42
SECTION 8.09 Counterparts....................................................................... 43
SECTION 8.10 Fees and Expenses.................................................................. 43
SECTION 8.11 Certain Definitions................................................................ 43
SECTION 8.12 Publicity.......................................................................... 44
EXHIBIT A ORGANIZATIONAL DOCUMENTS OF SURVIVING CORPORATION
EXHIBIT B LITIGATION TRUST AGREEMENT
EXHIBIT C ASSIGNMENT
EXHIBIT D FORM OF COMPANY CERTIFICATES
EXHIBIT E FORM OF PARENT AND SUB CERTIFICATES
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 1,
1999, among Suntory Water Group, Inc., a Delaware corporation (the "Parent"),
Suntory Acquisition Corp., a Texas corporation and a wholly-owned subsidiary of
the Parent (the "Sub"), and Great Pines Water Company, Inc., a Texas corporation
(the "Company").
RECITALS
WHEREAS, the Board of Directors of each of the Parent, the Sub and the
Company has determined that it is in the best interests of their respective
stockholders for the Sub to merge with and into the Company upon the terms and
subject to the conditions set forth herein;
WHEREAS, concurrently with the execution hereof and in order to induce
the Parent and the Sub to enter into this Agreement, (i) the Parent is entering
into Stock Purchase Agreements (collectively, the "Purchase Agreements") with
each of Robert A. Hammond, Sr., Robert A. Hammond, Jr., Cynthia Hammond, as
trustee of the Joshua Slocum Hammond Trust, and Nick A. Baki dated as of the
date hereof under which each such person has agreed, among other things, to sell
Shares (as defined herein) owned by such person to the Parent and to vote any
Shares over which he or she has voting power in favor of this Agreement and the
Merger (as hereinafter defined) at any meeting of holders of Shares called for
such purpose and (ii) the Parent is purchasing, pursuant to such Purchase
Agreements, Shares owned by each such person;
WHEREAS, concurrently with the execution hereof and in order to induce
the Parent and the Sub to enter into this Agreement, the Parent is entering into
a Stock Option Agreement with the Company (the "Stock Option Agreement") dated
as of the date hereof;
WHEREAS, the Board of Directors of the Company has adopted, by the
unanimous vote of all directors present, resolutions approving, among other
things, the Purchase Agreements, the Stock Option Agreement, this Agreement, the
merger of the Sub with and into the Company and the other transactions
contemplated hereby, and has agreed to recommend that the Company's stockholders
approve this Agreement and the transactions contemplated hereby; and
WHEREAS, the Parent, the Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree as follows:
1
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ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the Texas
Business Corporation Act, as amended (the "TBCA"), the Sub shall be merged with
and into the Company (the "Merger") as soon as practicable following the
satisfaction or waiver, if permissible, of the conditions set forth in
Article VI hereof. The Company shall be the surviving corporation in the Merger
(the "Surviving Corporation") under the name "Great Pines Water Company, Inc."
and shall continue its existence under the laws of the State of Texas. In
connection with the Merger, the separate corporate existence of the Sub shall
cease.
SECTION 1.02 Consummation of the Merger. Subject to the provisions
of this Agreement, the Sub and the Company shall cause the Merger to be
consummated by filing with the Secretary of State of the State of Texas duly
executed and verified articles of merger, as required by the TBCA, and shall
take all such other and further actions as may be required by law to make the
Merger effective. Prior to the filing referred to in this Section, a closing
(the "Closing") will be held at the offices of Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York (or such other place as the
parties may agree) for the purpose of confirming all the foregoing. The time
the Merger becomes effective in accordance with applicable law is referred to as
the "Effective Time."
SECTION 1.03 Effects of the Merger. The Merger shall have the
effects set forth herein and in the applicable provisions of the TBCA.
SECTION 1.04 Certificate of Incorporation and Bylaws. The Articles
of Incorporation and the Bylaws of the Surviving Corporation shall be as set
forth in Exhibit A hereto.
SECTION 1.05 Directors and Officers. The directors of the Sub
immediately prior to the Effective Time and the officers of the Company
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors are
duly elected and qualified.
SECTION 1.06 Conversion of Shares. Each share (each, a "Share") of
common stock of the Company, par value $0.01 per share (the "Common Stock"),
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by the Parent, the Sub, the Company or any of their respective
subsidiaries or held in the treasury of the Company, all of which shall be
canceled, and other than Dissenting Shares, as hereinafter defined) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive (i) an amount in cash per Share (subject
to any applicable withholding tax as specified in Section 1.09 hereof) equal to
$5.87 (such amount being referred to herein as the "Base Consideration") and
(ii) an amount per Share (subject to any applicable withholding tax as specified
in Section 1.09 hereof) equal to the Net Proceeds (as hereinafter defined)
divided by the Aggregate Diluted Outstanding Shares (as hereinafter defined),
which amount (as defined in the
2
<PAGE>
Litigation Trust Agreement (as hereinafter defined)) (such amount being referred
to herein as the "Additional Consideration" and, together with the "Base
Consideration," the "Merger Consideration"), which shall be payable in cash
promptly after the Liquidation Date (as defined in the Litigation Trust
Agreement). At the Effective Time, each Option (as hereinafter defined) shall be
converted into the right to receive the Option Consideration (as hereinafter
defined) pursuant to Section 2.04(a). The term "Aggregate Diluted Outstanding
Shares" shall mean the number of Shares that is equal to the sum of (i) the
aggregate number of Shares that are issued and outstanding immediately prior to
the Effective Time and (ii) the aggregate number of Shares for which the Options
(as hereinafter defined) that are issued and outstanding immediately prior to
the Effective Time are exercisable. The term "Net Proceeds" shall mean (i) the
Gross Proceeds (as defined in the Litigation Trust Agreement) multiplied by (A)
100% less (B) the highest marginal tax rate that could be applicable to the
Company as part of the consolidated group of the Parent on the Liquidation Date
(taking into account, without limitation, all federal income, state, local and
other taxes and which for the year ended December 31, 1998 would have been 42%)
less (ii) the sum of all unreimbursed expenses incurred by the Company in
connection with the LiquiBox Lawsuit (including expenses incurred or to be
incurred in distributing the Additional Consideration and the maintenance of the
Paying Agent for such purpose).
SECTION 1.07 Conversion of Common Stock of the Sub. Each share of
common stock, no par value, of the Sub issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become one share of common
stock of the Surviving Corporation.
SECTION 1.08 Stockholders' Meeting. The Company, acting through its
Board of Directors, shall, in accordance with applicable law, duly call, give
notice of, convene and hold a special meeting (the "Special Meeting") of its
stockholders as soon as practicable following the date hereof for the purpose of
adopting the plan of merger (within the meaning of Article 5.03 of the TBCA) set
forth in this Agreement, and, subject to the fiduciary duties of its Board of
Directors under applicable law (it being understood that members of the Board of
Directors in determining the scope and nature of their fiduciary duties shall be
entitled to rely on a written opinion of outside legal counsel), include in the
Information Statement (as hereinafter defined) the recommendation of its Board
of Directors that stockholders of the Company vote in favor of the adoption of
such plan of merger. The Parent and the Sub each agree that, at the Special
Meeting, any Shares acquired by the Parent or the Sub or any of their affiliates
will be voted in favor of the adoption of such plan of merger.
SECTION 1.09 Withholding Taxes. The Company shall provide to the
Parent or the Sub the statement described in Treasury Regulation
Section 1.1445-2(c)(3) certifying that none of the interests in the Company held
by the Company's shareholders or option holders are U.S. real property interests
for purposes of Section 1445 of the Internal Revenue Code of 1986 (the "Code").
Such statement must be complete, accurate and valid as of the Closing. If such
statement is not complete, accurate and valid as of the Closing, the Parent and
the Sub shall be entitled to withhold all amounts required to be withheld by
Section 1445 of the Code. The Parent and the Sub shall be entitled to deduct and
withhold from the consideration otherwise
3
<PAGE>
payable to a holder of Shares or Options pursuant to the Merger, any stock
transfer taxes and such amounts as are required to be withheld under the Code,
or any applicable provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Parent or the Sub, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by the Parent or the Sub.
SECTION 1.10 Directors.
(a) If the Effective Time shall not have occurred on or before
September 30, 1999 (the "Expiration Date"), the Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors of the Company as will give the Parent representation on the
Board of Directors of the Company equal to the product of the number of
directors on the Board of Directors of the Company and the percentage that the
aggregate number of Shares purchased by the Parent pursuant to the Purchase
Agreements and the Stock Option Agreement bears to the number of Shares
outstanding, and the Company shall, upon request by the Parent, promptly
increase the size of the Board of Directors of the Company or use its best
efforts to secure the resignations of such number of directors as is necessary
to provide the Parent with such level of representation and shall cause the
Parent's designees to be so elected. The Company will also use its best efforts
to cause persons designated by the Parent to constitute the same percentage as
is on the entire Board of Directors of the Company to be on each committee of
the Board of Directors of the Company. The Company's obligations to appoint
designees to its Board of Directors shall be subject to Section 14(f) of the
Exchange Act. At the request of the Parent, the Company shall take all actions
necessary to effect any such election or appointment of the Parent's designees,
including mailing to its stockholders the information required by Section 14(f)
of the Exchange Act and Rule 14f-l promulgated thereunder. The Parent will
supply to the Company all information with respect to itself and its respective
officers, directors and affiliates required by such Section and Rule. The
provisions of this Section 1.10(a) are in addition to and shall not limit any
rights which the Parent or any of its affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
(b) Following the election or appointment of the Parent's designees
pursuant to Section 1.10(a) and prior to the Effective Time (as hereinafter
defined), and so long as there shall be at least one Continuing Director (as
defined below), any amendment of this Agreement requiring action by the Board of
Directors of the Company, any extension of time for the performance of any of
the obligations or other acts of the Parent or the Sub under this Agreement, and
any waiver of compliance with any of the agreements or conditions under this
Agreement for the benefit of the Company will require the concurrence of a
majority of the directors of the Company then in office who are directors of the
Company on the date hereof (the "Continuing Directors").
4
<PAGE>
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 2.01 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares which are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders who have the
right to dissent with respect to the Merger pursuant to Article 5.11 of the TBCA
(the "Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Merger Consideration, and the holders of such Shares will
be entitled to receive payment of the fair value of such Shares in accordance
with the provisions of the TBCA, unless and until such holders shall have failed
to perfect or shall have effectively withdrawn or lost such right under the
TBCA. If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right, such holder's Shares shall thereupon be converted
into and become exchangeable only for the right to receive, as of the Effective
Time, the Merger Consideration without any interest thereon. The Company shall
give the Parent and the Sub (i) prompt notice of any written demands received by
the Company for payment of fair value in respect of any Shares, attempted
written withdrawals of such demands, and any other instruments served pursuant
to the TBCA and received by the Company relating to stockholders' rights to
dissent with respect to the Merger and (ii) the opportunity to direct all
negotiations and proceedings with respect to any exercise of such rights under
the TBCA. The Company shall not, except with the prior written consent of the
Parent, voluntarily make any payment with respect to any demands for payment of
fair value for capital stock of the Company, offer to settle or settle any such
demands or approve any withdrawal of any such demands.
SECTION 2.02 Payment for Shares.
(a) The Parent will cause the Sub or the Surviving Corporation to
make available to a bank or trust company designated by the Parent (the "Paying
Agent") (i) at or prior to the Effective Time, sufficient funds to make the Base
Consideration payable pursuant to Section 1.06 hereof on a timely basis and (ii)
at or promptly after the Liquidation Date, sufficient funds to pay the
Additional Consideration pursuant to Section 1.06 hereof on a timely basis to
holders (other than the Parent, the Sub, the Company or any of their respective
subsidiaries) of Shares that are issued and outstanding immediately prior to the
Effective Time (such amounts described in (i) and (ii) together being
hereinafter referred to as the "Payment Fund"). The Paying Agent shall,
pursuant to irrevocable instructions, make the payments provided for in the
preceding sentence out of the Payment Fund. The Payment Fund shall not be used
for any other purpose, except as provided in this Agreement.
(b) As soon as practicable after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each record holder, as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Shares (the "Certificates"),
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent) and instructions for
use in effecting the surrender of the Certificate and receiving payment
therefor. Following surrender to the Paying Agent of a
5
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Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be paid in exchange therefor (i) an amount in cash
(subject to any applicable withholding tax as specified in Section 1.09 hereof)
equal to the product of the number of Shares represented by such Certificate
multiplied by the Base Consideration and (ii) an amount (subject to any
applicable withholding tax as specified in Section 1.09 hereof) equal to the
product of the number of Shares represented by such Certificate multiplied by
the Additional Consideration, which shall be payable in cash promptly after the
Liquidation Date; and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable pursuant to the foregoing sentence.
If payment is to be made to a person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment pay any transfer
or other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. From and after the Effective Time and until surrendered in
accordance with the provisions of this Section 2.02, each Certificate (other
than Certificates representing Shares owned by the Parent or the Sub or any of
their respective subsidiaries and Certificates representing Dissenting Shares)
shall represent for all purposes solely the right to receive, in accordance with
the terms hereof, the amounts set forth in the second sentence of this
Section 2.02(a).
(c) Any portion of the Payment Fund (including the proceeds of any
investments thereof) that remains unclaimed by the former stockholders of the
Company (i) for a six-month period commencing on the Effective Time, in the case
of the Base Consideration, and (ii) for a six-month period commencing on the
Liquidation Date, in the case of the Additional Consideration, shall be repaid
to the Surviving Corporation. Any former stockholders of the Company who have
not complied with Section 2.01 prior to the expiration of the six-month period
commencing on the Effective Date shall thereafter look only to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws) but
only as general creditors thereof for payment of their claim for the Merger
Consideration, without any interest thereon. Neither the Parent nor the
Surviving Corporation shall be liable to any holder of Shares for any monies
delivered from the Payment Fund or otherwise to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificates
shall not have been surrendered prior to two years after the Effective Time,
unclaimed funds payable with respect to such certificates shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
SECTION 2.03 Closing of the Company's Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of Shares shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged in accordance with Section 2.02(b) hereof, subject to applicable
law in the case of Dissenting Shares.
SECTION 2.04 Options. With respect to Options (as defined below)
held by persons then performing services as "Employees" or "Consultants" (as
defined in such Plan)
6
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under the Company's 1993 Option Plan or 1995 Incentive Stock Plan, the Company
shall take all necessary action to cause such Options to become exercisable
immediately prior to the Effective Time. Each holder of an option to purchase
shares of Common Stock, whether or not then exercisable (the "Options"), which
is outstanding immediately prior to the Effective Time and theretofore has been
granted under the Company's 1993 Option Plan, 1995 Incentive Stock Plan or 1993
Non-Employee Director Stock Option Plan (collectively, the "Stock Option Plans")
shall, in settlement thereof, be entitled to receive for each Share subject to
such Option, in lieu of such Share, (i) an amount (subject to any applicable
withholding tax as specified in Section 1.09 hereof) (such amount being referred
to herein as the "Option Consideration"), in cash, equal to the excess, if any,
of the Base Consideration over the per Share exercise price of such Option and
(ii) if the amount of the Base Consideration is equal to or greater than the per
Share exercise price of the Option, an amount (subject to any applicable
withholding tax as specified in Section 1.09 hereof) equal to the Additional
Consideration, which shall be payable in cash promptly after the Liquidation
Date or (iii) if the per Share exercise price of such Option exceeds the Base
Consideration (such excess, the "Remaining Exercise Price"), the amount, if any,
by which the Additional Consideration exceeds the Remaining Exercise Price
(subject to any applicable withholding tax as specified in Section 1.09 hereof),
which amount shall be payable in cash promptly after the Liquidation Date. The
Option Consideration shall be payable on a timely basis by the Surviving
Corporation following the Effective Time to such holders of Options. Any
Additional Consideration payable to such holders shall be payable on a timely
basis following the Liquidation Date. Following the Effective Time, each Option
shall represent only the right to receive the amounts set forth in the second
sentence of this Section 2.04, and upon receipt of the Option Consideration (or
in the event that no payment is due in respect thereof pursuant to this
Section 2.04, at the Effective Time) such Option shall be canceled. Prior to the
Effective Time, the Company shall use its best efforts to obtain all necessary
consents or releases from holders of Options and take all such other action as
may be reasonably necessary to give effect to the transactions contemplated by
this Section 2.04. Except as otherwise agreed to by the parties, (i) the Stock
Option Plans shall terminate as of the Effective Time and, except with respect
to the right to receive the Option Consideration and the Additional
Consideration under this Section 2.04, any and all rights under any provisions
in any other plan, program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the Company shall be
canceled as of the Effective Time, and (ii) the Company shall take all action
necessary to ensure that no person shall have any right under the Stock Option
Plans (or any Option granted thereunder) or other plan, program or arrangement
with respect to, including any right to acquire, equity securities of the
Company, the Surviving Corporation, the Parent or any subsidiary of any of the
foregoing following the Effective Time.
7
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Parent and the Sub as
follows:
SECTION 3.01 Organization and Qualification. The Company is a duly
organized and validly existing corporation in good standing under the laws of
its jurisdiction of incorporation, with all corporate power and authority to own
its properties and conduct its business as currently conducted and is duly
qualified and in good standing as a foreign corporation authorized to do
business in each of the jurisdictions, if any, in which the character of the
properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary. The Company has heretofore
delivered to the Parent and the Sub accurate and complete copies of the Articles
of Incorporation and Bylaws (or similar governing documents) as currently in
effect of the Company. The Company does not, directly or indirectly, owns any
interest in any corporation, partnership, joint venture or other business
association or entity.
SECTION 3.02 Capitalization. The authorized capital stock of the
Company consists of (i) 10,000,000 shares of Common Stock, par value $0.01 per
share, and (ii) 1,000,000 shares of Preferred Stock, par value $0.01 per share
(the "Preferred Stock"). As of the date hereof: 2,760,862 shares of Common
Stock were issued and outstanding; 1,300 shares of Series A Preferred Stock
were issued and outstanding, which are convertible into an aggregate of 31,200
shares of Common Stock; 10,000 shares of Series B Preferred Stock were issued
and outstanding, which are convertible into an aggregate of 166,700 shares of
Common Stock; 4,200 shares of Series C Preferred Stock were issued and
outstanding, which are convertible into an aggregate of 70,014 shares of Common
Stock; no Shares or shares of Preferred Stock were held in the Company's
treasury; there were outstanding Options to purchase an aggregate of 35,867
Shares under the Stock Option Plans; and there are no stock appreciation rights
or limited stock appreciation rights or other similar rights or securities
granted under the Stock Option Plans or otherwise outstanding. Since the date
hereof, the Company (i) has not issued any Shares other than upon the exercise
or surrender of Options outstanding on such date or the conversion of Preferred
Shares outstanding on such date, (ii) has not granted any options, warrants or
rights or entered into other agreements or commitments to purchase Shares (under
the Stock Option Plans or otherwise) and (iii) has not split, combined or
reclassified any of its shares of capital stock. True and correct copies of
Certificates of Designation for the Company's Series A, B and C Preferred Stock
have been filed as exhibits to the SEC Reports (as hereinafter defined). All of
the outstanding Shares have been duly authorized and validly issued and are
fully paid and nonassessable and are free of preemptive rights. Section 3.02(a)
of a letter of the Company delivered at or prior to the date hereof to the
Parent and the Sub (the "Company Disclosure Letter") contains a true, accurate
and complete list, as of the date hereof, of the name of each Option holder, the
number of outstanding Options held by such holder, the grant date of each such
Option, the number of Shares such holder is entitled to receive upon the
exercise of each Option and the corresponding exercise price. Except as set
forth in this Section 3.02(a), there are
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no outstanding (i) shares of capital stock or other voting securities of the
Company, (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities or ownership interests in the
Company or (iii) options, warrants, rights or other agreements or commitments to
acquire from the Company, and no obligation of the Company to issue, any capital
stock, voting securities or other ownership interests in, or securities
convertible into or exchangeable for capital stock or voting securities or other
ownership interests in, the Company, and no obligation of the Company to grant,
extend or enter into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment (the items in
clauses (i), (ii) and (iii) of this sentence being referred to herein
collectively as "Company Securities"), and there are no outstanding obligations
of the Company to make payments based on the price of the Common Stock. Except
as set forth in this Section 3.02(a), there are no outstanding obligations of
the Company to repurchase, redeem or otherwise acquire any Company Securities
and there are no performance awards outstanding under the Company's Stock Option
Plans or any other outstanding stock related awards. There are no voting trusts
or other agreements or understandings to which the Company is a party with
respect to the voting of capital stock of the Company.
SECTION 3.03 Corporate Actions and Authority. (a) The Board of
Directors of the Company (at a meeting or meetings duly called and held) has, by
the unanimous vote of all directors present, (w) determined that the Merger and
the other transactions contemplated in this Agreement are fair to and in the
best interests of the stockholders of the Company, (x) resolved to recommend
approval and adoption of the plan of merger (within the meaning of Article 5.03
of the TBCA), contained in this Agreement by such stockholders of the Company,
(y) taken all necessary steps to render Article 13.03 of the TBCA inapplicable
to the transactions contemplated hereby and (z) resolved to elect, to the extent
permitted by law, not to be subject to any state takeover law other than Article
13.03 of the TBCA that may purport to be applicable to the transactions
contemplated by this Agreement.
(b) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than any required approval of the plan of merger (within the
meaning of Article 5.03 of the TBCA) contained in this Agreement by the holders
of Shares under the TBCA). This Agreement has been duly and validly executed
and delivered by the Company and constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and general
principles of equity (whether considered in a proceeding in equity or at law).
SECTION 3.04 Absence of Certain Changes. Except as disclosed in the
SEC Reports (as hereinafter defined) filed with the SEC prior to the date hereof
or in Section 3.04 of the Company Disclosure Letter, since December 31, 1998,
(i) the Company has not suffered any
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Material Adverse Effect or any change, condition, event or development that
reasonably could be expected to have a Material Adverse Effect, (ii) the Company
has conducted its business only in the ordinary course consistent with past
practice, except in connection with the negotiation and execution and delivery
of this Agreement and the transactions contemplated hereby, and (iii) there has
not been (a) any declaration, setting aside or payment of any dividend or other
distribution in respect of the Shares or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of capital stock or other
securities in, or other ownership interests in, the Company; (b) any increase in
the rate or terms (including any acceleration of the right to receive payment)
of any Plan (as hereinafter defined) or any other bonus, severance, insurance,
pension or other employee benefit plan, payment or arrangement made to, for or
with any such directors, officers or employees; (c) any action by the Company
which, if taken after the date hereof, would constitute a breach of any of
clause (ii), clause (iv) through clause (x) inclusive, clause (xii), clause
(xiii), clause (xv) or clause (xvii) of Section 5.01; (d) any labor dispute,
other than routine individual grievances, or any activity or proceeding by a
labor union or representative thereof to organize any employees of the Company,
which employees were not then subject to a collective bargaining agreement, or
any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees; (e) any revaluation by the Company of any of its
assets, including write-downs of inventory or of accounts receivable other than
in the ordinary course of business consistent with past practice; or (f) any
entry into any agreement, commitment or transaction by the Company which is
material to the Company taken as a whole other than in the ordinary course of
business consistent with past practice.
SECTION 3.05 Reports.
(a) Since January 1, 1996, the Company has timely filed with the U.S.
Securities and Exchange Commission (the "SEC") all forms, reports and documents
required to be filed by it pursuant to the federal securities laws and the rules
and regulations of the SEC thereunder, all of which have complied as of their
respective filing dates in all material respects with all applicable
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the SEC promulgated thereunder. True
and correct copies of all filings made by the Company with the SEC (the "SEC
Reports"), whether or not required under applicable laws, rules and regulations
and including any registration statement filed by the Company under the
Securities Act of 1933, as amended (the "Securities Act"), have been furnished
to the Parent and the Sub. None of the SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, as of the
date thereof, contained any untrue statement of a material fact or omitted 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.
(b) Each of the consolidated balance sheets (including, where
applicable, the related notes and schedules) included in or incorporated by
reference into the SEC Reports fairly presents the consolidated financial
position of the Company as of the date thereof, and each of the consolidated
statements of income (or statements of results of operations), stockholders'
equity and cash flows (including the related notes and schedules) included in or
incorporated by reference into the SEC Reports fairly presents the results of
operations, stockholders' equity,
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retained earnings and cash flows, as the case may be, of the Company (on a
consolidated basis) for the periods or as of the dates, as the case may be, set
forth therein, in each case in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
as stated therein or, where applicable, in the notes thereto and except, in the
case of unaudited interim financial statements, for customary year-end
adjustments, which will not be material in the aggregate) and in compliance with
the rules and regulations of the SEC.
(c) At December 31, 1998, there were no material liabilities or
obligations of any nature (whether accrued, absolute, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) required
by generally accepted accounting principles to be set forth on the balance sheet
of the Company taken as a whole except as reflected or reserved against on such
balance sheet as of December 31, 1998 included in the SEC Reports. Except as
set forth in Section 3.05(c) of the Company Disclosure Letter, since
December 31, 1998, the Company has not incurred any material liabilities other
than liabilities or obligations of any nature (whether accrued, absolute, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or to become
due) which (i) have been incurred in the ordinary course of business consistent
with past practice and (ii) have not had and will not have a Material Adverse
Effect.
SECTION 3.06 Information Statement.
(a) The Information Statement (as hereinafter defined), and any other
schedule or document required to be filed by the Company in connection with the
Merger, will not, at the time the Information Statement is first mailed and at
the time of the Special Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation or warranty is made by the
Company with respect to information supplied in writing by the Parent, the Sub
or an affiliate of the Parent or the Sub specifically for inclusion therein.
The Information Statement will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder. The letter to stockholders, notice of meeting, information or proxy
statement and form of proxy (if any) provided to stockholders of the Company in
connection with the Merger (including any supplements), and any schedules
required to be filed with the SEC in connection therewith, as from time to time
amended or supplemented, are collectively referred to herein as the "Information
Statement."
(b) The Company agrees promptly to correct the Information Statement
if and to the extent it shall have become false and misleading in any material
respect, and to take all steps necessary to cause the Information Statement, as
so corrected, to be filed with the SEC and to be disseminated to all holders of
Shares, in each case as and to the extent required by applicable federal
securities laws or the applicable rules and regulations of the SEC.
SECTION 3.07 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the
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respective Articles of Incorporation or Bylaws (or other similar governing
documents) of the Company, (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any federal, state, local or
foreign governmental or regulatory authority, except as may be required under
the Exchange Act and the TBCA, (iii) except as set forth in Section 3.07 of the
Company Disclosure Letter, require any consent, waiver or approval or result in
a default (or give rise to any right of termination, cancellation, modification
or acceleration) under any of the terms, conditions or provisions of any note,
license, agreement, contract or other instrument or obligation to which the
Company is a party or by which the Company or any of its respective assets may
be bound and which is material, (iv) result in the creation or imposition of any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind on
any asset of the Company; or (v) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its assets.
SECTION 3.08 Brokers. No broker or finder is entitled to receive any
brokerage, finder's or other fee or commission in connection with this Agreement
or the transactions contemplated hereby based upon agreements made by or on
behalf of the Company or any of its officers, directors or employees.
SECTION 3.09 Employee Benefit Matters.
(a) Except as set forth in Section 3.09(a) of the Company Disclosure
Letter, the Company does not maintain or contribute to, nor has any obligation
to contribute to or has any liability (including a liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) with respect to
any plan, program, arrangement, agreement or commitment which is an employment,
consulting, severance pay, termination pay, change in control or deferred
compensation agreement, or an executive compensation, incentive bonus or other
bonus, employee pension, profit-sharing, savings, retirement, stock option,
stock purchase, stock appreciation rights, severance pay, life, health,
disability or accident insurance plan, or other employee benefit plan, program,
arrangement, agreement or commitment, including any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (individually, a "Plan," or collectively, the "Plans").
Each such Plan with an aggregate annual cost of providing benefits exceeding
$25,000 is identified in Section 3.09(a) of the Company Disclosure Letter to the
extent applicable, as one or more of the following: an "employee pension plan"
(as defined in Section 3(2) of ERISA) or an "employee welfare plan" (as defined
in Section 3(1) of ERISA). No Plan is a "defined benefit plan" (as defined in
Section 414 of the Code) or a "multiemployer plan" (as defined in Section 3(37)
of ERISA). No Plan is subject to Section 302 of ERISA, Section 412 of the Code
or Title IV of ERISA.
(b) The Company is not subject to any actual or contingent liability
under Title IV of ERISA, Section 302 of ERISA, Section 412 or 4971 of the Code
or any similar provision of foreign law or regulation, whether in respect of any
employer benefit plan maintained by the Company or by any other employer or
person or otherwise.
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(c) For purposes of this Section 3.09, "Seller Group Plan" means each
"employee pension benefit plan" (within the meaning of section 3(2) of ERISA)
subject to Title IV of ERISA (i) that is maintained, sponsored or contributed to
(or has been maintained, sponsored or contributed to within the last 6 years) by
the Company or by any other person or entity that is considered a single
employer with the Company for purposes of Title IV of ERISA or section 414 of
the Code (together with the Company, the "Seller Group") or (ii) with respect to
which any member of Seller Group may incur any liability under Title IV of
ERISA. No Seller Group Plan is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
With respect to each Seller Group Plan:
(i) no such plan has been terminated so as to result, directly or
indirectly, in any liability, contingent or otherwise, of any member of the
Seller Group under Title IV of ERISA;
(ii) no proceeding has been initiated by any person (including the
Pension Benefit Guaranty Corporation ("PBGC")) to terminate any such plan
or to appoint a trustee for any such plan;
(iii) no condition or event currently exists or currently is expected
to occur that could result, directly or indirectly, in any liability of any
member of the Seller Group under Title IV of ERISA, whether to the PBGC or
otherwise, on account of the termination of any such plan;
(iv) if any such plan were to be terminated as of the Effective Time,
no member of the Seller Group would incur, directly or indirectly, any
liability under Title IV of ERISA;
(v) no "reportable event" (as defined in section 4043 of ERISA) has
occurred with respect to any such plan;
(vi) no such plan which is subject to section 302 of ERISA or
section 412 of the Code has incurred any "accumulated funding deficiency"
(as defined in section 302 of ERISA and section 412 of the Code,
respectively), whether or not waived; and
(vii) the transactions contemplated hereby will not result in any
event described in section 4062(e) of ERISA.
(d) No event has occurred, and no circumstance exists, in connection
with which either the Company or any Plan, directly or indirectly, could be
subject to any material liability under ERISA, the Code or any other law,
regulation or governmental order applicable to any Plan, including Section 406,
409, 502(i), 502(1) or 4069 of ERISA, or Part 6 of Title I of ERISA, or
Section 4971, 4972, 4975, 4976, 4977 or 4980B of the Code, or under any
agreement, instrument, statute, rule of law or regulation pursuant to or under
which the Company has agreed to indemnify or is required to indemnify any person
against liability incurred under, or for a violation or failure to satisfy the
requirements of, any such statute, regulation or order.
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(e) With respect to each Plan, (i) all material payments due from the
Company to date have been timely made and all material amounts properly accrued
to date or as of the Effective Time as liabilities of the Company which have not
been paid have been and will be properly recorded on the books of the Company;
(ii) each such Plan which is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) and intended to qualify under Section 401 of the Code has
received a favorable determination letter from the Internal Revenue Service with
respect to such qualification, its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code, and, to the knowledge of
the Company, nothing has occurred since the date of such letter that has or is
likely to, and the consummation of the transactions contemplated hereby will
not, adversely affect such qualification or exemption; (iii) there are no
actions, suits or claims pending (other than routine claims for benefits) or, to
the knowledge of the Company, threatened with respect to such Plan or against
the assets of such Plan and (iv) the Company has complied with, and such Plan
conforms in form and operation to, all applicable laws and regulations,
including ERISA and the Code, in all material respects.
(f) No deduction for federal income tax purposes has been or is
expected by the Company to be disallowed for remuneration paid by the Company by
reason of Section 162(m) of the Code.
(g) No Plan is under audit or is the subject of an investigation by
the Internal Revenue Service, the U.S. Department of Labor, the PBGC or any
other federal or state governmental agency.
(h) To the Company's knowledge, the transactions contemplated by this
Agreement will not result in the payment or series of payments by the Company to
any person of an "excess parachute payment" within the meaning of Section 280G
of the Code, or any other payment which is not deductible for federal income tax
purposes under the Code, whether or not such payment is considered to be
reasonable compensation for services rendered.
(i) The consummation of the transactions contemplated by this
Agreement (alone or together with any other event) will not (i) entitle any
person to any benefit under any Plan or (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation or other benefit due to any
person under any Plan.
(j) Except as disclosed in the financial statements referred to in
Section 3.05(b) above, the Company does not have any material liability with
respect to an obligation to provide benefits, including death or medical
benefits (whether or not insured) with respect to any person beyond their
retirement or other termination of service other than (i) coverage mandated by
Part 6 of Title I of ERISA or Section 4980B of the Code or state law, (ii)
retirement or death benefits under any employee pension plan, (iii) disability
benefits under any employee welfare plan that have been fully provided for by
insurance or otherwise, (iv) deferred compensation benefits accrued as
liabilities on the books of the Company, or (v) benefits in the nature of
severance pay.
(k) The Company has delivered to the Parent and the Sub, with respect
to each Plan for which the following exists:
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(i) a copy of the two most recent Forms 5500 with respect to each
Plan;
(ii) a copy of the Summary Plan Description, together with each
Summary of Material Modifications, required under ERISA with respect to
such Plan in the past two years, all material employee communications
relating to such Plan, and, unless the Plan is embodied entirely in an
insurance policy to which the Company is a party, a true and complete copy
of such Plan;
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust or
other funding agreement attached to Section 3.09(k)(iii) of the Company
Disclosure Letter; and
(iv) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan that is intended to be a
"qualified plan" under Section 401 of the Code.
(l) With respect to each Plan for which financial statements are
required by ERISA, there has been no material adverse change in the financial
status of such Plan since the date of the most recent such statements provided
to the Parent and the Sub.
(m) With respect to each Plan that is funded wholly or partially
through an insurance policy, all material amounts of the premiums required to
have been paid to date under the insurance policy have been paid, all material
amounts of the premiums required to be paid under the insurance policy through
the Effective Time will have been paid on or before the Effective Time and, as
of the Effective Time, there will be no material liability of the Company under
any such insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the Effective Time.
(n) The Company does not have any announced plan or legally binding
commitment to create any additional Plans or to amend or modify any existing
Plan, other than amendments required by law or those that would not materially
increase costs under any such Plan.
(o) To the knowledge of the Company, the Company has not violated any
statute, law, ordinance, rule or regulation, or any order, ruling, decree,
judgment or arbitration award of any court, arbitrator or any federal, state,
local or foreign government agency regarding the terms and conditions of
employment of employees, former employees or prospective employees or other
labor related matters, including laws, rules, regulations, orders, rulings,
decrees, judgments and awards relating to wages, hours, civil rights,
discrimination, fair labor standards and occupational health and safety,
workers' compensation, wrongful discharge or violation of the personal rights of
employees, former employees or prospective employees which, taken alone or
together with any other such violation or violations, could reasonably be
expected to have a Material Adverse Effect and has timely prepared and filed all
appropriate forms (including Immigration & Naturalization Service Form I-9)
required by any relevant federal, state, local or foreign authority.
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SECTION 3.10 Litigation. Except as expressly disclosed in
Section 3.10 of the Company Disclosure Letter or in the SEC Reports, there are
no claims, suits, actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened against or relating to the Company that
involve a claim against the Company in excess of $25,000 or that, individually
or in the aggregate, could be reasonably expected to have a Material Adverse
Effect or that in any manner challenge or seek to prevent, enjoin, alter or
materially delay the Merger or any of the other transactions contemplated
hereby. The Company is not subject to any outstanding orders, writs, injunctions
or decrees that have had or could be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect.
SECTION 3.11 Tax Matters
(a) The Company has timely filed (taking into account all available
extensions) all Tax Returns concerning Taxes (or such Tax Returns have been
filed on behalf of the Company) required to be filed by applicable law and have
paid all amounts due in respect of Taxes (whether or not actually shown on such
Tax Returns); all such Tax Returns are true, correct and complete in all
material respects and accurately set forth all items to the extent required to
be reflected or included in such Tax Returns by applicable federal, state, local
or foreign Tax laws, regulations or rules.
(b) As of the date hereof, the Company has not executed any
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any material Taxes or Tax Returns; and
the period during which any assessment against the Company may be made by the
Internal Revenue Service (the "IRS") or other appropriate authority has expired
without waiver or extension of any such period for each such authority.
(c) No claim has ever been made by any authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(d) As of the date hereof, there are no liens with respect to any
material Taxes upon any of the assets and properties of the Company.
(e) The Company has paid in full or set up reserves in accordance
with generally accepted accounting principles in respect of all Taxes for the
periods covered by such Tax Returns, as well as all other Taxes, penalties,
interest, fines, deficiencies, assessments and governmental charges that have
become due or payable (including all Taxes that the Company is obligated to
withhold from amounts paid or payable to or benefits conferred upon employees,
creditors and third parties). As of the date hereof, there is no proposed
liability for any material Tax to be imposed upon the Company for the year ended
December 31, 1998 and all prior years for which there is not an adequate
reserve.
(f) Adequate provisions in accordance with generally accepted
accounting principles consistently applied to the have been made in the audited
consolidated financial statements included in the SEC Reports for the payment of
all Taxes for which the Company
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may be liable for the periods covered thereby that were not yet due and payable
as of the dates thereof, regardless of whether the liability for such Taxes is
disputed.
(g) The transactions contemplated by this Agreement will not result
in the payment or series of payments by the Company to any person of an "excess
parachute payment" within the meaning of Section 280G of the Code or any other
payment which is not deductible for federal income tax purposes under the Code.
(h) There is no contract, agreement or intercompany account system in
existence under which the Company has, or may at any time in the future have, an
obligation to contribute to the payment of any portion of a Tax (or pay any
amount calculated with reference to any portion of a Tax) of any group of
corporations of which the Company is or was a part.
(i) Set forth in Section 3.11(c) of the Company Disclosure Letter is
a complete list of income and other Tax Returns filed by the Company pursuant to
the laws or regulations of any federal, state, local or foreign Tax authority
that have been examined or audited by the IRS or other appropriate authority
during the preceding three years, and a list of all adjustments resulting from
each such examination or audit. Except as set forth in Section 3.11(c) of the
Company Disclosure Letter, no such examination or audit is in progress. All
deficiencies proposed as a result of such examinations or audits have been paid
or finally settled and no issue has been raised in any such examination or audit
that, by application of similar principles, reasonably can be expected to result
in the assertion of a deficiency for any other year not so examined or audited.
Except for Taxes payable with Tax Returns not yet due and filed, there are no
reasonable grounds for any further Tax liability, beyond amounts accrued with
respect to the years that have not been examined or audited.
(j) The Company is not a United States Real Property Holding
Corporation (a "USRPHC") within the meaning of Section 897 of the code and was
not a USRPHC on any "determination date" (as defined in (S)1.897-2(c) of the
United States Treasury Regulations promulgated under the Code (the "Treasury
Regulations")) that occurred in the five-year period preceding the Closing.
(k) The Company has not executed any closing agreement pursuant to
Section 7121 of the Code or any predecessor provision thereof, or any similar
provision of state or local law.
(l) The Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code section 6662.
(m) The Company has not filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company.
(n) None of the assets owned by the Company is property that is
required to be treated as owned by any other person pursuant to
Section 168(f)(8) of the Internal Revenue Code
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of 1954, as amended, as in effect immediately prior to the enactment of the Tax
Reform Act of 1986 or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
(o) The Company has not agreed nor is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state or local law by reason of a change in accounting method initiated by it or
any other relevant party and the Company does not have any knowledge that the
IRS has proposed any such adjustment or change in accounting method, nor has any
application pending with any governmental or regulatory authority requesting
permission for any changes in accounting methods that relate to the business or
assets of the Company.
(p) The Company has not filed an election under Rev. Proc. 91-11,
1991-1 C.B. 470, as modified by Rev. Proc. 91-39, 1991-2 C.B. 694, Treas.
Reg. (S) 1.1502-20(g) or Rev. Proc. 95-39, 1995-2 C.B. 399.
(q) The Company has made available to the Parent and the Sub complete
and accurate copies of the portions applicable to the Company of all income and
franchise Tax returns, and any amendments thereto, filed by or on behalf of the
Company or any member of a group of corporations including the Company for the
taxable years ending 1991 through 1998.
(r) The Company has maintained the books and records required to be
maintained pursuant to Section 6001 of the Code and the rules and regulations
thereunder, and comparable laws, rules and regulations of the countries, states,
counties, provinces, localities and other political divisions wherein it is
required to file returns and reports relating to Taxes.
SECTION 3.12 Compliance with Law.
(a) Except as set forth in Section 3.12 (a) of the Company Disclosure
Letter, the Company is not in conflict with, in default with respect to or in
violation of, (i) any statute, law, ordinance, rule, regulation, order, judgment
or decree material to the Company or by which any property or asset of the
Company is bound or affected (including the Safe Drinking Water Act, the Federal
Food, Drug and Cosmetic Act, as amended, and other statutes, rules and
regulations administered by the United States Federal Food and Drug
Administration), or (ii) any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company is a party or by which any property or asset of the Company
is bound or affected. The Company has all permits, licenses, authorizations,
consents, approvals and franchises from governmental agencies required to
conduct their businesses as currently conducted, including any permit regulating
the conduct of the business of the Company, or any applicable building, zoning,
water use, water distribution, environmental control or similar law (the
"Company Permits"), except for such permits, licenses, authorizations, consents,
approvals and franchises the absence of which have not had and could not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company is in compliance with the terms of the Company
Permits, except for failures so to comply that have not had and could not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. Without limiting any other provision herein, the Company has
timely filed with the relevant federal, state, local or foreign governmental
authorities or
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agencies thereof all forms, reports and documents required to be filed by them
pursuant to all relevant laws, rules and regulations since December 31, 1994,
except for failures to file that have not had and could not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) To the knowledge of the Company, the Company does not have any
continuing liability resulting from (A) any citations, notices of violations,
written complaints, consent orders (or amendments to or modifications of such
orders), compliance schedules or other similar enforcement orders received from
any governmental authority or agency thereof since December 31, 1994, or (B) any
notice, including inspection reports, received from any governmental authority
or agency thereof since December 31, 1994, which in any case would indicate that
the Company was not then or is not currently in compliance with all applicable
statutes, laws, ordinances, rules and regulations. Except as disclosed in
Section 3.12(b) of the Company Disclosure Letter, the Company has not received
any notice from any governmental authority or agency to the effect that (i)
diversion or extraction of water pursuant to any Company Water Right (as
hereinafter defined) must be, will be, or could be, curtailed or discontinued,
(ii) injury to other vested water rights or habitats has been alleged or caused
by the diversion or extraction of water pursuant to any Company Water Right, or
(iii) additional actions must be taken by the Company in order to allow
continued diversion or extraction of water pursuant to any Company Water Right
in the future, and no action of the type specified above is pending or
threatened. For the purposes of this Agreement, "Company Water Rights" means
all water, water rights, wells and well rights together with any appurtenances
and any improvements related thereto, including any rights established by third
parties by virtue of conduct or agreement, owned by or leased to the Company.
SECTION 3.13 Environmental Matters.
(a) Except as set forth in Section 3.13(a) of the Company Disclosure
Letter:
(i) the Company has been at all times and is in material compliance
with all applicable Environmental Laws (as hereinafter defined) (including
compliance with standards, schedules and timetables therein);
(ii) the Company has obtained all permits, licenses, consents,
approvals, waivers, variances and other authorizations ("Authorizations")
that are required by and material to the operation of its business,
property and assets under the Environmental Laws and all such
Authorizations are in full force and effect, and the Company is in material
compliance with all terms and conditions of such Authorizations;
(iii) the Company has filed as required all applications, notices and
other documents necessary to effect the timely renewal or issuance of all
Authorizations necessary for each facility of the Company under any
Environmental Law to continue to conduct the business and operations of the
Company in the manner now conducted;
(iv) there are no past or present events, conditions, activities,
practices, incidents, actions, plans or pending changes in any
Environmental Law or Authorization that are
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likely to interfere materially with or otherwise materially and adversely
affect the continued operation of the facilities or the business of the
Company in the manner now conducted, to interfere materially with
compliance or continued compliance of the facilities of the Company with
any Environmental Law or Authorization, or to give rise to any material
liability under Environmental Laws;
(v) no real property or facility currently or formerly owned, used,
operated, leased or managed by the Company or any predecessor in interest
is listed or proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLIS"), both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any comparable foreign, state or local list established
pursuant to any Environmental Law;
(vi) neither the Company nor, to the best of its knowledge, any
predecessor in interest has received any written notification of potential
or actual liability or request for information under CERCLA or any
comparable foreign, state or local law;
(vii) there is no civil, criminal or administrative action, suit,
demand, hearing, notice of violation or deficiency, investigation,
proceeding, notice, demand letter, decree, judgment, complaint, agreement,
claim, order or citation pending or threatened against the Company under
any Environmental Law, except where such liability or action, suit, demand,
hearing, notice of violation or deficiency, investigation, proceeding,
demand letter, decree, judgment, complaint, agreement, order, claim and
citation would not in the aggregate have a Material Adverse Effect and also
would not materially and adversely affect the ability to continue to
operate each facility in the manner in which it is presently operating;
(viii) no Hazardous Material has been at any time or is on the date
hereof treated, recycled, or disposed of at, in, on or under any facility
or real property owned, operated, leased or managed by the Company, and the
Company does not presently require or previously required interim status or
a hazardous waste permit for the treatment, storage or disposal of
hazardous waste pursuant to the Resource Conservation and Recovery Act, as
amended, or pursuant to any comparable foreign or state hazardous waste
statute or regulation; or
(ix) the Company has not leased, operated or owned any facilities
which are not identified elsewhere herein as being currently leased,
operated or owned by the Company.
(b) There exists none of the items enumerated below:
(i) an underground storage tank or related piping on any real
property or facility owned, operated, leased or managed by the Company;
(ii) asbestos in, at, on or under any real property or facility
owned, operated, leased or managed by the Company;
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(iii) polychlorinated biphenyls in, at, on or under any facility or
real property owned, leased or managed by the Company;
(iv) any Release at, on, under, from or into any facility or real
property owned, operated, leased or managed by the Company; and
(v) any Release at, on, under, from or into any facility or real
property in the vicinity of any facility or real property owned, operated,
leased or managed by the Company or any predecessor in interest, which
Release has affected or is reasonably likely to affect said facility or
real property.
(c) The Company has given the Parent and the Sub access to all
records and files in its possession, if any, at both its corporate headquarters
and its facilities currently owned, operated, leased or managed by the Company,
including all reports, studies, analyses, tests or monitoring results,
pertaining to the existence of Hazardous Material or any other environmental
concerns relating to facilities or real property owned, operated, leased or
managed by the Company or any of its predecessors in interest or concerning
compliance with or liability under any Environmental Laws.
(d) Prior to the Effective Time, the Company shall have made all
notifications, registrations, and filings, if any, required under and have taken
all other necessary steps to comply with all Foreign, State and Local Real
Property Disclosure Requirements applicable to its assets, including the use of
forms provided by state or local agencies, where such forms exist, to or with
the state or local agency; provided, however, that where notification,
registration, or filing was made to a foreign, state or local agency, a copy of
such notification, registration, or filing shall be provided to the Sub prior to
the Effective Time.
(e) For purposes of this Agreement, "Environmental Law" means any
law, statute, ordinance, code, rule, regulation, standard, requirement, order,
writ, injunction, decree, demand, judgment, ruling, decision, determination,
policy, guidance document, award or binding agreement, issued or entered into by
any governmental, judicial, legislative, executive, administrative or regulatory
authority of the United States or of any state, local or foreign government,
relating to: (i) pollution, contamination, cleanup, preservation, protection or
reclamation of the environment (including any ambient, workplace or indoor air,
surface water, drinking water, groundwater, land surface, subsurface strata,
river sediment, plant or animal life, natural resources, workplace and real
property and the physical buildings, structures, improvement and fixtures
thereon); (ii) health or safety, including the exposure of employees and other
persons to any Hazardous Material; (iii) any Release or threatened Release,
including investigation, study, assessment, testing, monitoring, containment,
removal, remediation, cleanup and abatement of such Release or threatened
Release; (iv) the management of any Hazardous Material, including the
manufacture, generation, formulation, processing, labeling, distribution,
introduction into commerce, registration, use, treatment, handling, storage,
disposal, transportation, re-use, recycling or reclamation of any Hazardous
Material; and (v) the physical structure or condition, or appropriate use of a
building, facility, fixture or other structure.
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(f) For purposes of this Agreement, "Hazardous Material" means any
pollutant, contaminant, constituent, chemical, mixture, raw material,
intermediate, product or by-product, petroleum or any fraction thereof, asbestos
or asbestos-containing-material, polychlorinated biphenyls, urea formaldehyde
foam insulation, or industrial, solid, toxic, radioactive, infectious, disease-
causing or hazardous substance, material, waste or agent, including all
substances, materials, products or wastes which are identified or regulated
under any Environmental Law.
(g) For purposes of this Agreement, "Release" means any spill,
discharge, leak, emission, injection, escape, dumping, leaching, dispersal,
emanation, migration or release of any kind whatsoever of any Hazardous
Substance or noxious noise or odor, at, in, on, into or onto the environment,
including the movement of any Hazardous Substance through or in the environment,
the abandonment or discard of barrels, containers, tanks or other receptacles
containing or previously containing any Hazardous Substance, or any release,
emission or discharge as those terms are defined in any Environmental Law.
(h) For the purposes of this Agreement, "Foreign, State and Local
Real Property Disclosure Requirements" means any foreign, state and local laws
requiring notification of the buyer of real property, or notification,
registration, or filing with any state or local agency, prior to the sale of any
real property or transfer of control of an establishment, of the actual or
threatened presence or release into the environment, or the use, disposal, or
handling of Hazardous Materials on, at, under, or near the real property to be
sold or the establishment for which control is to be transferred.
SECTION 3.14 Intellectual Property.
(a) Section 3.14(a) of the Company Disclosure Letter sets forth a
true, correct and complete list of all Intellectual Property (as hereinafter
defined) (other than that Intellectual Property included in clauses (vi) and
(vii) of Section 3.14(d)) owned or held by the Company (or otherwise used in the
business of the Company) on the date hereof and identifies all license
agreements in effect on the date hereof pursuant to which any such Intellectual
Property is licensed to or by the Company, in each case, which have been, are,
or may in the foreseeable future be, material to the Company taken as a whole.
(b) Except as otherwise indicated in the license agreements referred
to in the immediately preceding paragraph (a), (i) the Company at the Effective
Time will be the sole and exclusive owner or holder of such Intellectual
Property free and clear of any royalty or other payment obligation, lien or
charge, (ii) the Intellectual Property is fully assignable, without conditions,
limitations or restrictions of any kind, (iii) there are no agreements which
restrict or limit the use by the Company of the Intellectual Property and (iv)
record title to all Intellectual Property owned or held by the Company or
otherwise used in the business of the Company is registered (or a registration
application for which has been submitted) in the name of the Company in the
respective patent, trademark and copyright offices of countries indicated in
Section 3.14(a) of the Company Disclosure Letter.
(c) To the knowledge of the Company, (v) such Intellectual Property
is valid and enforceable, (w) such Intellectual Property does not infringe on
any patents, trademarks,
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copyrights or any other intellectual property or proprietary rights of any
person or entity in any country, (x) all use by and disclosure of the
Intellectual Property to any other person has been pursuant to the terms of a
written agreement with such person and all use by the Company of Intellectual
Property that is owned by another person has been pursuant to the terms of a
written agreement with such person or is otherwise lawful, (y) all maintenance
taxes, annuities and renewal fees have been paid and all other necessary actions
to maintain such Intellectual Property have been taken through the date hereof
and will continue to be paid or taken by the Company through the Effective Time
and (z) there exists no impediment which would impair the Company's rights to
conduct its business after the Effective Time pursuant to such Intellectual
Property.
(d) The Company has taken all reasonable and appropriate steps to
protect the Intellectual Property and, where applicable, to preserve the
confidentiality of the Intellectual Property.
(e) during the two-year period immediately preceding the date of this
Agreement, the Company has not received any written notice of claim that any of
such Intellectual Property has expired, is not valid or enforceable in any
country or that it infringes upon or conflicts with any patent, trademark,
service mark, copyright or trade name of any third party, and, to the knowledge
of the Company, no such claims or controversies, whenever filed or threatened,
currently exist;
(f) during the two-year period immediately preceding the date of this
Agreement, the Company has not given any notice of infringement to any third
party with respect to any of such Intellectual Property or has become aware of
facts or circumstances evidencing the infringement by any third party of any of
such Intellectual Property, and, to the knowledge of the Company, no claim or
controversy with respect as any such alleged infringement currently exists; and
(g) certificates of registration and renewal, letter patents and
copyright registration certificates and all other instruments evidencing
ownership of such Intellectual Property are in the possession of the Company.
(h) The term "Intellectual Property" shall mean:
(i) all trademarks, service marks, trademark registrations, service
mark registrations, trade names and applications for registration of
trademarks and service marks;
(ii) all licenses which create rights in or to the trademark, service
mark or trade name properties described in clause (i) above;
(iii) all copyrights, copyright registrations and applications for
registration of copyrights;
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(iv) all renewals, modifications and extensions of any items
referred to in clauses (i) through (iii) above;
(v) all patents, design patents and utility patents, all
applications for grant of any such patents pending as of the date hereof or
as of the Effective Date or filed within five years prior to the date
hereof, and all reissues, divisions, continuations-in-part and extensions
thereof;
(vi) all technical documentation, trade secrets, designs,
inventions, processes, rights in plant varieties, formulae, know-how,
operating manuals and guides, plans, new product development, technical and
marketing surveys, material specifications, product specifications,
invention records, research records, labor routings, inspection processes,
equipment lists, engineering reports and drawing, architectural or
engineering plans, know-how agreements and other know-how;
(vii) all marketing and licensing records, sales literature, customer
lists, trade lists, sales forces and distributor networks lists,
advertising and promotional materials, service and parts records, warranty
records, maintenance records and similar records;
(viii) all rights arising under, and rights to develop, use and sell
under, any of the foregoing and all licenses with respect thereto; and
(ix) all rights and incidents of interest in and to all
noncompetition or confidentiality agreements.
SECTION 3.15 Real Property; Personal Property.
(a) Section 3.15(a) of the Company Disclosure Letter sets forth a
true, correct and complete list of all of the real property owned in fee by the
Company (the "Owned Property"). Except as set forth in Section 3.15(a) of the
Company Disclosure Letter, the Company has good and marketable title to each
parcel of Owned Property free and clear of all mortgages, pledges, liens,
encumbrances and security interests, except (i) those reflected or reserved
against in the balance sheet of the Company as of December 31, 1998 and included
in the SEC Reports, (ii) Taxes and general and special assessments not in
default and payable without penalty and interest, and (iii) other liens,
mortgages, pledges, encumbrances and security interests which do not materially
interfere with the Company's use of such Owned Property or materially detract
from or diminish the value thereof.
(b) Section 3.15(b) of the Company Disclosure Letter sets forth a
true, correct and complete list of all written leases, subleases and other
agreements under which the Company uses or occupies or has the right to use or
occupy any real property (the "Real Property Leases" and, the property governed
by such Real Property Leases, together with the Owned Property, is referred to
herein as the "Real Property"). The Company has heretofore delivered to the
Parent and the Sub true, correct and complete copies of all Real Property Leases
(including all written modifications, amendments, supplements, waivers and side
letters thereto). Each Real Property Lease is valid, binding and in full force
and effect, all rent and other sums and charges payable
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by the Company as tenant thereunder are current, and no termination event or
condition or uncured default of a material nature on the part of the Company
exists under any Real Property Lease. The Company has a good and valid leasehold
interest in each parcel of real property leased by it free and clear of all
mortgages, pledges, liens, encumbrances and security interests, except (i) those
reflected or reserved against in the balance sheet of the Company as of
December 31, 1998 and included in the SEC Reports, (ii) Taxes and general and
special assessments not in default and payable without penalty and interest; and
(iii) other liens, mortgages, pledges, encumbrances and security interests which
do not materially interfere with the Company's use of such Real Property or
materially detract from or diminish the value thereof.
(c) Except as disclosed in Section 3.15(c) of the Company Disclosure
Letter, the buildings and improvements on the Real Property (including all
fixtures, roofs, plumbing systems, HVAC systems, fire protection systems,
electrical systems, machinery, equipment, elevators and all structural
components) are in all material respects in good operating condition and in a
state of good and working maintenance and repair, ordinary wear and tear
excepted, are adequate and suitable for the purposes for which they are
presently being used.
(d) To the knowledge of the Company, no part of any of the Real
Property is subject to any building or use restriction that would materially
restrict or prevent the present use and operation of such Real Property.
(e) All of the Real Property has rights of access to dedicated public
ways (and makes no material use of any means of access or egress that is not
pursuant to such dedicated public ways or recorded, irrevocable rights-of-way)
and is served by water, sewer, telephone, electric, gas and other public
utilities necessary or desirable for the current use thereof which utilities are
available to such Real Property through a public right-of-way. There are no
pending or proposed special or other assessments for public improvements on the
Real Property.
(f) To the knowledge of the Company, there is no pending or
threatened proceeding or governmental action to modify the zoning classification
of, or to condemn or take by power of eminent domain (or any purchase in lieu
thereof), or to classify as a landmark, all or any material part of the Real
Property.
(g) The Company is in possession of and has good title to, or has
valid leasehold interests in or valid rights under contract to use, all material
tangible personal property used in the business of the Company. All such
tangible personal property is owned by the Company free and clear of all liens
other than those which do not materially interfere with the current use of such
property or that are expressly discussed in the notes to the financial
statements included in the SEC Reports or in Section 3.15(g) of the Company
Disclosure Letter, or is leased under a valid and subsisting lease, and in any
case, is in all material respects in good working order and condition, ordinary
wear and tear excepted.
SECTION 3.16 Insurance. Set forth in Section 3.16 of the Company
Disclosure Letter is a list of all insurance policies (including information on
the premiums payable in connection therewith) maintained by the Company. Such
policies have been issued by insurers, which, to the Company's knowledge, are
reputable and financially sound and provide coverage
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for the operations conducted by the Company of a scope and coverage consistent
with customary industry practice. All such insurance policies are in full force
and effect and the Company is not in material default thereunder. The Company
has previously provided the Parent and the Sub with copies of such policies and
of outstanding claims thereunder. All claims thereunder have been filed in a due
and timely fashion. During the past three years, the Company has not been
notified in writing of a refusal of any material insurance coverage relating to
products liability (including renewals of any such products liability coverage)
by any insurance carrier to which it has applied for insurance.
SECTION 3.17 Material Contracts. Except as disclosed in Section 3.17
of the Company Disclosure Letter, the Company has filed as exhibits to the SEC
Reports all Material Contracts (as hereinafter defined), and made available to
the Parent and the Sub, true, correct and complete copies of all written
Material Contracts. For purposes of this Agreement, the term "Material
Contracts" means all contracts, agreements, commitments, arrangements, leases
(including with respect to personal property), policies, and other instruments
to which the Company is a party or by which the Company or any of its respective
assets or properties is bound which (a) involves or could involve aggregate
payments of more than $25,000, or (b) is or could reasonably be expected to be
material to the Company taken as a whole. Except as described in Section 3.17
of the Company Disclosure Letter, the Company neither is, nor has received any
notice or has any knowledge that any other party is, in default in any material
respect under any Material Contract, and, to the knowledge of the Company, there
has not occurred any event that with the lapse of time or the giving of notice
or both would constitute such a default. No party to any of the Material
Contracts has made any claims against, or sought indemnification from, the
Company as to any matter arising under or with respect to any Material Contract,
and neither the Company nor any of its respective directors or officers has been
advised of any alleged basis for any such claims. No valid claim against the
Company exists for payment of any "topping", "profit-participation",
"termination", "break-up" or "bust-up" fee or any similar compensation or
payment arrangement as a result of or in connection with the transactions
contemplated hereby.
SECTION 3.18 Related Party Transactions. Except as set forth in the
SEC Reports or in Section 3.18 of the Company Disclosure Letter, no director,
officer, partner, employee, "affiliate" or "associate" (as such terms are
defined in Rule 12b-2 under the Exchange Act) of the Company (i) has borrowed
any monies from or has outstanding any indebtedness or other similar obligations
to the Company; (ii) owns any direct or indirect interest of any kind in, or is
a director, officer, employee, partner, affiliate or associate of, or consultant
or lender to, or borrower from, or has the right to participate in the
management, operations or profits of, any person or entity which is (x) a
competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor
of the Company, (y) engaged in a business related to the business of the Company
or (z) participating in any transaction to which the Company is a party; or
(iii) otherwise is or has been a party to any contract, arrangement,
understanding or transaction with the Company. Except as set forth in
Section 3.18 of the Company Disclosure Letter, each of such agreements,
obligations and arrangements shall have been paid in full or, in the case of
executory obligations, terminated prior to the Effective Time.
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SECTION 3.19 Liens. Except as set forth in Section 3.19 of the
Company Disclosure Letter or as disclosed in the SEC Reports or pursuant to
Sections 3.14 and 3.15 and other than liens, mortgages, security interests,
pledges and encumbrances which do not materially interfere with the Company's
use of its property or assets or materially diminish or detract from the value
thereof, the Company has not granted, created or suffered to exist with respect
to any of its assets, any mortgage, pledge, charge, hypothecation, collateral,
assignment, lien (statutory or otherwise), encumbrance or security agreement of
any kind or nature whatsoever.
SECTION 3.20 State Takeover Statute Inapplicable. As of the date
hereof and at all times on or prior to the Effective Time, Article 13.03 of the
TBCA shall be inapplicable to the transactions contemplated by this Agreement,
the Stock Option Agreement and the Purchase Agreements.
SECTION 3.21 Required Vote of Company Stockholders. The only vote of
the stockholders of the Company required to adopt the plan of merger (within the
meaning of Article 5.03 of the TBCA) contained in this Agreement and approve the
Merger is the affirmative vote of the holders of not less than two-thirds of the
outstanding Shares. No other vote of the stockholders of the Company is
required by law, the Articles of Incorporation or Bylaws of the Company as
currently in effect or otherwise to adopt such plan of merger contained in this
Agreement and approve the Merger.
SECTION 3.22 Employee Relations. (a) Since December 31, 1994 there
has not occurred or, to the knowledge of the Company, been threatened any
strikes, slow downs, picketing, work stoppages, concerted refusals to work
overtime or other similar labor activities by employees of the Company. No
grievance, unfair labor practice charge or complaint or arbitration proceeding
arising out of or under any collective bargaining agreement to which the Company
is a party is pending, and, to the knowledge of the Company, no such grievance
or proceeding is threatened, except for grievances and proceedings which,
individually and in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
(b) The employees of the Company are not represented by any labor
union or other labor representative and there are no collective bargaining
agreements or other arrangements in effect with respect to such employees and,
to the knowledge of the Company, there are no other Persons attempting to
represent or organize or purporting to represent any employees employed by the
Company.
(c) There are no complaints, charges or claims against the Company
or, to the knowledge of the Company, threatened, based on, arising out of, in
connection with or otherwise relating to the employment (or termination of
employment) by the Company of any individual, including individuals classified
as independent contractors or "leased employees" (within the meaning of
section 414(n) of the Code), or the failure to employ any individual, including
any claim relating to employment discrimination, equal pay, employee safety and
health, immigration, wages and hours or workers' compensation.
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(d) The Company is not a contractor or subcontractor with obligations
under any federal, state, local or foreign government contracts.
SECTION 3.23 Customers and Suppliers. The information set forth in
Section 3.23 of the Company Disclosure Letter fairly and accurately presents the
information described therein relating to the customer base and the top
suppliers of the Company. There are no disputes, claims or other actions or
proceedings between the Company, on the one hand, and any customer or any
supplier of the Company, on the other hand, other than those occurring in the
ordinary course of business in amounts consistent with past practice. As of the
date of this Agreement, the Company has not received any notice or other
communication (in writing or otherwise), or any other information, indicating
that (i) any supplier identified in Section 3.23 of the Company Disclosure
Letter will cease dealing with the Company or may otherwise materially reduce
the volume of business transacted by such supplier with the Company below
historical levels, or (ii) the consummation of the transactions contemplated
hereby will adversely affect the relationships of the Company with any of its
customers or suppliers.
SECTION 3.24 Inventory and Accounts Receivable. All inventory of the
Company reflected on the balance sheet of the company as of December 31, 1998
(included in the SEC Reports) (the "Inventories") consists of a quality and
quantity usable or salable in the ordinary course of business. All accounts
receivable of the Company that are reflected on each such balance sheet (the
"Accounts Receivable") represent valid obligations arising from sales actually
made or services performed in the ordinary course of business. To the knowledge
of the Company, the Accounts Receivable are current and collectible net of the
applicable reserves reflected on each such balance sheet (which reserves are
adequate and calculated consistent with past practice), in accordance with the
Company's collection practices. As of three (3) Business Days prior to the date
hereof, the Inventories and Accounts Receivable (net of the applicable reserves)
are $55,449.32 and $685,603.31, respectively.
SECTION 3.25 Debt. Except as set forth in Section 3.25 of the Company
Disclosure Letter, the aggregate amount of the Company's outstanding Debt does
not exceed $2,442,000 as of the date hereof. For purposes of this Agreement,
"Debt" means without duplication, (i) obligations for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services
(excluding accounts payable), (iv) obligations as lessee under capital leases,
(v) an amount equal to the aggregate amount of all Debt secured by a lien,
mortgage, pledge, charge, security interest or encumbrance of any kind on any
asset of the Company, whether or not such Debt is assumed by the Company, (vi)
an amount equal to the aggregate amount of all Debt of others Guaranteed by (as
defined below) the Company and (vii) all non-contingent reimbursement or
contribution obligations with respect to letters of credit or Guaranties
directly or indirectly providing for or ensuring the payment of any Debt. For
this purpose, a person shall be deemed to own subject to a lien any asset that
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capitalized lease or other title retention agreement
relating to such asset. For the purposes of this Agreement, "Guaranty" of means
any obligation, contingent or otherwise (i) to pay any liability (absolute
accrued, asserted or unasserted, contingent or otherwise) or to
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otherwise protect, or having the practical effect of protecting, the holder of
any such liability against loss (whether such obligation arises by virtue of
being a partner of a partnership or participant in a joint venture or by
agreement to pay, to keep well, to purchase assets, goods, securities or
services or to take or pay, or otherwise) or (ii) incurred in connection with
the issuance by a third party of a guaranty of any liability of any other person
(whether such obligation arises by agreement to reimburse or indemnify such
third party or otherwise.) The term "Guarantee," used as a verb, has a
correlative meaning.
SECTION 3.26 Insolvency Proceedings. No attachments, executions,
assignments for the benefit of creditors, receiverships, conservatorships or
voluntary or involuntary proceedings in bankruptcy or actions pursuant to any
other debtor relief laws or actions by any state or federal regulatory authority
are pending against the Company.
SECTION 3.27 Net Sales and Total Assets. (i) The annual net sales of
the Company, as stated on the last regularly prepared annual statement of income
and expense of the Company, are less than $10,000,000, and (ii) the total assets
(net of accumulated depreciation) of the Company, as stated on the last
regularly prepared balance sheet of the Company, are less than $10,000,000.
SECTION 3.28 No Subsidiaries. The Company has no subsidiaries.
SECTION 3.29 Litigation Trust Documents. Attached hereto as
Exhibit B is a true and correct copy of the Litigation Trust Agreement dated as
of March 31, 1999 between the Company and the Trustees (as defined therein) (the
"Litigation Trust Agreement"); and attached hereto as Exhibit C is a true and
correct copy of the Assignment dated as of March 31, 1999 by the Company and the
Trustees (the "Assignment"). The Litigation Trust Agreement and the Trust
created thereby and the Assignment remain in full force and effect, and
Litigation Trust Agreement is the only agreement between the Company and the
Trustees relating to the LiquiBox Lawsuit (as defined in the Litigation Trust
Agreement).
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE PARENT AND THE SUB
The Parent and the Sub represent and warrant to the Company as
follows:
SECTION 4.01 Organization and Qualification. Each of the Parent and
the Sub is a duly organized and validly existing corporation in good standing
under the laws of the state of its incorporation with all requisite corporate
power and authority to own its properties and conduct its business as currently
conducted. All of the issued and outstanding capital stock of the Sub is owned
directly by the Parent.
SECTION 4.02 Authority Relative to this Agreement. Each of the
Parent and the Sub has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this
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Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate proceedings on the part
of the Parent and the Sub. No vote of the Parent's shareholders is required to
approve this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of the Parent and the
Sub and this Agreement constitutes a legal, valid and binding agreement of each
of the Parent and the Sub, enforceable against each of the Parent and the Sub in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
in equity or at law).
SECTION 4.03 Information Statement. None of the information supplied
or to be supplied in writing by or on behalf of the Parent, the Sub or any
affiliate of the Parent or the Sub specifically for inclusion in the Information
Statement or any other schedule or document required to be filed by the Company
in connection with the Merger will, at the time the Information Statement is
first mailed and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 4.04 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by each of the Parent or the Sub nor
the consummation of the transactions contemplated hereby will (i) conflict with
or result in any breach of any provision of the respective Articles of
Incorporation or Bylaws (or other similar governing documents) of the Parent or
the Sub; (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
(A) as may be required under, the Exchange Act, the TBCA, the "takeover" or
"blue sky" laws of various states, or (B) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not, individually or in the aggregate, have a material
adverse effect on the ability of the Parent or the Sub to consummate the
transactions contemplated hereby; (iii) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, license, agreement, contract or other
instrument or obligation to which the Parent or the Sub is a party or by which
any of their respective assets may be bound, except for such defaults (or rights
of termination, cancellation or acceleration) which would not, individually or
in the aggregate, have a material adverse effect on the ability of the Parent or
the Sub to consummate the transactions contemplated hereby; (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Parent or the Sub or any of their respective assets, except for violations which
would not, individually or in the aggregate, have a material adverse effect on
the ability of the Parent or the Sub to consummate the transactions contemplated
hereby.
Section 4.05 Interim Operation of the Sub. The Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted and will conduct its
operations only as contemplated hereby.
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Section 4.06 Financing. The Parent has sufficient funds available to
pay the Merger Consideration with respect to all outstanding Shares and Options
and to pay all fees and expenses related to the transactions contemplated by
this Agreement.
ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business of the Company. (a) Except as
expressly contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, the Company will conduct its operations
according to its ordinary and usual course of business consistent with past
practice, and the Company will use its best efforts to preserve intact its
business organization, to keep available the services of its current officers
and employees and to preserve the goodwill of and maintain satisfactory
relationships with those persons and entities having business relationships with
the Company, and the Company will promptly advise the Parent and the Sub in
writing of any material change in the Company's condition (financial or
otherwise), properties, customer or supplier relationships, assets, liabilities,
business, prospects or results of operations. Without limiting the generality
of the foregoing and except as otherwise expressly provided in or contemplated
by this Agreement, during the period specified in the preceding sentence,
without the prior written consent of the Parent, the Company will not:
(i) other than as required pursuant to the terms of Options and
Preferred Stock outstanding on the date hereof, issue, sell, grant options
or rights to purchase, pledge, or authorize or propose the issuance, sale,
grant of options or rights to purchase or pledge of (A) any Company
Securities (including any Option), or grant or accelerate any right to
convert or exchange any Company Securities, or (B) any other securities in
respect of, in lieu of or in substitution for Shares outstanding on the
date hereof;
(ii) otherwise acquire or redeem, directly or indirectly, or
amend any of the Company Securities;
(iii) split, combine or reclassify its capital stock or declare,
set aside, make or pay any dividend or distribution (whether in cash, stock
or property) on any shares of its capital stock (other than mandatory
dividends on outstanding shares of Preferred Stock);
(iv) (A) make or offer to make any acquisitions, by means of a
merger or otherwise, of assets or securities, or any sale, lease,
encumbrance or other disposition of assets or securities, involving the
payment or receipt of consideration of, in the aggregate, $100,000 or more,
except for purchases of inventory made in the ordinary course of business
and consistent with past practice, or (B) enter into a material contract or
amend any Material Contract, or grant any release or relinquishment of any
rights under any Material Contract;
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(v) incur or assume any long-term Debt or short-term Debt
except for short-term Debt incurred in the ordinary course of business
consistent with past practice;
(vi) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person;
(vii) make any loans, advances or capital contributions to, or
investments in, any other person;
(viii) change any of the accounting principles or practices used
by it;
(ix) except with respect to the claim set forth in Section 5.01
of the Company Disclosure Letter, make any tax election or settle or
compromise any material federal, state or local income tax liability;
(x) propose or adopt any amendments to its Articles of
Incorporation or Bylaws (or similar governing documents);
(xi) grant any stock-related, performance or similar awards or
bonuses;
(xii) forgive any loans to employees, officers or directors or
any of their respective affiliates or associates;
(xiii) enter into any new, or amend any existing employment,
severance, consulting or salary continuation agreements with any officers,
directors or employees, or grant any increases in the compensation or
benefits to officers, directors and employees (other than increases to
persons who are not officers or directors in the ordinary course of
business consistent with past practice and that, in the aggregate, do not
result in a material increase in benefits or compensation expense of the
Company taken as a whole);
(xiv) make any deposits or contributions of cash or other
property to or take any other action to fund or in any other way secure the
payment of compensation or benefits under the Plans or agreements subject
to the Plans or any other plan, agreement, contract or arrangement of the
Company;
(xv) enter into, amend, or extend any collective bargaining or
other labor agreement;
(xvi) adopt, amend or terminate any Plan or other employee
benefit plan or arrangement;
(xvii) settle or agree to settle any suit, action, claim,
proceeding or investigation (including any suit, action, claim, proceeding
or investigation relating to this Agreement or the transactions
contemplated hereby) or pay, discharge or satisfy or agree to pay,
discharge or satisfy any claim, liability or obligation (absolute accrued,
asserted or unasserted, contingent or otherwise) other than the payment,
discharge or satisfaction of liabilities reflected or reserved against in
full in the financial statements as
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at December 31, 1998, incurred in the ordinary course of business
subsequent to December 31, 1998 or liabilities in the amount of $25,000
individually or $50,000 in the aggregate;
(xviii) use any Company resources with respect to the Litigation
Trust;
(xix) incorporate, form or otherwise establish or create any
subsidiaries of the Company; or
(xx) agree or otherwise to take any of the foregoing actions
or any action which would make any representation or warranty in this
Agreement untrue or incorrect as of the date when made or as of a future
date or would result in any of the conditions set forth in Section 6.02 not
being satisfied.
(b) The Company shall not make a general distribution of any
communication to their respective employees relating to the transactions
contemplated hereby, without the prior consent of the Parent which consent shall
not be unreasonably withheld.
SECTION 5.02 No Solicitation. The Company shall not, and shall not
permit its respective officers, directors and employees, representatives, agents
or affiliates to, directly or indirectly, encourage, solicit, initiate or
participate in any way in any discussions or negotiations with, or provide any
non-public information to, or afford any access to the properties, books or
records of the Company to, or otherwise assist or facilitate, any corporation,
partnership, person or other entity or group (other than the Parent or the Sub
or any affiliate of the Parent or the Sub) concerning any Acquisition
Transaction (as hereinafter defined); provided, however, that nothing contained
in this Section 5.02 shall prohibit the Board of Directors of the Company from
furnishing information to or entering into discussions or negotiations with any
person or entity that makes an unsolicited bona fide proposal to engage in an
Acquisition Transaction that the Board of Directors of the Company determines in
good faith, with the assistance of its independent financial advisor, represents
a financially superior transaction for the stockholders of the Company when
compared to the Merger if, and only to the extent that, the Board of Directors
of the Company determines in good faith based on the determination of outside
legal counsel that failure to take any such action would result in non-
compliance by the Board of Directors of the Company with its fiduciary duties
under applicable law to the stockholders of the Company; and provided, further,
that nothing contained in this Section 5.02 shall prohibit the Company or its
Board of Directors from taking and disclosing to the Company's stockholders a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act. The Company will immediately
notify the Parent if any such information is requested from it or any such
negotiations or discussions are sought to be initiated with the Company and will
immediately communicate to the Parent the terms of any proposal or inquiry and
the identity of the party making such proposal or inquiry which it may receive
in respect of any such transaction, including in the case of written proposals
or inquiries, furnishing the Parent with a copy of such proposal or inquiry (and
all amendments and supplements thereto). Subject to the first sentence of this
Section 5.02, the Company will and will cause its affiliates and their
respective officers, directors, employees, representatives and
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agents to immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any parties other than the Parent, the Sub or
any of their respective affiliates or associates conducted heretofore with
respect to any Acquisition Transaction. Except as is required in the exercise of
the fiduciary duties of the Board of Directors of the Company under applicable
law as determined by outside counsel to the Company, the Company agrees not to
release any third party from any confidentiality or standstill agreement to
which the Company is a party without the Parent's prior written consent and to
take all steps deemed necessary or appropriate by the Parent to enforce to the
fullest extent possible all such agreements.
SECTION 5.03 Access to Information. From and after the date hereof,
the Company will (i) give the Parent and the Sub and their authorized
accountants, investment bankers, counsel and other representatives complete
access (during regular business hours upon reasonable advance notice) to all
employees, plants, offices, warehouses and other facilities and to all books,
contracts, commitments and records (including tax returns) of the Company
(subject to any outstanding confidentiality agreements between the Company and
any third party, in which case the Company will advise the Parent and the Sub of
any limits on access and use its best efforts to obtain the consent of such
third party to the provision of such access to the Parent and the Sub) and cause
the Company's independent public accountants to provide access to their work
papers and such other information as the Parent or the Sub may reasonably
request, (ii) permit the Parent and the Sub to make such inspections as they may
require, (iii) cause its officers to furnish the Parent and the Sub with such
financial and operating data and other information with respect to the business,
properties and personnel of the Company as the Parent or the Sub may from time
to time reasonably request and (iv) furnish promptly to the Parent and the Sub a
copy of each report, schedule and other document filed or received by the
Company during such period pursuant to the requirements of federal or state
securities laws.
SECTION 5.04 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided for, each of
the parties hereto agrees to use its reasonable best efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement; provided, however, that nothing in
this Agreement shall obligate the Parent, the Sub or any of their respective
subsidiaries or affiliates to agree (i) to limit or not to exercise any rights
of ownership of any securities (including the Shares), or to divest, dispose of
or hold separate any securities or all or any portion of their respective
businesses, assets or properties or of the business, assets or properties of the
Company or (ii) to limit in any manner whatsoever the ability of such entities
(A) to conduct their respective businesses or own such assets or properties or
to conduct the businesses or own the properties or assets of the Company or (B)
to control their respective businesses or operations or the businesses or
operations of the Company. In connection with and without limiting the
foregoing, the Parent, the Sub and the Company shall cooperate with one another
(a) in promptly determining whether any filings are required to be or should be
made or consents, approvals, permits or authorizations are required to be or
should be obtained under any federal, state or foreign law or regulation or
whether any consents, approvals or waivers are required to be or
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should be obtained from other parties to loan agreements or other contracts or
instruments material to the business of the Company in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
promptly making any such filings, furnishing information required in connection
therewith and seeking to obtain timely any such consents, permits,
authorizations, approvals or waivers. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary action as may be reasonable in the
context thereof.
(b) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated hereby or thereby is
commenced, whether before or after the Effective Time, the parties hereto agree
to cooperate and use their reasonable best efforts to defend vigorously against
it and respond thereto.
SECTION 5.05 Indemnification. (a) The Parent shall cause the
Surviving Corporation to indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company in their
capacities as such and not in any other capacity (each an "Indemnified Party")
for a period of not less than four years after the Effective Time against all
losses, expenses, claims, damages or liabilities arising out of actions or
omissions occurring on or prior to the Effective Time to the fullest extent
permitted by federal law, the TBCA, and the Company's charter and bylaws as in
effect on the date hereof except the right to indemnification shall not arise in
those instances in which the party seeking indemnification has knowingly caused
any representation or warranty of the Company contained herein to be false or
inaccurate and the claim arises principally from such falsity or inaccuracy of
such representation or warranty. In addition, the Parent shall cause the
Surviving Corporation to advance expenses, regardless of allegations, as
incurred to the fullest extent permitted by federal law, the TBCA, and the
Company's charter and bylaws as in effect on the date hereof, provided that the
Indemnified Party to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such Indemnified Party is not
entitled to indemnification for whatever reason, including as set forth in the
previous sentence.
(b) If the Surviving Corporation or any of its successors or assigns
(i) shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then and
in each such case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation shall assume the obligations set forth in
this Section 5.05.
SECTION 5.06 Certain Employee Matters. The Company shall take, or
cause to be taken, all action necessary, as promptly hereafter as reasonably
practicable, to amend any plan, other than the Stock Option Plans, maintained by
the Company to eliminate, as of the date hereof, all provisions for the purchase
of Shares or other Company Securities directly from the Company.
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SECTION 5.07 State Takeover Statutes. The Company shall, upon the
request of the Parent or the Sub, take all reasonable steps to assist in any
challenge by the Parent or the Sub to the validity, or applicability of any
state takeover law to any of the transactions contemplated by this Agreement.
SECTION 5.08 Information Statement. The Company shall afford the
Parent and its counsel a reasonable opportunity to review and comment upon the
Information Statement prior to the filing with the SEC of any supplement or
amendment thereto, and shall reflect and incorporate therein all comments and
objections thereon reasonably made by the Parent and its counsel. The Company
shall obtain and furnish the information required to be included in any such
supplement or amendment Information Statement, shall respond promptly to any
comments made by the SEC with respect to the Information Statement in accordance
with the terms hereof, shall cause the final Information Statement to be mailed
to the Company's stockholders at the earliest practicable date and shall use its
best efforts to obtain the necessary approval of the Merger by its stockholders.
The record date for the Special Meeting shall occur after the transactions
contemplated by all of the Purchase Agreements shall have been consummated.
SECTION 5.09 Notification of Certain Matters. The Company shall give
prompt notice to the Parent and the Sub, and the Parent or the Sub, as the case
may be, shall give prompt notice to the Company, of the occurrence or non-
occurrence of any event, the occurrence, or non-occurrence of which is likely
(i) to cause any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time, or (ii) to result in any material failure of such party to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.09 shall not limit or otherwise affect the remedies
available hereunder to any of the parties receiving such notice.
SECTION 5.10 Subsequent Filings. Until the Effective Time, the
Company will timely file (subject to any extension in compliance with applicable
law) with the SEC each form, report and document required to be filed by the
Company under the Exchange Act and will promptly deliver to the Parent and the
Sub copies of each such report filed with the SEC. As of their respective
dates, none of such reports shall contain any untrue statement 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 audited consolidated financial statements and
unaudited interim financial statements of the Company included in such reports
shall be prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes thereto)
and shall fairly present the financial position of the Company as of the dates
thereof and the results of its operations and changes in financial position for
the periods then ended, subject in the case of unaudited interim financial
statements to normal and recurring year-end adjustments.
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ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, prior to the proposed Effective Time, of
the following conditions:
(a) the plan of merger (within the meaning of Article 5.03 of the
TBCA) contained in this Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company required by and in
accordance with applicable law; and
(b) no statute, rule, regulation, executive order, judgment, decree
or injunction shall have been enacted, entered, issued, promulgated or
enforced by any court or governmental authority against the Parent, the Sub
or the Company and be in effect that prohibits or restricts the
consummation of the Merger or makes such consummation illegal (each party
agreeing to use its reasonable best efforts to have such prohibition
lifted).
SECTION 6.02 Conditions to the Obligations of the Parent and the Sub
to Effect the Merger. The obligations of the Parent and the Sub to effect the
Merger are further subject to the satisfaction or waiver, on or prior to the
proposed Effective Time, of the following conditions:
(a) the Company shall have performed and complied in all material
respects with all agreements and obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time and the representations and warranties of Company which are
qualified as to materiality, shall be true and correct, and the
representations and warranties of the Company that are not so qualified,
shall be true and correct in all material respects, on the date of this
Agreement and at and on the proposed Effective Time as though such
representations and warranties were made on and as of such date;
(b) the Company shall have furnished certificates of its officers to
evidence compliance with the conditions set forth in Section 6.02(a)
hereof, each substantially in the forms attached as Exhibit C hereto;
(c) there shall not have been any action taken, or any statute, rule,
regulation, judgment, order or injunction, promulgated, enacted, entered,
enforced or deemed applicable to this Agreement or the Merger that would or
is reasonably likely to (i) require the Sub, the Parent, the Company, or
any of their respective subsidiaries or affiliates to dispose of or hold
separate any portion of their respective businesses, assets or properties
or impose any limitations on the ability of any of such entities to conduct
their respective businesses or own such assets or properties or impose any
limitations on the ability of the Parent or the Sub to conduct the business
of the Company and own the assets and properties of the Company, (ii)
impose any limitations on the ability of the
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Parent, the Sub or any of their respective subsidiaries or affiliates
effectively to control the business or operations of the Company, the
Parent, the Sub, or any of their respective subsidiaries or affiliates, or
(iii) otherwise materially adversely affects the Parent, the Sub, the
Company or any of their respective subsidiaries or affiliates or otherwise
make consummation of the Merger unduly burdensome;
(d) there shall not have been threatened, instituted or pending any
action, proceeding or counterclaim by or before any federal, state, local
or foreign governmental, administrative or regulatory agency or
instrumentality or before any court, arbitration tribunal or any other
tribunal, domestic or foreign, challenging the consummation of the Merger,
or seeking to obtain any material damages in connection therewith, or
seeking to, directly or indirectly, result in any of the consequences
referred to in clauses (i) through (iii) of paragraph (c) above;
(e) there shall not have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) the
declaration of any banking moratorium or any suspension of payments in
respect of banks or any limitation (whether or not mandatory) on the
extension of credit by lending institutions in the United States, (iii) the
commencement of a war, armed hostilities or any other international or
national calamity involving the United States, (iv) a material adverse
change in the United States currency exchange rates or a suspension of, or
limitation on, the markets therefor, or (v) in the case of any of the
foregoing existing as of the date hereof, a material acceleration or
worsening thereof;
(f) stockholders who hold Dissenting Shares shall have validly
exercised their right to dissent pursuant to Article 5.11 of the TCBA with
respect to no more than five percent (5%) of the outstanding Shares;
(g) the Company shall have given a notice of redemption to holders of
Series A, B and C Preferred Stock, which notice shall specify that the date
of such redemption shall be two (2) Business Days following the Effective
Time; and
(h) the Company shall not have suffered any Material Adverse Effect
or any change, condition, event or development that reasonably could be
expected to have a Material Adverse Effect.
SECTION 6.03 Conditions to the Obligations of the Company to Effect
the Merger. The obligations of the Company to effect the Merger are further
subject to the satisfaction or waiver, on or prior to the proposed Effective
Time, of the following conditions:
(a) the Parent and the Sub shall have performed and complied in all
material respects with all agreements and obligations required by this
Agreement to be performed or complied with by them on or prior to the
proposed Effective Time and the representations and warranties of Parent
and Sub which are qualified as to materiality, shall be true and correct,
and the representations and warranties of Parent and Sub that are
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not so qualified, shall be true and correct in all material respects, on
the date of this Agreement and at and on the proposed Effective Time as
though such representations and warranties were made on and as of such
date; and
(b) the Parent and the Sub shall have furnished certificates of their
respective officers to evidence compliance with the conditions set forth in
Section 6.03(a) hereof, each substantially in the forms attached as
Exhibit E hereto;
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement or the Merger by the stockholders of the
Company):
(a) by mutual written consent of the Boards of Directors of the
Company and the Parent;
(b) by the Parent or the Company on or after the date occurring five
(5) Business Days following the Expiration Date, if the Effective Time
shall not have occurred on or before the Expiration Date (provided that the
right to terminate this Agreement under this Section 7.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date);
(c) by the Parent or the Company, if any court of competent
jurisdiction shall have issued an order, decree or ruling, or taken any
other action restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by this Agreement, the Stock Purchase Agreements
or the Stock Option Agreement;
(d) by the Parent, (x) if the Board of Directors or any committee
thereof of the Company withdraws or modifies or amends in a manner adverse
to the Parent or the Sub its authorization or approval of the Merger or
this Agreement or its determination that the Merger is in the best
interests of the Company's shareholders or shall have resolved to do any of
the foregoing or shall have failed to have reiterated such approval or
determination within five Business Days of any written request by the
Parent or the Sub therefor or (y) if the Company (or the Board of Directors
or any committee thereof of the Company) shall have approved, recommended,
authorized, proposed, publicly announced its intention to enter into,
entered any agreement or arrangement in respect of or filed a
Schedule 14D-9 not opposing any Acquisition Transaction with a party other
than the Parent, the Sub or any of their affiliates;
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(e) by the Parent, if the Company participates in discussions or
negotiations with, or provides any information to or affords any access to
the properties, books and records of the Company to, or otherwise assists
or facilitates any corporation, partnership, person or other entity or
group (other than the Parent or the Sub or any affiliate or associate of
the Parent or the Sub) concerning any Acquisition Transaction, whether or
not permitted by Section 5.02;
(f) by the Parent, if the Company shall have breached or failed to
comply in any material respect with any of its obligations, covenants or
agreements under this Agreement, or any of the representations and
warranties of the Company set forth in this Agreement which is qualified as
to materiality, shall not be true and correct, or any such representation
or warranty that is not so qualified, shall not be true and correct in all
material respects when made or at any time prior to the Effective Time as
if made at and as such time, and the Company fails to remedy such breach
within 15 days written notice thereof by the Parent;
(g) by the Company, if either the Parent or the Sub shall have
breached or failed to comply in any material respect with any of its
obligations, covenants or agreements under this Agreement, or any of the
representations and warranties of such party set forth in this Agreement
which is qualified as to materiality, shall not be true and correct, or any
such representation and warranty that is not so qualified, shall not be
true and correct in all material respects when made or at any time prior to
the Effective Time as if made at and as such time, and the Parent or the
Sub fails to remedy such breach within 15 days written notice thereof by
the Company;
SECTION 7.02 Effect of Termination. If this Agreement is terminated
and the Merger is abandoned pursuant to Section 7.01 hereof, this Agreement,
except for the provisions of Sections 8.06, 8.10 and 8.12, shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers or stockholders. Nothing in this Section 7.02 shall
relieve any party to this Agreement of liability for breach of this Agreement.
SECTION 7.03 Amendment. To the extent permitted by applicable law,
this Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, the Parent and the Sub, at any time before or after
adoption of this Agreement by the stockholders of the Company but, after any
such stockholder approval, no amendment shall be made which decreases the Merger
Consideration or which adversely affects the rights of the Company's
stockholders hereunder without the approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all of the parties hereto.
SECTION 7.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company, the Parent and the Sub, may (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein by any other applicable party or in any
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document, certificate or writing delivered pursuant hereto by any other
applicable party or (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Representations and Warranties. The
representations, warranties and covenants contained in this Agreement, except
for the covenants contained in Section 5.05 hereof, shall not survive beyond the
Effective Time.
SECTION 8.02 Entire Agreement; Assignment. This Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
The Agreement shall not be assigned by operation of law or otherwise; provided,
however, that the Parent or the Sub may assign any of their respective rights
and obligations to any affiliate of the Parent or the Sub, as the case may be,
but no such assignment shall relieve the Parent or the Sub, as the case may be,
of its obligations hereunder.
SECTION 8.03 Enforcement of the Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any federal or
state court located in the State of Delaware (as to which the parties agree to
submit to jurisdiction for the purposes of such action), this being in addition
to any other remedy to which they are entitled at law or in equity.
SECTION 8.04 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 8.05 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
if to the Parent or the Sub:
Suntory Water Group, Inc.
2141 Powers Ferry Road
Marietta, Georgia 30067
Facsimile: (770) 956-9495
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Attention: Thomas E. Van Autreve
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile: 212-225-3999
Attention: Paul J. Shim, Esq.
if to the Company:
Great Pines Water Company, Inc.
600 North Shepherd, Suite 303
Houston, Texas 77007
Facsimile: 713-869-6204
Attention: Robert A. Hammond, Jr.
with a copy to:
Crady, Jewett & McCulley, L.L.P.
Suite 1400 Two Houston Center
909 Fannin
Houston, Texas 77010-1006
Facsimile: (713) 739-8403
Attention: Stephen A. Lee, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof). Any notice sent by or on behalf of the Company to the Parent
or the Sub pursuant to this Agreement shall also be deemed notice to the Sub or
the Parent, as the case may be.
SECTION 8.06 Governing Law. Except as to matters of corporate
governance governed by the laws of the State of Texas, this Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
SECTION 8.07 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 8.08 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature
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whatsoever under or by reason of this Agreement except for Section 5.05 (which
is intended to be for the benefit of the persons referred to therein, and may be
enforced by any such persons).
SECTION 8.09 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.10 Fees and Expenses. Whether or not the Merger is
consummated, all fees, costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
SECTION 8.11 Certain Definitions.
(a) The term "Acquisition Transaction" means any tender offer or
exchange offer, any merger, consolidation, liquidation, dissolution,
recapitalization, reorganization or other business combination, any acquisition,
sale or other disposition of all or a substantial portion of the assets or
securities of the Company or any other similar transaction involving the
Company, its securities or any of its material divisions.
(b) The term "Acquisition Event" means the consummation of any
(i) Acquisition Transaction or (ii) series of transactions that results in any
person, entity or "group" (other than the Parent, the Sub or any of their
affiliates) acquiring more than 25% of the outstanding Shares or assets of the
Company (through any open market purchases, merger, consolidation,
recapitalization, reorganization or other business combination).
(c) The term "Business Day" means any day other than a Saturday or
Sunday or a day on which banks are authorized or obligated by law to be closed
in New York, New York or Houston, Texas.
(d) The term "including" shall be deemed to be followed by the phrase
"without limitation."
(e) The term "Material Adverse Effect" means any change, condition,
event or development in the business, condition (financial or otherwise),
assets, liabilities, results of operations or prospects of the Company that is
material and adverse to the Company taken as a whole, or that materially impairs
the ability of the parties to consummate the transactions contemplated by this
Agreement.
(f) The term "subsidiary" means, when used with reference to an
entity, any other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions, or a majority of the outstanding voting
securities of which, are owned, directly or indirectly, by such entity.
(g) The term "Tax" means all taxes, charges, fees, levies, imposts,
duties, and other assessments, including any income, alternative minimum or
add-on tax, estimated, gross
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income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, employee withholding, payroll, worker's
compensation, unemployment insurance, social security, employment, excise
(including the federal communications excise tax under Section 4251 of the
Code), severance, stamp, occupation, premium, recording, real property, personal
property, federal highway use, commercial rent, environmental (including taxes
under Section 59A of the Code) or windfall profit tax, custom, duty or other
tax, fee or other like assessment or charge of any kind whatsoever, together
with any interest, penalties, related liabilities, fines or additions to tax
imposed by any country, any state, county, provincial or local government or
subdivision or agency thereof.
(h) The term "Tax Return" means a report, return or other information
(including any amendments) required to be supplied to a governmental entity with
respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company or any
of its subsidiaries.
SECTION 8.12 Publicity. Except as required by law or by obligations
pursuant to any listing agreement with or requirement of any national securities
exchange or national quotation system, neither the Parent, the Sub or the
Company (or any of their respective Affiliates) shall, without the prior written
consent of each other party hereto, which consent shall not be unreasonably
withheld or delayed, make any public announcement or issue any press release
with respect to the transactions contemplated by this Agreement. Prior to
making any public disclosure required by applicable law or pursuant to any
listing agreement with or requirement of any national exchange or national
quotation system, the disclosing party shall consult with the other parties
hereto, to the extent feasible, as to the content and timing of such public
announcement or press release.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all at or
on the day and year first above written.
GREAT PINES WATER COMPANY, INC.
By: /s/ ROBERT A. HAMMOND, JR.
--------------------------------------
Name: Robert A. Hammond, Jr.
Title: President
SUNTORY WATER GROUP, INC.
By: /s/ DAVID A. KRISHOCK
--------------------------------------
Name: David A. Krishock
Title: President and Chief Executive Officer
SUNTORY ACQUISITION CORP.
By: /s/ DAVID A. KRISHOCK
----------------------------------------
Name: David A. Krishock
Title: President and Chief Executive Officer
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EXHIBIT A
ARTICLES OF INCORPORATION
OF
GREAT PINES WATER COMPANY, INC.
I, the undersigned natural person of the age of eighteen years or more,
acting as the incorporator of a corporation under the Texas Business Corporation
Act, do hereby adopt the following Articles of Incorporation for such
corporation:
ARTICLE ONE
The name of the corporation is Suntory Acquisition Corp.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is:
"To engage in the transaction of any or all lawful business for which
corporations may be incorporated under the Texas Business Corporation Act."
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority
to issue is one hundred thousand (100,000) of the par value of one cent ($0.01)
each. The aggregate number of shares which the corporation is authorized to
issue is one hundred thousand (100,000). The designation of each class, the
number of shares of each class, and the par value, if any, of the shares of each
class, are as follows:
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Series
Number of Shares Class (If any) Par Value per Share
- -------------------- ---------------- ------------ -----------------------
100,000 Common Stock None $0.01
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000), consisting of money, labor done or property actually received, which
sum is not less than One Thousand Dollars ($1,000).
ARTICLE SIX
The street address of its initial registered office is c/o CT CORPORATION
SYSTEM, 350 N. St. Paul Street, Dallas, Texas 75201, and the name of its initial
registered agent at such address is CT CORPORATION SYSTEM.
ARTICLE SEVEN
The number of directors of the corporation may be fixed by the By-Laws.
The number of directors constituting the initial board of directors is
two (2), and the name and address of each person who is to serve as director
until the first annual meeting of the shareholders or until a successor is
elected and qualified are:
NAME ADDRESS
- ---- -------
David A. Krishock 2141 Powers Ferry Road
Marietta, Georgia 30067
Thomas E. Van Autreve 2141 Powers Ferry Road
Marietta, Georgia 30067
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ARTICLE EIGHT
Unless, and except to the extent that, the By-Laws of the Corporation (the
"By-Laws") so require, the election of directors need not be by written ballot.
ARTICLE NINE
The board of directors of the corporation (the "Board of Directors") may
from time to time adopt, amend or repeal the By-Laws, subject to the power of
the stockholders to adopt any By-Laws or to amend or repeal any By-Laws adopted,
amended or repealed by the Board of Directors.
ARTICLE TEN
The name and addresses of the incorporator is:
NAME ADDRESS
---- -------
KIRA MALYAROV One Liberty Plaza, Suite 4300, New York, New York 10006
IN WITNESS WHEREOF, I have hereunto set my hand this twenty-ninth day of
March, 1999.
Kira Malyarov
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GREAT PINES WATER COMPANY, INC.
* * * * *
BY-LAWS
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Houston, Texas.
Section 2. The corporation may also have offices at such other places
both within and without the State of Texas as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in Marietta, GA at such place as may be fixed from time to time by
the board of directors. Said meetings may also be held at such other place,
either within or without the State of Texas, as shall be designated from time to
time by the board of directors and stated in the notice of the meeting.
Section 2. Annual meetings of shareholders, commencing with the year
1999, shall be held on February 1st, if not a legal holiday, and if a legal
holiday, then on the next business day following, at 10 A.M., at which they
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
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Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be delivered not less than ten (10) nor
more than fifty (50) days before the date of the meeting, either personally or
by mail, by or at the direction of the president, the secretary, or the officer
or persons calling the meeting, to each shareholder of record entitled to vote
at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than
the election of directors may be held at such time and place within or without
the State of Texas as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president, the board of directors, or the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting.
Section 3. Written or printed notice of a special meeting stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than fifty
(50) days before the date of the meeting, either personally or by mail, by or at
the direction of the president, the secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
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ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of fifty one percent (51%) of the shares of stock
issued and outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority of
the shares of stock represented at the meeting shall be the act of the
shareholders unless the vote of a greater number of shares of stock is required
by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power, shall
be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
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ARTICLE V
DIRECTORS
Section 1. The number of directors shall be two (2). Directors need not
be residents of the State of Texas nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first annual meeting of shareholders.
Section 2. Any vacancy occurring in the board of directors may be filled
by the shareholders at an annual or a special meeting or by the affirmative vote
of a majority of the remaining directors though less than a quorum of the board
of directors. A director elected to fill a vacancy shall be elected for the
unexpired portion of the term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election at an annual meeting or at a special meeting
of shareholders called for that purpose. A director elected to fill a newly
created directorship shall serve until the next succeeding annual meeting of
shareholders and until his successor shall have been elected and qualified. Any
directorship to be filled by reason of an increase in the number of directors
may also be filled by the board of directors for a term of office until the next
election of directors by shareholders; provided no more than two directorships
may be so filled during a period between any two successive annual meetings of
shareholders.
Whenever the holders of any class or series of shares are entitled to elect
one or more directors by the provisions of the articles of incorporation, any
vacancies in such
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directorships and any newly created directorships of such class or series to be
filled by reason of an increase in the number of such directors may be filled by
the affirmative vote of a majority of the directors elected by such class or
series then in office or by a sole remaining director so elected, or by the vote
of the holders of the outstanding shares of such class or series, and such
directorships shall not in any case be filled by the vote of the remaining
directors or the holders of the outstanding shares as a whole unless otherwise
provided in the articles of incorporation.
Section 3. The business affairs of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the articles of
incorporation or by these by-laws directed or required to be exercised or done
by the shareholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the State of
Texas, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority
of the directors then in office, and irrespective of any personal interest of
any of its members, shall have authority to establish reasonable compensation of
all directors for services to the corporation as directors, officers or
otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may
be held either within or without the State of Texas.
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Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by
the president on three (3) days' notice to each director, either personally or
by mail or by telegram; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a quorum for the
transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any
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meeting of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. Unless otherwise restricted by the articles of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing which shall set forth the action taken and be signed by all
members of the board of directors or of the committee as the case may be.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. The board of directors, by resolution adopted by a majority
of the full board of directors, may designate from among its members an
executive committee and one or more other committees, each of which shall be
comprised of one or more members and, to the extent provided in the resolution,
shall have and may exercise all of the authority of the board of directors,
except that no such committee shall have the authority of the board of directors
in reference to amending the articles of incorporation, approving a plan of
merger or consolidation, recommending to the shareholders the sale, lease, or
exchange of all or substantially all of the property and assets of the
corporation other than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, amending, altering, or repealing the by-laws of the
corporation or adopting new by-laws for the corporation, filling vacancies on
the board of directors or on any committee, filling any directorship to be
filled by reason of an increase in
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the number of directors, electing or removing officers or members of any
committee, fixing the compensation of any member of a committee, or altering or
repealing any resolution of the board of directors which by its terms provides
that it shall not be so amendable or repealable; and, unless the resolution
expressly so provides, no committee shall have the power or authority to declare
a dividend or to authorize the issuance of shares of the corporation.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these by-laws, notice is required to be given to
any director or shareholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
shareholder, at his or her address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or under the provisions of the articles of
incorporation or these by-laws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president and a secretary. The board of directors
may also elect or
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appoint such other officers, including assistant officers and agents as may be
deemed necessary.
Section 2. The board of directors at its first meeting after each annual
meeting of shareholders shall choose a president and a secretary neither of whom
need be a member of the board.
Section 3. The board of directors may also appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
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Section 7. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, if there is one, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He or she shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he or she shall be. The secretary shall
have custody of the corporate seal of the corporation and he or she, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his or her signature or
by the signature of such assistant secretary. The board of
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directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, if there is one, or if there be
more than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer, if there is one, shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. The treasurer shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his or her transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, the treasurer shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of his or her office and for the restoration to the corporation, in
case of his death, resignation, retirement or removal from
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office, of all books, papers, vouchers, money and other property of whatever
kind in his or her possession or under his or her control belonging to the
corporation.
Section 14. The assistant treasurer, if there is one, or, if there shall
be more than one, the assistant treasurers in the order determined by the board
of directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the president and secretary or such other officers as may
be elected or appointed, and may be sealed with the seal of the corporation or a
facsimile thereof.
When the corporation is authorized to issue shares of more than one class
there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class authorized to be issued and, if the corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series. When the
corporation is authorized to issue shares of more than one class, every
certificate shall also set forth upon the face or the back of such certificate a
notice that there is
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set forth in the articles of incorporation on file in the office of the
Secretary of State a full statement of all the designations, preferences,
limitations and relative rights, including voting rights, of the shares of each
class authorized to be issued and the corporation will furnish a copy of such
statement to the record holder of the certificate without charge on written
request to the corporation at its principal place of business or registered
office. Every certificate shall have noted thereon any information required to
be set forth by the Texas Business Corporation Act and such information shall be
set forth in the manner provided in said Act.
Section 2. The signatures of the officers of the corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
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TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate canceled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders, or any adjournment thereof
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the board of
directors may provide that the stock transfer books shall be closed for a stated
period but not to exceed, in any case, fifty (50) days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten (10) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the board of directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than fifty (50) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
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resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Texas.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least ten (10) days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of ten (10) days prior to such meeting, shall be
kept on file at the registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share ledger or transfer book, or a duplicate thereof,
shall be prima facie evidence as
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to who are the shareholders entitled to examine such list or share ledger or
transfer book or to vote at any meeting of the shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation
relating thereto, if any, dividends may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or in shares of the capital stock, subject to any provisions of the
articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
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FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Texas". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended, or repealed or new by-
laws may be adopted by the affirmative vote of a majority of the board of
directors at any regular or special meeting of the board subject to repeal or
change at any regular or special meeting of shareholders at which a quorum is
present or represented, by the affirmative vote of a majority of the stock
entitled to vote, provided notice of the proposed repeal or change be contained
in the notice of such meeting.
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EXHIBIT B
LITIGATION TRUST AGREEMENT
This Litigation Trust Agreement (the "Litigation Trust Agreement"), dated as
of March 31, 1999, by and among Great Pines Water Company, Inc. (the "Company"),
a Texas corporation, as Settlor, Robert A. Hammond, Sr., Robert A. Hammond, Jr.
and Stephen A. Lee, Esq. creates a trust to retain and preserve the Litigation
Claims for enforcement by the Trustees, as successors to the Company.
ARTICLE I
ESTABLISHMENT OF TRUST
1.1 Declaration of Trust. In order to declare the terms and conditions
hereof, the Company has executed this Litigation Trust Agreement and hereby
absolutely and irrevocably assigns to the Trustees, all of its right and
interest in and to the Litigation Claims; to have and to hold unto the Trustees
forever; in trust nevertheless, under and subject to the terms and conditions
set forth herein for the benefit of the Company and its successors and assigns
as provided for herein (it being understood that the Trust Assets shall at all
times remain subject to the claims of the Company's creditors).
1.2 Trustee's Acceptance. The Trustees accept the trust imposed upon them by
this Trust Agreement and agree to observe and perform that trust, upon and
subject to the terms and conditions set forth herein.
1.3 Purpose of the Trust. The sole purpose of the Trust created hereby is to
prosecute, appeal, resolve, settle, compromise or otherwise pursue the
Litigation Claims, and, upon the Liquidation Date, to collect and distribute the
Trust Assets to the Company in as prompt and orderly a fashion as possible after
the payment of, or provisions for, expenses and liabilities reasonably incurred
in connection with the foregoing. Anything to the contrary herein
notwithstanding, the Trustees shall not at any time, on behalf of the Trust or
the Company, enter into or engage in any trade or business, and the Trustees
shall not take any actions hereunder other than as are incidental to the
achievement of the foregoing sole purpose of this Trust.
ARTICLE II
DEFINITIONS
The following terms shall have the respective meanings specified below:
"Affiliate" means, with respect to a person, any other person that, directly
or indirectly through one or more intermediaries, controls such first person.
"Code" means the Internal Revenue Code of 1986, as amended.
"Gross Proceeds" means the amount of cash actually distributed to the
Company pursuant to Section 4.2 hereof.
"LiquiBox Lawsuit" means LiquiBox Corporation v. Great Pines Water Co.,
Inc., No. 98-20198, currently on appeal in the U.S. Court of Appeals for the
Fifth Circuit.
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"Liquidation Date" means the date on which the Gross Proceeds are
distributed to the Company pursuant to Section 4.2 hereof.
"Litigation Claims" means each and every claim asserted or which may be
asserted by or on behalf of Northeast in the LiquiBox Lawsuit.
"Trust" means the trust created by this Litigation Trust Agreement.
"Trust Administrative Expenses" means all fees, costs, and expenses of every
nature or description incurred, directly or indirectly, by the Trustees in
connection with maintaining and administering the Trust and the Trust Assets or
in carrying out the Trustees' express or implied powers and duties under this
Litigation Trust Agreement or applicable law, including without limitation (i)
legal and other expenses relating to prosecuting the Litigation Claims, (ii)
compensation and disbursements of the Trustees and the auditors of the Trust,
and (iii) all costs or expenses of prosecuting or defending any other litigation
involving the Trust or the Trustees, or indemnifying the Trustees with respect
thereto.
"Trust Assets" means (i) the Litigation Claims and all recoveries thereon,
(ii) any assets hereafter acquired by the Trust, (iii) any investment purchased
with Trust Assets or otherwise acquired by the Trust, and (iv) all proceeds of
each of the foregoing (including, without limitation, any income earned
thereon), excluding assets distributed, expended or otherwise disposed of from
time to time by the Trustees.
"Trustee" means each of Robert A. Hammond, Sr., Robert A. Hammond, Jr. and
Stephen A. Lee, Esq., as trustee of the Trust, or any successor to or assign of
such person appointed as provided for herein or otherwise.
ARTICLE III
ADMINISTRATION OF THE TRUST
3.1 Acts of the Trustees. The Trustees shall act by the majority of the
Trustees then in office on all discretionary matters involving the Trust buy may
delegate ministerial duties.
3.2 Prosecution of Litigation Claims. The Trustees shall have full power and
authority in their sole and unrestricted discretion to make all decisions and
take all actions necessary or appropriate to prosecute or otherwise pursue the
Litigation Claims by litigation in trial or appellate courts, arbitration,
alternative dispute resolution, negotiation, settlement or compromise, or to
withdraw or abandon the Litigation Claims and terminate the Trust, in the same
manner and to the same extent as if the Trustees were the sole beneficial owners
thereof.
3.3 Retention of Attorneys, Accountants and Other Professionals. (a) The
Trustees shall retain such attorneys as counsel to the Trust as the Trustees in
their sole discretion may select to aid in the prosecution of the Litigation
Claims and to perform such other functions as may be appropriate in the
Trustees' sole and absolute discretion. The Trustees may commit the Trust to and
shall pay such attorneys reasonable compensation from the Trust Assets for
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services rendered and expenses incurred and may enter into arrangements on such
terms as may be approved by the Trustees with such counsel, including terms
providing that all or a portion of such counsel's compensation may be contingent
and may be used on a percentage of any recovery.
(b) The Trustees may retain an independent public accounting firm to audit
the financial books and records of the Trust and to perform such other reviews
and/or audits as may be appropriate in the Trustees' sole and absolute
discretion. The Trustees may commit the Trust to and shall pay such accounting
firm reasonable compensation from the Trust Assets for services rendered and
expenses incurred.
(c) The Trustees may retain such other experts, advisors, consultants,
investigators or other assistants or employees as the Trustees, in their sole
and absolute discretion, may deem necessary or appropriate to assist the
Trustees in carrying out their powers and duties under this Litigation Trust
Agreement. The Trustees may commit the Trust to and shall pay all such persons
or entities reasonable compensation from the Trust Assets for services rendered
and expenses incurred.
3.4 Additional Powers. (a) Except as otherwise provided in this Litigation
Trust Agreement, but without prior or further authorization, the Trustees may
control and exercise authority over the Trust Assets, over the acquisition,
management and disposition thereof, and over the management and conduct of the
activities of the Trust to the same extent as if the Trustees were the sole
owners thereof in their own right. No person dealing with the Trust shall be
obligated to inquire into the authority of the Trustees in connection with the
acquisition, management or disposition of the Trust Assets.
(b) In connection with the management and use of the Trust Assets, the
Trustees, except as otherwise expressly limited in this Litigation Trust
Agreement, may, without limitation of their power and authority, do the
following: (i) accept, receive, hold and use the Trust Assets; (ii) apply Trust
Assets to the payment of Trust Administrative Expenses; (iii) distribute Trust
Assets to the Company in accordance with the terms of Section 4.2 of this
Litigation Trust Agreement; (iv) sell, convey, transfer, assign, pledge,
encumber, liquidate or abandon Trust Assets or any part thereof or any interest
therein, upon such terms and for such consideration as the Trustees in their
sole and absolute discretion deem desirable and to file such documents as are
customarily required to effect any of the foregoing, including the filing of
necessary UCC financing statements; (v) endorse the payment of notes or other
obligations of any person or make contracts with respect thereto; (vi) engage in
all acts that would occur in the ordinary course of activities in performing the
obligations of a trustee under a trust of this type; and (vii) borrow such sums
of money or obtain goods or services on credit at any time and from time to time
for such periods of time upon such terms and conditions from such persons,
corporations or other entities for such purposes as may be deemed advisable, and
secure such loans by the pledge or hypothecation of or granting of a security
interest in any property held hereunder.
3.5 Certain Indemnification. The Trustees shall cause the Trust to indemnify
and hold harmless the Company and its Affiliates harmless from and against any
and all losses,
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claims, costs, expenses, and liabilities imposed on any of them in connection
with, arising out of or related to, the establishment or administration of the
Trust, including, without limitation, the transfer to the Trust of the
Litigation Claims, the operation or administration of the Trust and the exercise
(or the failure to exercise) by the Trustees of any power or authority under
this Litigation Trust Agreement or under applicable law but excluding legal fees
and related expenses incurred in connection with the establishment of the Trust
and the assignment thereto of the Litigation Claims that have been incurred up
to and including the date hereof; provided, however, that the obligation to
indemnify and hold harmless the Company and its affiliates, as aforesaid, shall
be payable (a) solely out of (i) the proceeds of any settlement or other
resolution of the Litigation Claims, and (ii) any other Trust Assets that are
held by the Trustees after the final disposition of the Litigation Claims, but
(b) prior to the making of any distribution to the Company.
ARTICLE IV
GENERAL POWERS, RIGHTS AND OBLIGATIONS OF THE TRUSTEES
4.1 Title. The Trustees shall hold legal title to all Trust Assets, except
that the Trustees may cause legal title or evidence of title to any of the Trust
Assets (except for the Litigation Claims) to be held by any nominee or person,
in such manner and with such power as the Trustees may determine in their sold
and absolute discretion.
4.2 Distribution to Company. Subject to Article VIII hereof, promptly
following the irrevocable settlement or other final resolution of the Litigation
Claims and the discharge, in cash, of all of the Trust's obligations, including
its obligations to the Company or its Affiliates hereunder, the Trustees shall
liquidate the remaining Trust Assets (if any), and following such liquidation,
shall distribute all remaining Trust Assets (if any), in cash to the Company;
provided, however, that the Trustees shall not be required to make any
distribution to the Company, unless and until all existing and future claims
against the Trustees or any of their officers, employees and agents relating to
or arising out of the execution of their duties under this Trust Agreement have
been fully and finally settled by a judicial accounting or other proceeding, as
appropriate, binding on all persons claiming an interest in the Trust.
4.3 Reports and Notices. The Trustees shall produce and furnish to the
Company, at such periodic intervals, not less frequently than annually, as the
Trustees shall in their sole and absolute discretion determine, a report showing
all transactions consummated by the Trust during the report period, including
resolution of any Litigation Claim, payments made or received in respect
thereof, and all other receipts or disbursements. Such reports shall be prepared
by the Trustees in accordance with such accounting principles as may be
applicable to an entity such as the Trust and, for reports covering a full
fiscal year of the Trust, may be audited by the independent public accounting
firm retained by the Trustees pursuant to Section 3.2(b) hereof. In addition,
the Trustees shall prepare and furnish to the Company, at periodic intervals not
less than frequently than annually, a report describing the present status of
the Litigation Claims and any significant developments relating to the
Litigation Claims which have occurred since the date of the last report.
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4.4 Investment of Trust Assets. The Trustees shall invest Trust Assets in
their sole and absolute discretion in "government securities" (as such term is
defined in Section 2(a)(16) of the Investment Company Act of 1940, as amended)
or in interest-bearing deposits in any depositary institution whose deposits are
insured by the Federal Deposit Insurance Corporation which, in either case,
mature in less than 183 days from the date of acquisition; provided, however,
that the Trustees may, to the extent deemed necessary by the Trustees in their
sole and absolute discretion to implement the provisions of this Litigation
Trust Agreement, deposit funds in demand deposits at any bank or trust company
(including, if applicable, one of the Trustees). The Trustees shall make such
investments in such amounts and at such times as may be deemed necessary by the
Trustees in their sole and absolute discretion to provide funds when needed to
make payments from the Trust Assets. If at any time it shall become necessary
that some or all of the investments constituting Trust Assets be redeemed or
sold in order to raise money necessary to comply with the provisions of this
Litigation Trust Agreement, the Trustees shall effect such redemption or sale,
in such manner and at such time as the Trustees, in their sole and absolute
discretion, deem reasonable.
4.5 Compliance with Tax Laws. The Trustees shall, in consultation with the
Company, prepare and file with the Internal Revenue Service and other applicable
federal and state governmental agencies such reports, forms, notifications,
applications, tax returns and other documents, provide the Company with copies
of all applicable tax reports, and take any other actions necessary to comply
with the Code or state tax laws.
4.6 Compliance with Applicable Laws, Etc. All actions required to be taken
by the Trustees pursuant to this Litigation Trust Agreement shall be taken in
compliance with all applicable statutes, rules, regulations, orders, writs,
decrees and injunctions of courts or other governmental agencies having
jurisdiction over the Trust. The Trustees shall timely file or shall cause to be
timely filed all reports, forms, notifications, applications, and other
documents, and take any and all other actions, as may be required under
applicable law. The Trustees shall not take or cause to be taken or omit to take
or cause to omit to be taken, any action such that the Trust shall be or become
required to register as an investment company under the Investment Company Act
of 1940, as amended, or any similar law.
ARTICLE V
GENERAL OBLIGATIONS OF THE COMPANY
AND ITS SUCCESSORS IN INTEREST
5.1 Cooperation. (a) The Company shall provide the Trustees with such access
to its books, records, offices and other facilities and to its employees,
agents, attorneys and independent accountants as the Trustees shall reasonably
require for the purpose of performing their duties and exercising their powers
hereunder. The Company shall be entitled to reimbursement by the Trust for
reasonable out-of-pocket expenses incurred in connection with providing such
access.
(b) The Company and its successors in interest shall execute and deliver to
the Trustees a power of attorney in form reasonably satisfactory to the
Trustees, and with provisions for indemnification satisfactory to the Company
and its Affiliates, to enable the Trustees to file
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pleadings and execute any documents on behalf of the Company necessary or
appropriate to prosecute the Litigation Claims in the Company's name. However,
the Trustees shall promptly move to be substituted for the Company as parties
plaintiff pursuant to Fed. Rule Civ. Proc. 25(c) and upon such substitution
shall have no further authority to act in the Company's name.
ARTICLE VI
THE TRUSTEES
6.1 Resignation. Any Trustee may resign as such by executing an instrument
in writing and delivering that instrument to the remaining Trustee or Trustees.
In the event of its resignation, such Trustee shall continue to serve as a
Trustee after its resignation until the time when appointment of a successor
Trustee shall become effective in accordance with Section 6.2 hereof.
6.2 Appointment of Successor Trustees. In the event of the death (in the
case of a Trustee that is a natural person), dissolution, merger or other form
of reorganization (in the case of a Trustee that is a corporation), resignation,
incompetency or removal of a Trustee, the remaining Trustee or Trustees shall
have the authority to, and shall, appoint a successor Trustee. Such appointment
shall specify the date on which such appointment shall be effective. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the remaining Trustees an instrument accepting such appointment, and thereupon
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of a Trustee. No
successor Trustee shall have any duty to investigate the administration of the
Trust for any period prior to the effective date of such successor Trustee's
appointment, and no resigning Trustee shall be required or permitted, prior to
final termination of the LiquiBox Lawsuit (including any proceedings to collect
any recovery due the Trustees), to file any accounting proceeding.
6.3 Trust Continuance. The death, dissolution, merger or other form of
reorganization, resignation, incompetency or removal of a Trustee shall not
operate to terminate the Trust created by this Litigation Trust Agreement,
revoke any existing agency created pursuant to the terms of this Litigation
Trust Agreement or invalidate any action theretofore taken by the Trustees. In
the event of the resignation or removal of a Trustee, such Trustee shall
promptly: (a) execute and deliver such documents, instruments and other writings
as may be reasonably requested by the remaining Trustees to effect the
termination of such Trustee's capacity under this Litigation Trust Agreement;
(b) deliver to the remaining Trustees all assets, documents, instruments,
records and other writings related to the Trust as may be in the possession of
such Trustee; and (c) otherwise assist and cooperate in effecting the assumption
of such Trustee's obligations and functions by its successor Trustee.
6.4 Compensation. The Trustees, including any successor Trustees, may commit
the Trust to and shall pay the Trustees from the Trust Assets reasonable
compensation for their services rendered and expenses incurred on the terms and
conditions set forth in acknowledgements in the form of Exhibit A to this
Litigation Trust Agreement.
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ARTICLE VII
SUITS AGAINST THE TRUSTEES OR HOLDERS
7.1 Liability of Trustees; Exculpation. No Trustee shall have personal
liability for any contracts of the Trust, express or implied in fact or in law.
All parties dealing with the Trust, and having actual, implied or constructive
knowledge of its provisions, may look only to the funds of the Trust for the
satisfaction of their claims. No Trustee shall be personally liable to the Trust
nor to the Company for any mistake or error of judgment, or for any action taken
or omitted, either by the Trustee or by any agent or attorney employed by the
Trustee, or for any loss or depreciation in the value of the Trust Assets,
except for such of his own acts as shall constitute willful misconduct, actual
fraud or bad faith. The Trustees shall be entitled to expend Trust Assets to
defend themselves or the Trust against all claims of any nature or description
arising out of or related to the Trust or its administration, and the Trustees
shall be defended, held harmless and indemnified from time to time from the
Trust Assets against any and all losses, claims, costs, expenses and liabilities
arising out of or relating to the Trust or the performance of their duties as
Trustees until such time as it has been finally judicially determined that the
Trust has sustained actual loss as the result of their willful misconduct,
actual fraud or bad faith. The Trustees shall not be obligated to give any bond
or surety or other security for the performance of their duties.
7.2 Reliance by Trustees. The Trustees may rely, and shall be fully
protected personally in acting, upon any resolution, statement, certificate,
instrument, opinion, report, notice, request, consent, order or other instrument
or document which they believe to be genuine, true or correct. The Trustees may
consult with legal counsel and shall be fully protected, and shall not be liable
to the Trust or its beneficiaries, in respect of any action taken or suffered by
them in accordance with the advice of legal counsel. The Trustees may, but shall
not be under any obligation to, seek instructions from an appropriate court
concerning any aspect of the acquisition, management or disposition of the Trust
Assets.
7.3 Situs; Venue; Jurisdiction; Waiver of Trial by Jury. The Trustees shall
maintain an office in Houston, Texas, which shall be the situs of the Trust. The
Company, for itself and its successors and assigns and the Trustees agree that
the United States District Court for the Southern District of Texas and the
state courts of Texas located in Harris County, Texas shall be the exclusive
venues in which any suit may be brought against the Trustees or the Company with
respect to any matter relating to the administration of the Trust, and consent
that any order, process, notice of motion or other application to or by said
court or a judge thereof may be served within or without such court's
jurisdiction by mail in accordance with Section 9.1 hereof, or by personal
service, provided, that a reasonable time for appearance is allowed, and hereby
irrevocably waive any objection that they may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Litigation Trust Agreement in such court. The Trustees and the Company, for
itself and its successors and assigns, hereby knowingly, voluntarily and
intentionally waive (to the extent permitted by applicable law) any right they
may have to a trial by jury of any dispute arising under or relating to this
Litigation Trust Agreement.
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7.4 Conditions Precedent to Suits Against Trust or Trustees. Prior to final
termination of the LiquiBox Lawsuit (including any proceedings to collect any
recovery due the Trustees), no person having or claiming to have an interest in
the Trust may institute or prosecute any action against the Trust or the
Trustees, unless consent to such suit is obtained from the Company.
ARTICLE VIII
TERMINATION
The Trust shall continue until (A) thirty (30) days after the date on which
the Trustees have distributed all of the Trust Assets in accordance with Section
4.2 hereof or (B) if the Trust Assets have been exhausted, thirty (30) days
after the Trustees have voted to terminate the Trust, but (C) in no event later
than the third anniversary of the date hereof (provided, however, that the
Trustees, acting unanimously, may extend such three-year period for an
additional period not exceeding three years if necessary in their judgment to
fulfill the purpose of the Trust), nor later than one year after final
disposition of the Litigation Claims. Upon termination of this Trust, the
Trustees shall advise the Company or its successor in interest in writing of its
termination. Notwithstanding the foregoing, after the termination of the Trust
the Trustees shall have the power to exercise all the powers, authorities and
discretions herein conferred until the complete distribution of the property
held hereunder.
ARTICLE IX
MISCELLANEOUS
9.1 Notices.
(a) All notices, requests or other communications required or permitted to
be made in accordance with this Litigation Trust Agreement shall be in writing
and shall be delivered personally or by facsimile transmission or mailed by
first-class mail:
(i) if to the Trustees, at:
Robert A. Hammond, Sr.
Facsimile:
Robert A. Hammond, Jr.
Facsimile:
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Stephen A. Lee, Esq.
Crady, Jewett & McCulley, L.L.P.
1400 Two Houston Center
909 Fannin
Houston, Texas 77010-1006
Facsimile: 713-739-8403
with a copy to:
Crady, Jewett & McCulley, L.L.P.
Attn: Stephen A. Lee, Esq.
1400 Two Houston Center
909 Fannin
Houston, Texas 77010-1006
Facsimile: 713-739-8403
(ii) if to the Company, at:
Great Pines Water Company, Inc.
600 North Shepherd, Suite 303
Houston, Texas 77007
Facsimile: 713-869-6204
Notices sent by first-class mail shall be deemed delivered five (5) business
days after mailing.
(b) Any entity may change the address at which it is to receive notices
under this Litigation Trust Agreement by furnishing written notice in accordance
with the provisions of this Section 10.1 to the entity to be charged with
knowledge of such change.
10.2 Effectiveness. This Litigation Trust Agreement shall become effective
as of the date hereof.
10.3 Counterparts. This Litigation Trust Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute but one and the same instrument.
10.4 Governing Law. This Litigation Trust Agreement shall be governed by,
construed under and interpreted in accordance with the laws of the State of
Texas without regard to conflicts of laws principles thereof.
10.5 Headings. Sections, subheadings and other headings used in this
Litigation Trust Agreement are for convenience only and shall not affect the
construction of this Litigation Trust Agreement.
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10.6 Severability. Any provision of this Litigation Trust Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable any such provision in
any other jurisdiction.
10.7 Successors. This Litigation Trust Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Litigation Trust
Agreement or caused this Litigation Trust Agreement as of the day and year first
above written.
GREAT PINES WATER COMPANY, INC.
/s/ ROBERT A. HAMMOND, JR.
By ___________________________________________
Name: Robert A. Hammond, Jr.
Title: President
TRUSTEES
/s/ ROBERT A. HAMMOND, SR.
______________________________________________
Robert A. Hammond, Sr., as Trustee
/s/ ROBERT A. HAMMOND, JR.
______________________________________________
Robert A. Hammond, Jr., as Trustee
/s/ STEPHEN A. LEE, ESQ.
______________________________________________
Stephen A. Lee, Esq., as Trustee
11
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EXHIBIT A
The undersigned hereby acknowledges receipt of a copy of the Litigation
Trust Agreement, dated as of the 31st day of March, 1999, between Great Pines
Water Company, Inc. and the undersigned as Trustee, and having accepted the
Trust under such Agreement, hereby agrees that his sole compensation for
services rendered as Trustee shall, in addition to the provisions of the
Litigation Trust Agreement for reimbursement of expenses and indemnification, be
$[ ] per hour or such greater or lesser amount as the court having
jurisdiction thereof may deem reasonable.
_______________________________________
By:
<PAGE>
EXHIBIT C
ASSIGNMENT
Assignment (the "Assignment") made as of this 31st day of March, 1999, by
Great Pines Water Company, Inc. ("Assignor"), a Texas corporation, to the
Trustees (hereinafter referred to as the "Assignees") as set forth in the
Litigation Trust Agreement, dated as of the date hereof (the "Litigation Trust
Agreement"), between the Assignor and the Assignees.
RECITALS
WHEREAS, pursuant to the terms of the Litigation Trust Agreement, among
other things, the Assignor agreed to absolutely assign to the Assignees and
their successors and assigns all of Assignor's rights, title and interest in and
to each and every claim (the "Litigation Claims") asserted or which may be
asserted by or on behalf of the Assignor in the suit captioned LiquiBox
Corporation v. Great Pines Water Co., Inc., No. 98-20198, currently on appeal to
the U.S. Court of Appeals for the Fifth Circuit (the "LiquiBox Lawsuit"); and
WHEREAS, the Assignor desires to transfer to the Assignees all of its
rights, title and interest in and to the Litigation Claims subject to the terms
and conditions set forth in the Litigation Trust Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in the Litigation Trust Agreement and for other good and valuable
consideration, the receipt, adequacy, and sufficiency of which are hereby
acknowledged, Assignor hereby agrees as follows:
ARTICLE I
ASSIGNMENT
Assignor hereby assigns sets over, transfers, and conveys to the Assignees
all of the Assignor's rights, title, interest, claims, and demands in and to the
Litigation Claims.
ARTICLE II
POWERS OF ASSIGNEES
The Assignees shall have such powers as are set forth in the Litigation
Trust Agreement. The Assignor expressly intends to confer on the Assignees any
and all powers that the Assignees deem necessary or expedient to carry out the
purposes of this Assignment and the Litigation Trust Agreement. The Assignees
may exercise any and every such power as fully and effectively as if such powers
were specifically enumerated in this Assignment or the Litigation Trust
Agreement.
<PAGE>
ARTICLE III
SUBSTITUTION
The Assignees shall be substituted in the full place and stead of the
Assignor, plaintiff in the LiquiBox Lawsuit.
ARTICLE IV
POWER OF ATTORNEY
The Assignor designates and appoints the Assignees and its successors and
assigns, Assignor's true and lawful attorney-in-fact, with full power of
substitution, having full right and authority in Assignor's name, place and
stead:
(1) To prosecute, appeal, resolve, settle, compromise or otherwise preserve
the Litigation Claims and to make all decisions and take all actions necessary
or appropriate to prosecute or otherwise pursue the Litigation Claims by
litigation in trial or appellate courts, arbitration, alternative dispute
resolution, negotiation, settlement or compromise, or to withdraw or abandon the
Litigation Claims and terminate the Trust (as defined in the Litigation Trust
Agreement), in the same manner and to the same extent as if the Assignees were
the sole beneficial owners thereof;
(2) To ask, demand, receive and enforce and give receipts, releases and
satisfactions for and to sue for any and all amounts that may become due or
payable to Assignor arising out of the Litigation Claims, and with the same
powers in relation to such matters as Assignor could exercise if this Assignment
had not been made;
(3) To file and prosecute any claim or take any other action or
proceeding, either in their own name or in the name of Assignor or otherwise,
that the Assignees deem proper in order to collect, assert or enforce any claim,
right, or title of any kind in or to the Litigation Claims or the payment of any
and all amounts that may become due or owing to Assignor arising out of the
Litigation Claims, to defend and compromise any and all actions, suits or
proceedings in respect of the Litigation Claims, and to do all such acts and
things in relation to the Litigation Claims that the Assignees may deem
necessary or advisable; and
(4) To exercise any and all other powers or rights granted to the
Assignees under the Litigation Trust Agreement.
ARTICLE V
ASSIGNMENT BINDING ON ASSIGNOR
The Assignor acknowledges that this Assignment is valid and binding on it
subject to all of the provisions, terms and conditions of the Litigation Trust
Agreement.
2
<PAGE>
ARTICLE VI
WAIVER AND MODIFICATION
No waiver, modification, release, or cancellation of this Assignment or any
portion of this Assignment shall be binding unless evidenced by a writing
executed by the Assignor and the Assignees or an authorized representative
thereof with the same formality as this instrument.
ARTICLE VII
PERSONS BOUND BY ASSIGNMENT
This Assignment shall inure to and be binding on the successors and assigns
of the Assignor and the Assignees.
ARTICLE VII
GOVERNING LAW
This Assignment shall be governed by, construed, and enforced in accordance
with the laws of the State of Texas, without regard to the conflicts of laws
principles thereof.
ARTICLE IX
NOTICES
All notices, requests or other communications required or permitted to be
made in accordance with the terms hereof shall be made pursuant to Section 9.1
of the Litigation Trust Agreement.
ARTICLE X
EFFECTIVENESS
This Assignment shall become effective as of this 31st day of March, 1999.
ARTICLE XI
COUNTERPARTS
This Assignment may be executed in one or more counterparts, each of which
shall be deemed an original, but which together shall constitute but one and
the same instrument.
ARTICLE XII
HEADINGS
Sections, subheadings and other headings used in this Assignment are for
convenience only and shall not affect the construction of this Assignment.
3
<PAGE>
ARTICLE XIII
SEVERABILITY
Any provision of this Assignment which is prohibited or unenforceable in
any jurisdiction, shall not invalidate the remaining provisions hereof, and any
said prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable any such provision in any other jurisdiction.
ARTICLE XIV
EXECUTION OF DOCUMENTS
Assignor agrees to execute any additional documents deemed necessary by the
Assignees to effectuate this Assignment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed
by its officer thereunto duly authorized at Houston, Texas as of this 31st day
of March, 1999.
GREAT PINES WATER COMPANY, INC.
By /s/ ROBERT A. HAMMOND, JR.
--------------------------------------
Name: Robert A. Hammond, Jr.
Title: President and Chief Executive Officer
5
<PAGE>
EXHIBIT D
FORM OF OFFICER'S CERTIFICATE OF THE COMPANY
Great Pines Water Company, Inc., pursuant to Section 6.02(b) of the
Agreement and Plan of Merger (the "Agreement") dated as of April 1, 1999 among
the Company, Suntory Water Group, Inc. and Suntory Acquisition Corp., hereby
represents and warrants to the Parent and the Sub as follows:
1. Each of the agreements, obligations and conditions under the
Agreement which are to be performed or complied with by the Company at or prior
to the Effective Time (as defined in the Agreement) have been fully complied
with and performed in all material respects, as the case may be, as of the date
hereof.
2. Each of the representations and warranties of the Company set
forth in Article III of the Agreement that are qualified as to materiality are
true and correct and each of the representations and warranties of the Company
set forth in Article III of the Agreement that are not qualified as to
materiality are true and correct in all material respects on and as of the date
hereof as if made on and as of this date.
3. Attached hereto as Annex I is a statement of the Company,
pursuant to Treasury Regulation Section 1.1445-2(c)(3), certifying that none of
the interests in the Company held by the Company's shareholders or option
holders are U.S. real property interests for purposes of Section 1445 of the
Internal Revenue Code of 1986.
The delivery of this certificate in no way diminishes the
representations, covenants and warranties set forth in the Agreement.
Capitalized terms not defined herein shall have the meanings given
such terms in the Agreement.
Dated: [__________ __], 1999 GREAT PINES WATER COMPANY, INC.
By:
--------------------------------
[Name]
[Title]
D-1
<PAGE>
FORM OF SECRETARY'S CERTIFICATE OF THE COMPANY
This certificate is furnished in connection with that certain
Agreement and Plan of Merger (the "Agreement") dated as of April 1, 1999 among
Great Pines Water Company, Inc., a Texas corporation, Suntory Water Group, Inc.,
a Delaware corporation and Suntory Acquisition Corp., a Texas corporation and a
wholly-owned subsidiary of the Parent.
The undersigned hereby certifies on behalf of the Company that:
1. Attached hereto as Exhibit A is a true, correct and complete
copy of the Amended and Restated Articles of Incorporation of the Company as in
effect from [ ] through the date hereof;
2. Attached hereto as Exhibit B is a true, correct and complete
copy of the By-Laws of the Company as in effect from [ ] through the date
hereof;
3. Attached hereto as Exhibit C is a true, correct and complete
copy of a Long Form Good Standing Certificate of the Company issued by the State
of Texas;
4. Attached hereto as Exhibit D is a true copy of resolutions duly
adopted by the Board of Directors of the Company on March [________], 1999. The
resolutions contained in Exhibit D, which constitute all the resolutions adopted
by the Board of Directors of the Company with respect to the transactions
contemplated by the Agreement, the Stock Option Agreement and the Purchase
Agreements have not been modified, amended, rescinded or revoked and are in full
force and effect on the date hereof.
5. Each person who executed, on behalf of the Company, the
Agreement or any other document delivered pursuant thereto or in connection with
the transactions contemplated thereby was duly elected or appointed, qualified
and acting on behalf of the Company, and the signatures of such persons
appearing on such documents were and are their genuine signatures.
Capitalized terms not defined herein shall have the meanings given
such terms in the Agreement.
D-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
[___] day of [____], 1999.
------------------------------------
Name:
Title: Secretary
I, [____], President of Great Pines Water Company, Inc. hereby certify
that [____] is the duly elected, qualified and acting Secretary of Great Pines
Water Company, Inc. and that the signature appearing above is his genuine
signature.
IN WITNESS WHEREOF, I have hereunto set my hand as of this [___] day
of [___________], 1999.
------------------------------------
Name:
Title: Vice President
D-3
<PAGE>
EXHIBIT E
FORM OF OFFICER'S CERTIFICATE OF THE PARENT
Suntory Water Group, Inc., pursuant to Section 6.03(b) of the
Agreement and Plan of Merger (the "Agreement") dated as of April 1, 1999 among
the Great Pines Water Company, Inc., the Parent and Suntory Acquisition Corp.,
hereby represents and warrants to the Company as follows:
1. Each of the agreements, obligations and conditions under the
Agreement which are to be performed or complied with by the Parent at or prior
to the Effective Time (as defined in the Agreement) have been fully complied
with and performed in all material respects, as the case may be, as of the date
hereof.
2. Each of the representations and warranties of the Parent set
forth in Article IV of the Agreement that are qualified as to materiality are
true and correct and each of the representations and warranties of the Parent
set forth in Article IV of the Agreement that are not qualified as to
materiality are true and correct in all material respects on and as of the date
hereof as if made on and as of such date.
The delivery of this certificate in no way diminishes the
representations, covenants and warranties set forth in the Agreement.
Capitalized terms not defined herein shall have meanings given such
terms in the Agreement.
Dated: [__________ __], 1999 SUNTORY WATER GROUP, INC.
By:
----------------------------
[Name]
[Title]
E-1
<PAGE>
FORM OF SECRETARY'S CERTIFICATE OF THE PARENT
This certificate is furnished in connection with that certain
Agreement and Plan of Merger (the "Agreement") dated as of April 1, 1999 among
Great Pines Water Company, Inc., a Texas corporation, Suntory Water Group, Inc.,
a Delaware corporation and Suntory Acquisition Corp., a Texas corporation and a
wholly-owned subsidiary of the Parent.
The undersigned hereby certifies on behalf of the Parent that:
1. Attached hereto as Exhibit A is a true, correct and complete
copy of the Certificate of Incorporation of the Parent as in effect from
September 20, 1985 through the date hereof;
2. Attached hereto as Exhibit B is a true, correct and complete
copy of the By-Laws of the Parent as in effect from [______ ] through the date
hereof;
3. Attached hereto as Exhibit C is a true, correct and complete
copy of a Long Form Good Standing Certificate of the Parent issued by the State
of Delaware;
4. Attached hereto as Exhibit D is a true copy of resolutions duly
adopted by the Board of Directors of the Parent on March [__], 1999. The
resolutions contained in Exhibit D, which constitute all the resolutions adopted
by the Board of Directors of the Parent with respect to the transactions
contemplated by the Agreement, the Stock Option Agreement and the Purchase
Agreements have not been modified, amended, rescinded or revoked and are in full
force and effect on the date hereof.
5. Each person who executed, on behalf of the Parent, the Agreement
or any other document delivered pursuant thereto or in connection with the
transactions contemplated thereby was duly elected or appointed, qualified and
acting on behalf of the Parent and the signatures of such persons appearing on
such documents were and are their genuine signatures.
Capitalized terms not defined herein shall have the meanings given
such terms in the Agreement.
E-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
[__] day of [ ], 1999.
-----------------------------------------
Name:
Title: Vice President
I, [__________ ], Vice President of Suntory Water Group, Inc., hereby
certify that [________ ] is the duly elected, qualified and acting Secretary of
Suntory Water Group, Inc. and that the signature appearing above is his genuine
signature.
IN WITNESS WHEREOF, I have hereunto set my hand as of this [__] day of
[______________________], 1999.
-----------------------------------------
Name:
Title: Vice President
E-3
<PAGE>
FORM OF OFFICER'S CERTIFICATE OF THE SUB
Suntory Acquisition Corp., pursuant to Section 6.03(b) of the
Agreement and Plan of Merger (the "Agreement") dated as of April 1, 1999 among
Great Pines Water Company, Inc., Suntory Water Group, Inc. and Suntory
Acquisition Corp., hereby represents and warrants to the Company as follows:
1. Each of the agreements, obligations and conditions under the
Agreement which are to be performed or complied with by the Sub at or prior to
the Effective Time (as defined in the Agreement) have been fully complied with
and performed in all material respects, as the case may be, as of the date
hereof.
2. Each of the representations and warranties of the Sub set forth
in Article IV of the Agreement that are qualified as to materiality are true and
correct and each of the representations and warranties of the Parent set forth
in Article IV of the Agreement that are not qualified as to materiality are true
and correct in all material respects on and as of the date hereof as if made on
and as of such date.
The delivery of this certificate in no way diminishes the
representations, covenants and warranties set forth in the Agreement.
Capitalized terms not defined herein shall have the meanings given
such terms in the Agreement.
Dated: [__________ __], 1999 SUNTORY ACQUISITION CORP.
By:
----------------------------------
[Name]
[Title]
E-4
<PAGE>
FORM OF SECRETARY'S CERTIFICATE OF THE SUB
This certificate is furnished in connection with that certain
Agreement and Plan of Merger (the "Agreement") dated as of April 1, 1999, among
Great Pines Water Company, Inc., a Texas corporation, Suntory Water Group, Inc.,
a Delaware corporation and Suntory Acquisition Corp., a Texas corporation and a
wholly-owned subsidiary of the Parent.
The undersigned hereby certifies on behalf of Sub that:
1. Attached hereto as Exhibit A is a true, correct and complete
copy of the Articles of Incorporation of the Sub as in effect from [_________]
through the date hereof;
2. Attached hereto as Exhibit B is a true, correct and complete
copy of the By-Laws of the Sub as in effect from [______________] through the
date hereof;
3. Attached hereto as Exhibit C is a true, correct and complete
copy of a Long Form Good Standing Certificate of the Sub issued by the State of
Texas;
4. Attached hereto as Exhibit D is a true copy of resolutions duly
adopted by the Board of Directors of the Sub on March [__], 1999. The
resolutions contained in Exhibit D, which constitute all the resolutions adopted
by the Board of Directors of the Sub with respect to the transactions
contemplated by the Agreement, have not been modified, amended, rescinded or
revoked and are in full force and effect on the date hereof.
5. Each person who executed, on behalf of Purchaser, the Agreement
or any other document delivered pursuant thereto or in connection with the
transactions contemplated thereby was duly elected or appointed, qualified and
acting on behalf of Purchaser, and the signatures of such persons appearing on
such documents were and are their genuine signatures.
Capitalized terms not defined herein shall have the meanings given
such terms in the Agreement.
E-5
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
[__] day of [______], 1999.
------------------------------------
Name:
Title: Secretary
I, [____________] of Suntory Acquisition Corp., hereby certify that
[_______________] is the duly elected, qualified and acting Secretary of Suntory
Acquisition Corp. and that the signature appearing above is his genuine
signature.
IN WITNESS WHEREOF, I have hereunto set my hand as of this [__] day of
[_________], 1999.
------------------------------------
Name:
Title:
E-6
<PAGE>
ANNEX B
March 31, 1999
The Board of Directors
Great Pines Water Company, Inc.
600 North Shepherd, Suite 303
Houston, Texas 77007
Dear Sirs:
You have requested Howard Frazier Barker Elliott, Inc. ("HFBE") to render
its opinion as to the fairness, from a financial point of view, to Great Pines
Water Company, Inc., a Texas corporation ("Great Pines" or the "Company") and
its stockholders other than Suntory Water Group, Inc., a Delaware corporation
("Suntory"), of the consideration to be received by the Company and its
stockholders other than Suntory in connection with the Agreement and Plan of
Merger dated March 31, 1999 (the "Agreement") among Great Pines, Suntory and
Suntory Acquisition Corp., a Texas corporation and a wholly-owned subsidiary of
Suntory ("Acquisition Corp."). The Agreement provides for a reverse statutory
merger of Great Pines and Acquisition Corp. (the "Merger"). The shareholders of
Great Pines other than Suntory will receive a price of $5.87 per share of common
stock of the Company in cash, payable promptly after the effective time of the
Merger, and a pro rata portion of the net proceeds, if any, from the litigation
Liqui-Box Corporation ("Liqui-Box") v. Great Pines (the "Litigation"), payable
promptly in cash following the final resolution of the Litigation.
As part of our financial advisory activities, HFBE engages in the valuation
of businesses and securities in connection with mergers and acquisitions,
private placements, and valuations for estate, corporate and other purposes. We
are experienced in these activities and have performed assignments similar in
nature to that requested by you on numerous occasions. The opinion of HFBE is
for the use of the Board of Directors and cannot be used for any other purpose
without our prior written consent.
In connection with this opinion, we have: (i) reviewed the Company's
Annual Report, Form 10-KSB and related financial information for 1993 through
1997, and Form 10-QSB and related financial information for the quarter ended
September 30, 1998; (ii) reviewed the Agreement; (iii) analyzed the nature and
financial terms of certain business combinations involving companies in lines of
business we believe to be generally comparable to those of the Company; (iv)
visited the Company's facilities and conducted discussions with members of
senior management of Great Pines; (v) reviewed the historical market prices and
trading activity for Great Pines' common stock and compared them with that of
certain companies which HFBE deemed to be reasonably similar to Great Pines;
(vi) compared the results of operations of Great Pines with that of certain
companies which we deemed to be reasonably similar to the Company; (vii)
reviewed the various briefs filed by Great Pines and Liqui-Box in connection
with the Litigation; and (viii) considered such other matters as HFBE deemed
relevant, including an assessment of general economic, market and monetary
conditions.
In preparing its opinion, HFBE relied on the accuracy and completeness of
all information supplied or otherwise made available to HFBE by the Company.
HFBE did not independently verify such information. HFBE's opinion is based
upon market, economic, financial and other conditions as they exist and can be
evaluated as of the date of the opinion. To the extent a vote of the Company's
stockholders is required or sought, HFBE's opinion does not constitute a
recommendation to any stockholder of the Company as to how any such stockholder
should vote on the Merger. The opinion does not address the relative merits of
the Merger and any other transaction or business strategies discussed by the
Board of the Company as alternatives to the Merger or the decision of the
Company Board to proceed with the Merger. HFBE has not been requested to and
did not solicit third party indications of interest in acquiring all or any part
of the Company.
HFBE assumed that there had been no material change in the Company's
financial condition, results of operations, business or prospects since the date
of the last financial statements made available to HFBE. HFBE relied on
B-1
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advice of counsel to the Company as to all legal matters with respect to the
Company, the Merger and the Agreement. In addition, HFBE did not make an
independent evaluation appraisal or physical inspection of the assets or
individual properties of Great Pines, nor was it furnished with any such
appraisals.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. Furthermore, in arriving at its
fairness opinion, HFBE did not attribute any particular weight to any analysis
or factor considered by it, but rather made qualitative judgements as to the
significance and relevance of each analysis or factor. Accordingly, HFBE
believes that its analysis must be considered as a whole and that considering
any portion of such analysis and of the factors considered, without considering
all analyses and factors, could create a misleading or incomplete view of the
process underlying its opinion. In its analyses, HFBE made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values which may be significantly more
or less favorable than as set forth therein. In addition, analyses relating to
the value of the businesses do not purport to be appraisals or to reflect the
prices at which businesses may actually be sold.
Neither HFBE nor its employees have any present, or contemplate future,
interest in the Company, which might tend to prevent them from making a fair and
unbiased opinion.
Subject to and based upon the foregoing, it is our opinion that the
consideration to be received by the Company and its stockholders other than
Suntory in the proposed Merger is fair, from a financial point of view, to the
Company and its stockholders other than Suntory.
Sincerely,
HOWARD FRAZIER BARKER ELLIOTT, INC.
By: /s/ William H. Frazier
-------------------------------------
William H. Frazier, ASA
Senior Managing Director
By: /s/ David S. Kulkarni
-------------------------------------
David S. Kulkarni
Vice President
B-2
<PAGE>
ANNEX C
ART. 5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1) (a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's address, to which
notice thereof shall be delivered or mailed in that event. If the action
is effected and the shareholder shall not have voted in favor of the
action, the corporation, in the case of action other than a merger, or
the surviving or new corporation (foreign or domestic) or other entity
that is liable to discharge the shareholder's right of dissent, in the
case of a merger, shall, within ten (10) days after the action is
effected, deliver or mail to the shareholder written notice that the
action has been effected, and the shareholder may, within ten (10) days
from the delivery or mailing of the notice, make written demand on the
existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value
thereof as of the day immediately preceding the meeting, excluding any
appreciation or depreciation in anticipation of the proposed action. The
demand shall state the number and class of the shares owned by the
shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the ten (10)
day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in
the case of action other than a merger, and the surviving or new
corporation (foreign or domestic) or other entity that is liable to
discharge the shareholders right of dissent, in the case of a merger,
shall, within ten (10) days after the date the action is effected, mail
to each shareholder of record as of the effective date of the action
notice of the fact and date of the action and that the shareholder may
exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or
documents filed by the corporation with the Secretary of State to effect
the action. If the shareholder shall not have consented to the taking of
the action, the shareholder may, within twenty (20) days after the
mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The
fair value of the shares shall be the value thereof as of the date the
written consent authorizing the action was delivered to the corporation
pursuant to Section A of Article 9.10 of this Act, excluding any
appreciation or depreciation in anticipation of the action. The demand
shall state the number and class of shares owned by the dissenting
shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the twenty
(20) day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of a
demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or
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other entity, as the case may be, payment for the shares shall be made within
ninety (90) days after the date on which the action was effected and, in the
case of shares represented by certificates, upon surrender of the certificates
duly endorsed. Upon payment of the agreed value, the shareholder shall cease to
have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation, the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
F. The provisions of this Article shall not apply to a merger if, on
the date of the filing of the articles of merger, the surviving corporation is
the owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
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G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action.
If the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ART. 5.13 PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act shall not thereafter be
entitled to vote or exercise any other rights of a shareholder except the right
to receive payment for his shares pursuant to the provisions of those articles
and the right to maintain an appropriate action to obtain relief on the ground
that the corporate action would be or was fraudulent, and the respective shares
for which payment has been demanded shall not thereafter be considered
outstanding for the purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under
Articles 5.12 and 5.16 of this Act unless a court of competent jurisdiction for
good and sufficient cause shown shall otherwise direct. If uncertificated shares
for which payment has been demanded or shares represented by a certificate on
which notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act may withdraw such demand
at any time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to
Article 5.12 or 5.16, the court shall determine that such shareholder is not
entitled to the relief provided by those articles, then, in any such case, such
shareholder and all persons claiming under him shall be conclusively presumed to
have approved and ratified the corporate action from which he dissented and
shall be bound thereby, the right of such shareholder to be paid the fair value
of his shares shall cease, and his status as a shareholder shall be restored
without prejudice to any corporate proceedings which may have been taken during
the interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
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