Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D9 Tender-Offer Solicitation/Recommendation Statement 17 96K
2: EX-99.1 Agreement and Plan of Merger 57 186K
11: EX-99.10 Letter to Stockholders 1 9K
12: EX-99.11 Option of Houlihan, Lokey, Howard & Zukin 3 15K
3: EX-99.2 Second Amended & Restated Mgmt. Agreement 15 55K
4: EX-99.3 Management Agreement - Rick Ferguson 8 33K
5: EX-99.4 Management Agreement - Roy Breneman 6 26K
6: EX-99.5 Form of Option Agreement Dated February 3, 1997 8 34K
7: EX-99.6 1996-97 Stock Option 8 36K
8: EX-99.7 Form of Option Agreement Dated February 4, 1997 8 32K
9: EX-99.8 Confidentiality Agreement Dated February 26, 1997 4 17K
10: EX-99.9 Press Release 2± 9K
SC 14D9 — Tender-Offer Solicitation/Recommendation Statement
Document Table of Contents
[LOGO OF SEVEN UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA INC.]
March 7, 1997
To Our Stockholders:
On behalf of the Board of Directors of Seven Up/RC Bottling Company of
Southern California, Inc. (the "Company"), we are pleased to inform you that on
February 28, 1997, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Dr Pepper Bottling Company of Texas and DPB
Acquisition Corp. (the "Purchaser"). Pursuant to the Merger Agreement, the
Purchaser has today commenced a cash tender offer (the "Offer") to purchase all
of the issued and outstanding shares of Common Stock of the Company (the
"Shares") at $12.00 net per Share in cash (the "Offer Consideration").
Pursuant to the terms and conditions of the Merger Agreement, the Offer will
be followed by a merger of the Company and the Purchaser whereby each Share
will be converted into the right to receive the Offer Consideration.
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE OFFER AND MERGER AND HAS
UNANIMOUSLY DETERMINED THAT THE OFFER AND MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY TENDER THEIR SHARES
PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including the
written opinion dated February 28, 1997 of Houlihan, Lokey, Howard and Zukin,
Inc., the Company's financial advisor, to the effect that, as of such date and
based upon and subject to certain matters stated therein, the consideration to
be received by holders of Shares (other than the Purchaser and its affiliates)
pursuant to the terms of the Merger Agreement is fair to such holders from a
financial point of view. The Schedule 14D-9 contains other important
information relating to the Offer, and you are encouraged to read the Schedule
14D-9 carefully.
In addition to the attached Schedule 14D-9, enclosed also is the Offer to
Purchase dated March 7, 1997, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and provide instructions
as to how to tender your Shares. We urge you to read these documents carefully
in making your decisions with respect to tendering your Shares pursuant to the
Offer.
On behalf of the Board of Directors,
/S/ Bart S. Brodkin
Bart S. Brodkin Chairman of the Board,
President and Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
(NAME OF SUBJECT COMPANY)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
----------------
818043-10-1 (COMMON STOCK)
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
RICK FERGUSON
CHIEF FINANCIAL OFFICER
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
3220 EAST 26TH STREET
VERNON, CALIFORNIA 90023
(213) 268-7779
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
----------------
COPY TO:
LANCE C. BALK, ESQ.
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 446-4800
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Seven-Up/RC Bottling Company of Southern
California, Inc., a Delaware corporation (the "Company"), and the address of
the principal executive offices of the Company is 3220 East 26th Street,
Vernon, California, 90023. The title of the class of equity securities to
which this statement relates is the voting common stock, par value $0.01 per
share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a cash tender offer by DPB Acquisition Corp., a
Delaware corporation (the "Purchaser") and a direct wholly owned subsidiary of
Dr Pepper Bottling Company of Texas, a Texas corporation ("Parent"), disclosed
in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated
March 7, 1997, to purchase all outstanding Shares at $12.00 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated March 7, 1997 (the "Offer to Purchase") and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
The Offer is being made by the Purchaser pursuant to an Agreement and Plan
of Merger, dated as of February 28, 1997, by and among the Company, the
Purchaser, and Parent (the "Merger Agreement"). The Merger Agreement provides,
among other things, for the commencement of the Offer by Purchaser and further
provides that, subject to the satisfaction or waiver of certain conditions,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger (the "Surviving Corporation"). Certain terms and
conditions of the Merger Agreement are described below in Item 3. A copy of
the Merger Agreement is attached hereto as Exhibit 1 and is incorporated
herein by reference.
Based on the information in the Offer to Purchase, the principal executive
offices of the Purchaser are located at 2304 Century Center Blvd., Irving,
Texas, 75062.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as described below and as of the date hereof, there exists no
material contract, agreement, arrangement, or understanding and no actual or
potential conflict of interest between the Company or its affiliates and (i)
the Company's executive officers, directors, or affiliates, or (ii) the
Purchaser or the Purchaser's executive officers, directors, or affiliates.
(1) Arrangements with Executive Officers, Directors, or Affiliates of the
Company.
Information with respect to certain contracts, agreements, arrangements, or
understandings between the Company and certain of its executive officers,
directors, or affiliates is set forth below.
Employment Agreements. At a meeting held on October 31, 1996 of the
Personnel & Compensation Committee of the Board of Directors (the
"Compensation Committee"), which committee is comprised of Jack Attwood and
Monroe L. Lowenkron, the Compensation Committee recommended that the Board of
Directors review and evaluate the employment agreement between the Company and
Bart S. Brodkin, the Chief Executive Officer of the Company. After a series of
negotiations between the Compensation Committee and Mr. Brodkin, on January
22, 1997, the Company entered into a Second Amended and Restated Management
Agreement with Mr. Brodkin (the "Brodkin Agreement"). The annual compensation
payable by the Company to Mr. Brodkin under the Brodkin Agreement is $400,000.
The Brodkin Agreement expires on December 31, 1999, subject to automatic one-
year renewals unless terminated upon written notice by either party at least
90 days prior to the end of the year or earlier upon Mr. Brodkin's death,
Disability, resignation, retirement, or removal for Cause (as such capitalized
terms are defined in the Brodkin Agreement). In addition, the Brodkin
Agreement provides for severance benefits to be paid in a lump sum by the
Company to Mr. Brodkin upon a Change of Control (as defined in the Brodkin
Agreement).
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The Brodkin Agreement was amended by a First Amendment to Management
Agreement, dated as of February 28, 1997 (the "First Amendment"). The First
Amendment shall only become effective immediately prior to the purchase of
Shares by the Purchaser in the Offer and shall be of no further force or
effect if the Merger Agreement is terminated. The execution and delivery of
the First Amendment was a condition to the execution and delivery of the
Merger Agreement by Parent. The First Amendment, will, among other things,
significantly amend certain of the provisions regarding severance payments to,
and continued fringe benefits for, Mr. Brodkin following the termination of
his employment. In this regard, the special provisions requiring the Company
to pay to Mr. Brodkin an amount equal to three times his base salary and bonus
and to maintain certain benefits for him for 36 months if his employment is
terminated under certain circumstances following a Change of Control (as
defined in the Brodkin Agreement) will be eliminated. In addition, under the
First Amendment, the circumstances constituting Good Reason (as defined in the
Brodkin Agreement) under which Mr. Brodkin may resign and obtain severance
benefits will be significantly narrowed and certain procedural requirements
for the benefit of Mr. Brodkin that would have been applicable if he had been
terminated under certain circumstances constituting Cause (as defined in the
Brodkin Agreement) will be terminated. The First Amendment will also eliminate
Mr. Brodkin's right to receive certain severance payments in the event that he
resigns other than for Good Reason (as defined in the Brodkin Agreement).
Pursuant to the First Amendment, the automatic extension under the Brodkin
Agreement is limited to one additional year, such extension still being
subject to neither party giving contrary notice. The First Amendment will not
alter the base salary provided under the Brodkin Agreement or Mr. Brodkin's
rights to participate in the Company's annual bonus program.
The foregoing is a summary of the Brodkin Agreement and the First Amendment.
Such summary is qualified in its entirety by reference to the text of the
Brodkin Agreement and the First Amendment, copies of which are filed as
Exhibit 2 hereto and are incorporated herein by reference.
On February 10, 1997, the Company entered into Management Agreements with
each of Rick Ferguson and Roy Breneman (the "Ferguson Agreement" and the
"Breneman Agreement," respectively). Each of the Ferguson Agreement and the
Breneman Agreement provides for severance benefits to be paid by the Company
in a lump sum to Messrs. Ferguson and Breneman, respectively, upon a Change of
Control (as defined in each of the Ferguson Agreement and the Breneman
Agreement). The Ferguson Agreement was amended by a Termination Agreement,
dated as of February 28, 1997 (the "Ferguson Contract Termination Agreement").
The execution and delivery of the Ferguson Contract Termination Agreement was
a condition to the execution and delivery of the Merger Agreement by Parent.
The Ferguson Contract Termination Agreement shall only become effective
immediately prior to the purchase of Shares by the Purchaser in the Offer and
shall be of no further force or effect if the Merger Agreement is terminated.
In the event that the provisions of the Ferguson Contract Termination
Agreement become effective, the Ferguson Agreement will be terminated and will
cease to be of any further force and effect. The foregoing is a summary of the
Ferguson Agreement, as amended by the Ferguson Contract Termination Agreement,
and the Breneman Agreement. Such summary is qualified in its entirety by
reference to the text of the Ferguson Agreement, as amended by the Ferguson
Contract Termination Agreement, and the Breneman Agreement, copies of which
are filed as Exhibits 3 and 4 hereto, respectively, and are each incorporated
herein by reference.
Stock Option Plans. Pursuant to the terms and conditions of the First
Amended Joint Plan of Reorganization of the Company and Beverage Group
Acquisition Corporation, dated as of June 19, 1996, and as approved on August
15, 1996 by the United States Bankruptcy Court, District of Delaware (the
"Joint Plan"), the Company granted, on February 3, 1997, options to purchase
Shares, at an exercise price of $7.30 per Share, to its executive officers
(collectively, the "Management Options") as follows: Rick Ferguson, options to
purchase 32,000 Shares; Joe Chalmers, options to purchase 22,000 Shares; Lou
Janicich, options to purchase 22,000 Shares; Roy Breneman, options to purchase
22,000 Shares; Tom Theriault, options to purchase 22,000 Shares; Derrick
Snider, options to purchase 13,800 Shares; Tom Holborow, options to purchase
13,800 Shares; Jose Mejia, options to purchase 5,500 Shares; Steve Walb,
options to purchase 5,500 Shares; and Bart Brodkin, options to purchase
160,549 Shares.
Upon the exercise of the stock purchase warrant held by WB Bottling
Corporation and pursuant to anti-dilution provisions contained in such stock
purchase warrant, the holders of Management Options shall receive additional
options pursuant to anti-dilution provisions contained in the Management
Options. Such additional
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options shall be granted as follows: Rick Ferguson, options to purchase 1,800
Shares; Joe Chalmers, options to purchase 1,250 Shares; Lou Janicich, options
to purchase 1,250 Shares; Roy Breneman, options to purchase 1,250 Shares; Tom
Theriault, options to purchase 1,250 Shares; Derrick Snider, options to
purchase 775 Shares; Tom Holborow, options to purchase 775 Shares; Jose Mejia,
options to purchase 300 Shares; Steve Walb, options to purchase 300 Shares;
and Bart Brodkin, options to purchase 8,980 Shares. The foregoing is a summary
of the Management Options. Such summary is qualified in its entirety by
reference to the text of each Management Option, the form of which is filed as
Exhibit 5 hereto and is incorporated herein by reference.
At a meeting of the Compensation Committee held on October 31, 1996, the
Compensation Committee resolved to recommend to the Board of Directors that a
stock option plan be approved for certain managers and directors of the
Company. On January 30, 1997, the Compensation Committee made their
recommendation to the Board of Directors and the Board of Directors
authorized, approved, and adopted the terms and conditions of the 1996-1997
Stock Option Plan (the "Stock Option Plan"). Pursuant to the terms and
conditions of the Stock Option Plan, on February 4, 1997, the Company granted
options to purchase Shares, at an exercise price of $8.00 per Share, to its
executive officers and directors (collectively, the "Employee/Director
Options" and, together with the Management Options, the "Options") as follows:
Rick Ferguson, options to purchase 13,900 Shares; Joe Chalmers, options to
purchase 10,250 Shares; Lou Janicich, options to purchase 10,250 Shares; Roy
Breneman, options to purchase 6,850 Shares; Tom Theriault, options to purchase
10,250 Shares; Derrick Snider, options to purchase 8,300 Shares; Tom Holborow,
options to purchase 8,300 Shares; Jose Mejia, options to purchase 2,150
Shares; Steve Walb, options to purchase 2,150 Shares; Bart Brodkin, options to
purchase 225,622 Shares; Jack Attwood, options to purchase 21,000 Shares;
Monroe Lowenkron, options to purchase 21,000 Shares; William Langley, options
to purchase 21,000 Shares; and Daniel Villanueva, options to purchase 21,000
Shares. The foregoing is a summary of the Stock Option Plan and the
Employee/Director Options. Such summary is qualified in its entirety by
reference to the text of the Stock Option Plan, a copy of which is filed as
Exhibit 6 hereto and is incorporated herein by reference, and the
Employee/Director Options, the form of which is filed as Exhibit 7 hereto and
is incorporated herein by reference.
Director Compensation. Non-employee directors of the Company are paid an
annual retainer of $20,000 plus an additional fee of $1,000 for each meeting
of the Board of Directors attended and are reimbursed for expenses incurred in
attending meetings of the Board of Directors.
Other Directorships. Mr. Lowenkron, a director of the Company, serves on the
Board of Directors of Triarc Companies, the parent company of Royal Crown Cola
Co.
Director Liability and Indemnification. Under the Delaware General
Corporation Law ("DGCL"), a corporation has the power to indemnify any
director or officer against expenses, judgments, fines, and settlements
incurred in a proceeding, other than an action by or in the right of the
corporation, if the person acted in good faith and in a manner that the person
reasonably believed to be in the best interests of the corporation or not
opposed to the best interests of the corporation, and, in the case of a
criminal proceeding, had no reason to believe the conduct of the person was
unlawful. In the case of an action by or in the right of the corporation, the
corporation has the power to indemnify any officer or director against
expenses incurred in defending or settling the action if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation; provided, however, that no
indemnification may be made when a person is adjudged liable to the
corporation, unless a court determines such person is entitled to indemnity
for expenses, and then such indemnification may be made only to the extent
such court shall determine. The DGCL requires that to the extent an officer or
director of a corporation is successful on the merits or otherwise in defense
of any third-party or derivative proceeding, or in defense of any claim,
issue, or matter therein, the corporation must indemnify the officer or
director against expenses incurred in connection therewith.
Under the DGCL, a corporation may adopt a provision in its certificate of
incorporation that eliminates or limits the personal liability of a director
to the corporation or its stockholders for monetary damages for breach
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of fiduciary duty as a director; provided, however, that such provision may
not eliminate or limit director monetary liability for: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of laws; (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (iv) transactions in which the director
received an improper personal benefit. The Company's Certificate of
Incorporation includes such a provision.
The Company's By-Laws provide that the Company will, to the fullest extent
permitted by the DGCL, indemnify all persons whom it has the power to
indemnify against all of the costs, expenses, and liabilities incurred by them
by reason of having been officers or directors of the Company, or any
subsidiary of the Company or any other corporation for which such persons
acted as officer or director at the request of the Company.
The Merger Agreement also contains covenants that will require the Surviving
Corporation to maintain the Company's current director and officer liability
coverage (or replacement insurance with similar coverage) for a period of two
years after the Effective Time. See "The Merger Agreement--Indemnification"
and "The Merger Agreement--Directors' and Officers' Insurance."
(2) Arrangements with the Purchaser or its Affiliates.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement. Such summary is
qualified in its entirety by reference to the text of the Merger Agreement, a
copy of which is filed as Exhibit 1 hereto and is incorporated herein by
reference.
The Offer. The Merger Agreement provides for the commencement of the Offer,
in connection with which the Purchaser has expressly reserved the right to
amend or modify the terms of the Offer and to waive certain conditions of the
Offer; however, without the prior written consent of the Company, Purchaser
has agreed not to (i) decrease the Offer Price or the form of consideration
therefor or decrease the number of Shares sought pursuant to the Offer, (ii)
change, in any material respect, the conditions to the Offer, (iii) impose
additional material conditions to the Offer, (iv) waive the condition that
there shall be validly tendered and not withdrawn prior to the time the Offer
expires a number of Shares which constitutes at least 65% of the Shares
outstanding on a fully-diluted basis on the date of purchase ("on a fully-
diluted basis" having the following meaning, as of any date: the number of
Shares outstanding, together with Shares which the Company may be required to
issue pursuant to options, warrants, or other obligations outstanding on that
date), (v) extend the expiration date of the Offer (except the Purchaser may
extend the expiration date of the Offer (a) as required by law or (b) for such
periods as Purchaser may reasonably deem necessary (but not to a date later
than the 45th calendar day after the date of commencement) in the event that
any condition to the Offer is not satisfied), or (vi) amend any term of the
Offer in any manner materially adverse to holders of Shares; provided,
however, that, except as set forth above, Purchaser may waive any other
condition to the Offer in its sole discretion; and provided further, that the
Offer may be extended in connection with an increase in the consideration to
be paid pursuant to the Offer so as to comply with applicable rules and
regulations of the Securities and Exchange Commission (the "Commission").
Board Representation. The Merger Agreement provides that promptly upon the
purchase by Parent or any of its subsidiaries of such number of Shares which
represents at least 65% of the outstanding Shares on a fully-diluted basis and
from time to time thereafter, Parent shall be entitled to designate such
number of directors, rounded up to the next whole number (but in no event more
than one less than the total number of directors on the Board of the Company)
as will give Parent, subject to compliance with Section 14(f) of the
Securities Exchange Act of 1934 (the "Exchange Act"), representation on the
Board equal to the product of (x) the number of directors on the Board (giving
effect to any increase in the number of directors pursuant to the Merger
Agreement) and (y) the percentage that such number of Shares so purchased
bears to the aggregate number of
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Shares outstanding (such number being the "Board Percentage"). The Company has
agreed, upon request of Parent, to promptly satisfy the Board Percentage by
increasing the size of the Board or using its best efforts to secure the
resignations of such number of directors as is necessary to enable Parent's
designees to be elected to the Board and to cause Parent's designees promptly
to be so elected; provided, that no such action shall be taken which would
result in there being, prior to the consummation of the Merger, less than two
directors of the Company that are not affiliated with Parent. Following the
election or appointment of Parent's designees pursuant to the Merger Agreement
and prior to the Effective Time of the Merger, any amendment or termination of
the Merger Agreement, extension for the performance or waiver of the
obligations or other acts of Parent or Purchaser or waiver of the Company's
rights thereunder shall require the concurrence of a majority of the directors
of the Company then in office who are Continuing Directors. The term
"Continuing Directors" means (i) each member of the Board on the date of the
Merger Agreement who voted to approve the Merger Agreement and (ii) any
successor to any Continuing Director that was recommended to succeed such
Continuing Director by a majority of the Continuing Directors then on the
Board.
Consideration to be Paid in the Merger. The Merger Agreement provides that
upon the terms (but subject to the conditions) set forth in the Merger
Agreement, Purchaser will be merged with and into the Company. In the Merger,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders of any of the Shares, the Purchaser, or the Company, each
Share issued and outstanding immediately prior to the Effective Time
(excluding Shares owned directly or indirectly by (i) the Company or by
Parent, Purchaser, or any other subsidiary of Parent, and (ii) stockholders of
the Company who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal
for such Shares under Delaware law (such Shares to be referred to as
"Dissenting Shares")) shall be converted into the right to receive $12.00 net
per Share in cash, without any interest thereon, less any required withholding
taxes. Each share of the capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
Preparation of the Information Statement; Merger Without a Company
Stockholders Meeting. In the event that Parent or any Subsidiary of Parent
shall acquire at least 65% of the outstanding Shares (on a fully diluted
basis) in the Offer or otherwise, the Parent, Purchaser, and the Company have
agreed, at the request of the Purchaser, to take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after
the expiration of the Offer, in accordance with Section 251 of the DGCL. Such
action shall include the prompt preparation and distribution of an information
statement (if required by applicable law) relating to the written consent of
Stockholders approving the Merger (such information statement as amended or
supplemented from time to time referred to herein as the "Information
Statement"). The Company has agreed to use all commercially reasonable efforts
to cause the Information Statement to be mailed to the Company's Stockholders
at the earliest practicable date. Notwithstanding the foregoing, the Merger
Agreement provides that in the event that Parent or any subsidiary of Parent
acquires at least 90% of the outstanding Shares in the Offer, the Merger may
be effected without a meeting of the Stockholders in accordance with Section
253 of the DGCL.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties hereto. These include
representations and warranties by the Company with respect to corporate
existence and power, capital structure, corporate authorization,
noncontravention, consents and approvals, Commission filings, information
supplied, compliance with applicable laws, litigation, taxes, pension and
benefit plans and ERISA, absence of certain changes or events, absence of
undisclosed material liabilities, opinion of financial advisor, vote required,
labor matters, intangible property, environmental matters, real property,
board recommendation, material contracts, related party transactions,
indebtedness, liens, and other matters.
Parent and Purchaser have also made certain representations and warranties
with respect to corporate existence and power, corporate authorization,
consent and approvals, noncontravention, information supplied, board
recommendation, financing, absence of certain agreements, and other matters.
5
Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement to the Effective Time, except
as otherwise provided in the Merger Agreement or consented to by Parent, the
Company will conduct its business in the usual, regular, and ordinary course
of business in substantially the same manner as conducted prior to the date of
the Merger Agreement and shall use all reasonable efforts to preserve intact
its business organization, keep available the services of its current officers
and employees and preserve relationships with third parties with whom it has
business dealings to the end that its goodwill and ongoing business shall not
be impaired in any material respect at the Effective Time. The Company has
further agreed that it shall not: (i) declare or pay any dividends on or make
any other distributions in respect of any of its capital stock; (ii) split,
combine, or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire any shares of its capital stock, except as required by the terms of
any employee benefit plan as in effect on the date of the Merger Agreement;
(iv) grant any options, warrants, or rights to purchase Shares; (v) amend the
terms of or reprice any option or amend the terms of Stock Option Plan; or
(vi) issue, deliver or sell, or authorize propose to issue, deliver or sell,
any shares of its capital stock, any Company voting debt or any securities
convertible into, or any rights, warrants, or options to acquire, any such
shares, Company voting debt, or convertible securities, other than (a)
issuances of Shares upon the exercise of options that are outstanding on the
date of the Merger Agreement; or (b) the issuance of Shares upon the exercise
of warrants that are outstanding on the date of the Merger Agreement; (vii)
make or propose to make any changes in its Certificate of Incorporation or By-
laws; (viii) merge or consolidated with, or acquire any equity interest in,
any corporation, partnership, association, or other business organization, or
enter into an agreement with respect thereto; (ix) acquire or agree to acquire
any assets of any corporation, partnership, association, or other business
organization or division thereof, except for the purchase of inventory and
supplies in the ordinary course of business; (x) create or otherwise permit to
exist any subsidiary of the Company; (xi) sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operation or
capital lease), encumber, or otherwise dispose of, any of its assets except
for dispositions in the ordinary course of business consistent with past
practice which are not material, individually or in the aggregate, to the
Company; (xii) authorize, recommend, propose, or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the Company;
(xiii) take or agree to take any action that is reasonably likely to result in
any of the Company's representations or warranties contained in the Merger
Agreement being untrue in any material respects or any of the Company's
covenants contained in the Merger Agreement not being satisfied in all
material respects; (xiv) increase in any manner the compensation of directors,
officers, or key employees, pay or agree to pay any pension, retirement
allowance or other employee benefit not required or contemplated to be paid
prior to the effective time of the Merger by any of the existing benefit plans
or employee arrangements of the Company as in effect on the date of the Merger
Agreement to any such director, officer or key employee, enter into any new,
or materially amend any existing, employment, severance, or termination
agreement with any such a director, officer, or key employee or, except as may
be required by law, become obligation under any new employee benefit plan or
employee arrangement, which was not in existence on the date of the Merger
Agreement, or amend any such plan or arrangement in existence on the date of
the Merger Agreement if such amendment would have the effect of materially
enhancing any benefits thereunder; (xv) assume or incur (which shall not be
deemed to include entering into credit agreements, lines of credit or similar
arrangements until borrowings are made under such arrangements) indebtedness
for borrowed money or act as guarantor for any such indebtedness, issue or
sell any debt securities or warrants or rights to acquire debt securities or
guarantee any debt securities of others, or enter into any lease (whether such
lease is an operating or a capital lease) or create any mortgages, liens, or
security interests or other encumbrances on Company property or enter into any
"keep well" or other agreement or arrangement to maintain the financial
condition of another person except for indebtedness incurred by the Company
from time to time for working capital purposes in the ordinary course of
business under the Credit Agreement; (xvi) enter into, modify, rescind,
terminate, waive, release or otherwise amend in any material respect any of
the terms or provisions of any material contract; (xvii) take any action,
other than in the ordinary course of business consistent with past practice or
as required by the Commission or by law, with respect to accounting policies,
procedures, and practices; or (xvii) incur any capital expenditures other than
those set forth on a schedule to the Merger Agreement.
6
Other Agreements. The Company, Parent, and Purchaser have agreed to use
their respective commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary,
proper, or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by the Merger Agreement subject
to approval of the Company's stockholders, including cooperating fully with
the other party, including by provision of information and making of all
necessary filings in connection with, among other things, approvals under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"). Parent and the Company have also made
certain agreements regarding publicity, access to information, and
confidentiality.
No Solicitation. From and after the date of the Merger Agreement until the
termination thereof, neither the Company, nor any of its officers, directors,
employees, representatives, agents, or affiliates (including without
limitation, any investment banker, attorney, or accountant retained by the
Company) (such officers, directors, employees, representatives, agents,
affiliates, investment bankers, attorneys, and accountants being collectively
referred to as "Representatives), will, directly or indirectly, initiate,
solicit, or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, and the Company shall not authorize or permit any of its
Representatives to take any such action, and the Company shall notify Parent
orally (within one business day) and in writing (as promptly as practicable)
of all of the relevant details relating to, and all material aspects of, all
inquiries and proposals which it or any of its Representatives may receive
relating to any of such matters and, if such inquiry or proposal is in
writing, the Company shall deliver to Parent a copy of such inquiry or
proposal as promptly as practicable; provided, however, that the Board is not
prohibited from (i) furnishing information to, or entering into discussions
with, any person or entity that makes an unsolicited written bona fide
Acquisition Proposal (provided that such person or entity has the necessary
funds or commitments to provide the funds to effect such Acquisition Proposal)
if, and only to the extent that, (A) the Board, after consultation with and
based upon the advice of independent legal counsel (who may be the Company's
regularly engaged independent legal counsel), determines in good faith that
such action is necessary for the Board to comply with its fiduciary duties to
Stockholders under applicable law, (B) prior to taking such action, the
Company (x) provides reasonable prior notice to Parent to the effect that it
is taking such action and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form, and (C) the Company
shall promptly and continuously advise Parent as to all of the relevant
details relating to, and all material aspects of, any such discussions or
negotiations; or (ii) failing to make or withdrawing or modifying its
recommendation to the Stockholders to approve the Merger Agreement and the
transactions contemplated thereby, including the Merger, and to accept the
Offer and tender their Shares pursuant thereto, if there exists an Acquisition
Proposal and the Board, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary
for the Board to comply with its fiduciary duties to Stockholders under
applicable law; or (iii) making a "stop-look-and-listen" communication with
respect to the Offer or the Merger Agreement of the nature contemplated in,
and otherwise in compliance with, Rule 14d-9 under the Exchange Act as a
result of an Acquisition Proposal meeting the requirements of clause (i)
above. The term "Acquisition Proposal" means any of the following transactions
(other than the transactions among the Company, Parent, and Purchaser
contemplated in the Merger Agreement) involving the Company: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 25% or more of the assets of the Company,
computed on the basis of book value, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith; or
(iv) any public announcement or a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Fees and Expenses. Except as provided below, the Merger Agreement provides
that all costs and expenses in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party
7
incurring such expense, except as otherwise provided in the Merger Agreement
and except with respect to claims for damages incurred as a result of the
breach of the Merger Agreement. In addition, the Company has agreed to pay
Parent a fee in immediately available funds equal to $2,500,000 upon the
termination of the Merger Agreement in accordance with the terms thereof if
any of the following events occurs (each, a "Trigger Event"): (i) the Board
shall have (A) withdrawn or adversely modified in any material respect or
taken a public position materially inconsistent with its approval or
recommendation of the Offer, the Merger or the Merger Agreement, (B) made a
"stop-look-and-listen" communication as provided in the Merger Agreement less
than five business days prior to the 45th calendar day after the date of the
commencement of the Offer, or (C) failed to reaffirm its approval or
recommendation of the Offer, the Merger, or the Merger Agreement in the event
an Acquisition Proposal has been made to the Company prior to the consummation
of the Offer; or (ii) an Acquisition Proposal has been recommended or accepted
by the Company or the Company shall have entered into an agreement (other than
a confidentiality agreement as contemplated by the Merger Agreement) with
respect to an Acquisition Proposal. In the event (i) the Merger Agreement
shall be terminated in accordance with its terms, (ii) on or after August 15,
1996 and at or prior to such termination, any person or group of persons shall
have made an Acquisition Proposal (each such person or member of a group of
such persons being referred to as a "Designated Person"), and (iii) either (A)
a transaction contemplated by the term "Acquisition Proposal" shall be
consummated, on or before the one year anniversary of the termination of the
Merger Agreement, with any Designated Person or any affiliate of any
Designated Person or (B) the Company shall enter into an agreement, on or
before the one year anniversary of the termination of the Merger Agreement,
with respect to an Acquisition Proposal with any Designated Person or any
affiliate of any Designated Person and a transaction contemplated by the term
"Acquisition Proposal" shall thereafter be consummated with such Designated
Person or affiliate thereof, then the Company shall pay to Parent a fee in
immediately available funds equal to $2,500,000 (less any amount paid in
connection with the termination of the Merger Agreement upon the occurrence of
a Trigger Event), such fee to be paid contemporaneously with the consummation
of such contemplated transaction. Any amounts payable to Parent pursuant to
the foregoing that are not paid when due shall bear interest at the rate of 9%
per annum from the date due through and including the date paid. Unless Parent
is materially in breach of the Merger Agreement as of the final expiration of
the Offer (after giving effect to any extensions thereof), the Company shall
pay to Parent upon demand an amount, not to exceed $750,000 to reimburse
Parent and Purchaser for their Expenses (defined herein), payable in same-day
funds, if the minimum tender condition is not met or the Requisite Consents
(as defined in the Merger Agreement) are not obtained or in full force and
effect as of the final expiration of the Offer (after giving effect to any
extensions thereof). As used herein, the term Expenses shall mean all
documented, reasonable out-of-pocket fees and expenses incurred or paid by or
on behalf of Parent or the Purchaser to third parties in connection with the
Merger, the Offer, or the consummation of any of the transactions contemplated
by the Merger Agreement, including, without limitation, all printing costs and
reasonable fees and expenses of counsel, investment banking firms,
accountants, experts, and consultants.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the satisfaction
prior to the Closing Date (as defined in the Merger Agreement) of the
following conditions: (i) the Merger Agreement and the Merger shall have been
approved and adopted by the affirmative vote or written consent of the holders
of a majority of the outstanding Shares entitled to vote thereon if such vote
is required by applicable law; provided that Parent and Purchaser shall vote
all Shares purchased pursuant to the Offer in favor of the Merger; (ii) the
waiting period (and any extension thereof) applicable to the merger under the
HSR Act shall have been terminated or shall have expired, and no restrictive
order or other requirements shall have been placed on the Company, Parent,
Purchaser, or the Surviving Corporation in connection therewith; (iii) no
temporary restraining order, preliminary or permanent injunction, or other
order issued by any court of competent jurisdiction or other legal restraint
or prohibited preventing the consummation of the Merger shall be in effect;
provided however, that prior to invoking the condition, each party shall use
all commercially reasonable efforts to have any such decree, ruling,
injunction or order vacated; (iv) no statute, rule, order, decree or
regulation shall have been enacted or promulgated by any government or
governmental agency or authority which prohibits the consummation of the
Merger; and (v) Purchaser shall have accepted for payment and paid for the
Shares tendered in the Offer such that, after such acceptance and payment,
Parent and its affiliates shall own, at consummation of the Offer, 65% of the
outstanding Shares of the Company
8
on a fully diluted basis; provided that this condition shall be deemed to have
been satisfied if Purchaser fails to accept for payment and pay for Shares
pursuant to the Offer in violation of the terms and conditions of the Offer.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent, by (a) mutual written consent of the
Company and Parent or by mutual action of their respective Board of Directors;
(b) either the Company or Parent, (i) prior to consummation of the Offer if
there has been a breach of any representation, warranty, covenant or agreement
on the part of the other set forth in the Merger Agreement, which breach has
not been cured within three business days following receipt by the breaching
party of notice of such breach, or (ii) if any permanent injunction or other
order of a court or other competent authority preventing the consummation of
the Merger shall have become final and non-appealable; (c) either the Company
or Parent, so long as such party has not breached its obligations under the
Merger Agreement, if the Merger shall not have been consummated on or before
the 45th calendar day following the consummation of the Offer; provided, that
such right to terminate the Merger Agreement under this clause shall not be
available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date; (d) Parent, in the event that a
Trigger Event has occurred prior to the consummation of the Offer (see "Fees
and Expenses" above); (e) Parent, in the event an Acquisition Proposal has
been made to the Company prior to the consummation of the Offer and the
Company shall after request from the Parent, fail to publicly reaffirm its
approval or recommendation of the Offer, the Merger, and the Merger Agreement
on or before the fifth business day following the date on which Parent shall
request such reaffirmation; (f) Parent, if the Offer terminates, is withdrawn,
abandoned, or expires by reason of the failure to satisfy any of the
conditions described in Section 14 of the Offer to Purchase; (g) the Company,
if the Offer shall have expired or have been withdrawn, abandoned, or
terminated without any Shares being purchased by Purchaser thereunder on or
prior to the 45th calendar day after the date of commencement of the Offer;
(h) by the Company, if the Board of Directors of the Company shall fail to
make or withdraw or modify its recommendation that the Stockholders approve
the Merger Agreement and the Merger and accept the Offer and tender their
Shares pursuant thereto if there exists an Acquisition Proposal and the Board
of Directors of the Company, after consultation with and based upon the advice
of independent legal counsel who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary
for the Board of Directors of the Company to comply with its fiduciary duties
to holders of Shares under applicable law. In the event of termination of the
Merger Agreement by either Company or Parent as provided therein, the Merger
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Purchaser, or the Company, or their
respective affiliates, officers, directors, or shareholders, except to the
extent that such termination results from the material breach by a party to
the Merger Agreement of any of its representations or warranties, or any of
its covenants or agreements (subject to certain limitations) or as otherwise
provided in the Merger Agreement.
Indemnification. The Merger Agreement provides that the Company shall, and
from and after the Effective Time, the Surviving Corporation shall, indemnify,
defend, and hold harmless each person who was at the date of the Merger
Agreement, or had been at any time prior to the date of the Merger Agreement
or who becomes prior to the Effective Time, an officer or director of the
Company (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees and expenses), liabilities or
judgments or amounts paid in settlement with the approval of the indemnifying
party (which approval shall not be unreasonably withheld) of or in connection
with any threatened or actual claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director or officer of the Company whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, or pertaining
to the Merger Agreement or the transactions contemplated thereby in each case
to the full extent a corporation is permitted under the DGCL to indemnify its
own directors or officers, as the case may be, and the Company and the
Surviving Corporation, as the case may be, shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified
Party to the full extent permitted by law. All rights to indemnification,
9
including provisions relating to advances of expenses incurred in defense of
any action or suit, existing in favor of the Indemnified Parties with respect
to matters occurring through the Effective Time, shall survive the Merger and
shall continue in full force and effect for a period of not less than five
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
Directors' and Officers' Insurance. For a period of two years after the
Effective Time, the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by the Company (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in any material respect to the
Indemnified Parties) with respect to matters arising before the Effective
Time, provided that the Surviving Corporation shall not be required to pay an
annual premium for such insurance in excess of 150% of the last annual premium
paid by the Company prior to the date of the Merger Agreement, but in such
case shall purchase as much coverage as possible for such amount.
Amendment. Subject to applicable law, the Merger Agreement may be amended,
modified, or supplemented only by written agreement of Parent, Purchaser, and
the Company at any time prior to the Effective Time with respect to any of the
terms contained therein; provided, however, that after the Merger Agreement is
approved by the Stockholders, no such amendment or modification shall (i)
reduce the amount or change the form of consideration to be delivered to the
holders of the Shares, (ii) cause the date by which the Merger is required to
be effected, or (iii) change the amounts payable in respect of the options or
warrants set forth in the Merger Agreement.
Timing. The Merger Agreement provides that the closing of the Merger shall
occur on the second business day after satisfaction of the conditions set
forth in the Merger Agreement (or as soon as practicable thereafter following
satisfaction or waiver of such conditions). The Merger shall become effective
upon such filing or at such time thereafter as may be provided in the
certificate of merger to be filed with the Secretary of State of the State of
Delaware, as provided in the DGCL, on the date of the closing of the Merger or
as soon as practicable thereafter.
The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Parent has agreed to
cause the Merger to be consummated on the terms set forth above, there can be
no assurance as to the timing of the Merger.
OTHER AGREEMENTS
Management Agreements. As a condition to the execution and delivery of the
Merger Agreement, Parent required the Company and Mr. Brodkin to enter into
the First Amendment and the Company and Mr. Ferguson to enter into the
Ferguson Contract Termination Agreement. See the discussion under Item 3
above.
Confidentiality Agreements. On February 26, 1997, the Parent and the Company
entered into a Confidentiality Agreement (the "Confidentiality Agreement")
pursuant to which the Company agreed to supply certain information to the
Parent and the Parent agreed to treat such information as confidential and to
use such information solely in connection with the evaluation of a possible
transaction with the Company. The Parent agreed that until February 26, 1999,
it would not, among other things, taken any action that would cause or
facilitate the acquisition by any person, including the Parent or its
affiliates, of any securities or assets of, or a merger or business
combination with, the Company. The foregoing is a summary of the
Confidentiality Agreement. Such summary is qualified in its entirety by
reference to the text of the Confidentiality Agreement, a copy of which is
filed as Exhibit 8 hereto, and is incorporated herein by reference.
10
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has unanimously approved the Merger Agreement and the
transactions contemplated thereby and recommends that the stockholders of the
Company tender their Shares pursuant to the Offer.
(B) BACKGROUND; REASONS FOR THE RECOMMENDATION.
Set forth below is a description of the background of the Offer, including a
brief description of the material contacts between Jim L. Turner, the
President and Chief Executive Officer of Parent, and the officers and
directors of the Company regarding the transactions described herein.
Since the consummation of the Joint Plan and the emergence of the Company
from bankruptcy, the Company's senior management have been actively studying
the changing and competitive bottling environment, and analyzing how the
Company's current and future products and services might best compete in the
changing marketplace.
This analysis has caused the Company to consider exploring strategic
opportunities to combine with other bottling operations and to consider
conducting talks with other companies regarding such potential transactions.
Mr. Lowenkron, a director of the Company, and Mr. Turner have known each
other personally and professionally for many years. Mr. Lowenkron was employed
by a number of well-known soft drink franchise companies, including A&W
Brands, Inc. ("A&W Brands"). Mr. Lowenkron was the Chief Executive Officer and
a director of A&W Brands and its predecessors from 1980 through 1993. A&W
Brands produces and sells a number of soft drink concentrates (including
concentrates for A&W and Squirt brand products) to soft drink bottlers,
including Parent. Mr. Lowenkron and Mr. Turner also served together on the
board of directors of G. Heileman Brewing Company, Inc. On innumerable
occasions during the course of their relationship, Mr. Turner and Mr.
Lowenkron have discussed the soft drink industry generally and Parent's
business specifically. With respect to Parent's business, these discussions
included Mr. Turner's goals and strategies for Parent, as well as the
potential for expanding Parent's business base through appropriate
acquisitions.
In connection with the Company's strategic objectives (as described above),
on December 18, 1996, Mr. Lowenkron telephoned Mr. Turner. Mr. Lowenkron and
Mr. Turner discussed, in general terms, the objectives of the Company and
Parent, the potential opportunities and benefits that might arise as a result
of a combination of the two companies, and whether Mr. Turner would be
interested in further exploring a possible business combination involving
Parent and the Company. Mr. Lowenkron stated that he would have Ed Whiting of
Whitman, Heffernan, Rhein & Co., then the Company's financial advisors, call
Mr. Turner to follow-up on their discussion.
On December 20, 1996, Mr. Brodkin, the President and Chief Executive Officer
of the Company, telephoned Mr. Turner to follow-up on Mr. Turner's
conversation with Mr. Lowenkron. Mr. Turner advised Mr. Brodkin that he would
be interested in exploring a business combination, but that he would need to
visit the Company to obtain additional information before he could proceed any
further.
On December 23, 1996, Mr. Whiting telephoned Mr. Turner to discuss Parent's
interest in a potential business combination with the Company. Mr. Turner
indicated to Mr. Whiting that he would be interested in visiting the Company
and obtaining additional information in order to evaluate such a transaction.
On January 3, 1997, Mr. Brodkin telephoned Mr. Turner. According to Mr.
Brodkin, Mr. Whiting had suggested that Mr. Brodkin call Mr. Turner to set up
a meeting to provide Mr. Turner with additional information in order for
Parent to evaluate a potential business combination with the Company. The
meeting took place on January 16, 1997. Attendees were Mr. Turner, Mr.
Whiting, Mr. Brodkin, and Rick Ferguson, the Chief Financial Officer of the
Company. Mr. Brodkin and Mr. Ferguson presented certain historical financial
data concerning the Company and responded to questions raised by Mr. Turner.
Mr. Turner indicated that Parent would have an interest in pursuing an
acquisition of the Company. According to Mr. Turner, Mr. Whiting stated that
he believed that the three major stockholders of the Company would likely
require a price in the range of $11 to $12 per
11
share in such a transaction. On January 17 and 18, 1997, Messrs. Turner,
Brodkin, and Ferguson discussed by telephone certain information regarding the
Company and Messrs. Brodkin and Ferguson responded to certain follow-up
questions raised by Mr. Turner.
On January 18, 1997, Mr. Turner telephoned Mr. Lowenkron, who, Mr. Turner
had been advised, had been appointed by the Company's Board of Directors to
head a special committee comprised of Mr. Lowenkron and Mr. William Langley
(the "Strategic Committee") to review any offers to acquire the Company. Mr.
Turner and Mr. Lowenkron agreed that Mr. Turner would meet with the Strategic
Committee on February 6, 1997 to present a proposal for acquiring the Company.
On January 27, 1997, the Company and Parent executed a confidentiality
agreement.
On February 6, 1997, Mr. Turner and certain of Parent's legal and financial
advisors met with Mr. Lowenkron, Mr. Langley (who, Mr. Turner was then
advised, was the other member of the Strategic Committee), and the Company's
outside counsel. Mr. Turner and Parent's financial advisors presented the
material terms of Parent's proposal for acquiring the Company. The proposal
contemplated a tender offer followed by a back-end merger, with the
stockholders of the Company receiving $12.00 per Share in the transactions.
The Strategic Committee then informed Mr. Turner and Parent's advisors that
they would discuss Parent's proposal with the entire Board of Directors of the
Company, which discussion was held on February 6, 1997.
On February 7, 1997, Mr. Brodkin telephoned Mr. Turner and informed him that
the Company's Board of Directors was willing to continue to explore the
possibility of entering into a mutually acceptable transaction with Parent.
Mr. Brodkin informed Mr. Turner that the Board of Directors had instructed the
Company's representatives to proceed with the negotiation of definitive
documents. Over the next three weeks, representatives of Parent conducted a
"due diligence" investigation of the Company and representatives of the
Company and Parent negotiated the Merger Agreement and the details of the
transactions contemplated thereby.
On February 13, 1997 and February 19, 1997, the Board of Directors was
briefed by Messrs. Brodkin and Ferguson as to the status of the "due
diligence" investigation of the Company being conducted by representatives of
Parent as well as the status of the negotiations regarding the Merger
Agreement.
On February 26, 1997, Texas Commerce Bank National Association and Chase
Securities Inc. delivered to Parent a Commitment Letter (the "Bank Commitment
Letter") and a copy was provided to the Company's Board of Directors as well
as to the Company's representatives. Effective February 26, 1997, the Company
and Parent entered into a new confidentiality agreement that superseded their
prior confidentiality agreement.
Negotiations among the Company, the Parent, and their respective
representatives continued through February 28, 1997 with respect to various
matters, including the economic terms of the Merger, and the legal and
financial advisors of the Company and the Parent completed their due diligence
review of the Company. On February 28, 1997, the parties reached agreement on
the final terms of the Merger Agreement and the related transactions
contemplated thereunder.
The Board of Directors of the Company held a meeting on February 28, 1997 to
discuss the proposed Offer and Merger, the Merger Agreement, and the related
transactions contemplated thereunder. After reviewing the transaction with the
Company's legal and financial advisors and hearing the presentation of
Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan Lokey"), the Company's
financial advisor, the Board of Directors discussed the proposed Offer and
Merger and all transactions contemplated thereby. The Board of Directors
unanimously approved the Offer, the Merger, and the Merger Agreement,
recommended that the stockholders of the Company tender their Shares pursuant
to the Offer, and executed and delivered the Merger Agreement in the late
afternoon on February 28, 1997.
On March 7, 1997, Parent commenced the Offer.
12
A copy of the joint press release of the Company and the Purchaser
announcing the execution of the Merger Agreement is attached hereto as Exhibit
9 and is incorporated herein by reference. A copy of a letter to stockholders
of the Company, which accompanies this Schedule 14D-9, is attached hereto as
Exhibit 10 and is incorporated herein by reference.
In reaching its conclusion and recommendation described above, the Board of
Directors considered the following factors:
1. the terms of the Merger Agreement;
2. the opinion of Houlihan Lokey to the effect that, as of the date of
its opinion and based upon and subject to certain matters stated therein,
the consideration to be received by the holders of Shares (other than the
Purchaser and its affiliates) pursuant to the Offer and the Merger, taken
together, was fair to such holders from a financial point of view. The full
text of Houlihan Lokey's written opinion, which sets forth the assumptions
made, matters considered, and limitations on the review undertaken by
Houlihan Lokey, is attached hereto as Exhibit 11 and is incorporated herein
by reference. HOLDERs OF SHARES ARE URGED TO READ THE OPINION OF HOULIHAN
LOKEY CAREFULLY IN ITS ENTIRETY;
3. the fact that the $12.00 per Share to be paid pursuant to the Offer
represents a premium over the valuation of the Shares upon the consummation
of the Joint Plan and the emergence of the Company from bankruptcy in
August 1996 and subsequent trading prices of the Shares;
4. the familiarity of the Board of Directors with the financial
condition, results of operations, business, prospects, and strategic
objectives of the Company and the conditions of the bottling industry;
5. the Parent's and the Purchaser's financial condition, results of
operations, cash flows, competitive position, and prospects;
6. the high regard of management of the Company for the integrity and
operating ability of the Parent and the recommendation of management
(considered in light of the matters described or referred to under Item 3--
"Identity and Background" above);
7. the fact that the Merger Agreement, which prohibits the Company, its
subsidiaries, or its affiliates from initiating, soliciting, or encouraging
any potential Acquisition Proposal, does permit the Company (conditioned
upon the execution of confidentiality agreements) to furnish non-public
information to, allow access by and participate in discussions and
negotiations with any third party that has submitted a bona fide and
unsolicited Acquisition Proposal to the Company, provided that (i) such
third party has the necessary funds or commitments to provide the funds to
effect such Acquisition Proposal, (ii) the Board of Directors, upon advice
of counsel, determines that failure to so act would constitute a breach of
its fiduciary duties, and (iii) the Board of Directors determines that
failure to so act would constitute a breach of its fiduciary duties;
8. the provisions of the Merger Agreement that require the Company to pay
the Purchaser a termination fee of $2,500,000 and reimburse the Purchaser
for its out-of-pocket expenses (subject to a maximum amount of $750,000)
under certain circumstances as described above under "Merger Agreement--
Fees and Expenses";
9. the structure of the transaction, including the fact that the Offer
will permit stockholders to receive cash for their Shares and the terms and
conditions of the Bank Commitment Letter; and
10. the regulatory approvals required to consummate the Merger, and the
prospects for receiving all such approvals.
13
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position and recommendations as being based on the
totality of the information presented to and considered by them.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
Houlihan Lokey has been retained by the Board of Directors to act as a
financial advisor to the Company with respect to the Offer and the Merger.
Pursuant to an engagement letter with Houlihan Lokey, the Company has agreed
to pay Houlihan Lokey a fee of $200,000 for its services, $100,000 of which
was payable upon the execution of the engagement letter and the remainder of
which was payable upon delivery by Houlihan Lokey to the Company of its
written opinion as to the consideration to be received by holders of Shares
pursuant to the Offer and the Merger. No portion of that fee was contingent
upon the consummation of the Offer or the Merger or the conclusions reached in
the opinion. The Company has also agreed to reimburse Houlihan Lokey for its
reasonable out-of-pocket expenses (up to $10,000 limit), and to indemnify
Houlihan Lokey and certain related parties against certain liabilities,
including liabilities under the federal securities laws. Houlihan Lokey has
provided certain financial advisory and investment banking services to the
Company in the past, for which services Houlihan Lokey has received customary
compensation.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain, or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in Item 3(b) (the provisions of which are hereby
incorporated by reference), no transactions in the Shares have been effected
during the past 60 days by the Company or, to the best of the Company's
knowledge, by any executive officer, director, affiliate, or subsidiary of the
Company.
(b) To the best of the Company's knowledge, each executive officer and
director of the Company who holds Options intends, at the Effective Time, to
cancel and settle such Options in consideration for an amount equal to the
difference between $12.00 per Share underlying such Option and the per Share
exercise price of such Option in accordance with the terms and conditions of
Section 3.5 of the Merger Agreement, a copy of which is attached hereto as
Exhibit 1 and is incorporated herein by reference. Except for the foregoing,
to the best of the Company's knowledge, none of the executive officers,
directors, and affiliates of the Company currently intends to tender, pursuant
to the Offer, any Shares to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth above or in Items 3(b) and 4(b) (the provisions of
which are hereby incorporated herein by reference), the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale,
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described above or in Items 3(b) or 4 above (the provisions of
which are hereby incorporated herein by reference), there are no transactions,
Board of Directors' resolutions, agreements in principle, or signed contracts
in response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
14
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete,
and correct.
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
By: /s/ Bart S. Brodkin
---------------------------------
Bart S. Brodkin
Chairman and Chief Executive Officer
Dated: March 7, 1997
Dates Referenced Herein and Documents Incorporated by Reference
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