Agreement And Plan Of Merger

EXHIBIT 10.17


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AGREEMENT AND PLAN OF MERGER


Dated as of October 15, 1997


Effective as of 9:00 a.m. EST on October 15, 1997


by and among


AquaPenn Spring Water Company, Inc.


Castle Rock Spring Water Company, Inc.


Dunsmuir Bottling Company
doing business as
Castle Rock Spring Water Company


and


Certain Shareholders of Dunsmuir Bottling Company


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TABLE OF CONTENTS


PAGE


ARTICLE I


THE MERGER


SECTION 1.1 The Merger........................ 1
SECTION 1.2 Effective Time of the Merger...... 1


ARTICLE II


THE SURVIVING AND PARENT CORPORATIONS


SECTION 2.1 Certificate of Incorporation...... 2
SECTION 2.2 Bylaws............................ 2
SECTION 2.3 Directors and Officers............ 2


ARTICLE III


MERGER CONSIDERATION


SECTION 3.1 Consideration..................... 2
SECTION 3.2 Conversion of Subsidiary Shares... 5
SECTION 3.3 Exchange of Certificates.......... 5
SECTION 3.4 Closing........................... 6
SECTION 3.5 Closing of the Company's Transfer Books 6


ARTICLE IV


REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY


SECTION 4.1 Organization and Qualification.... 6
SECTION 4.2 Capitalization.................... 7
SECTION 4.3 Authority; Non-Contravention; Approvals 7
SECTION 4.4 Litigation........................ 8
SECTION 4.5 No Violation of Law............... 8
SECTION 4.6 Financial Statements.............. 9
SECTION 4.7 Brokers........................... 9
SECTION 4.8 Employment Agreements............. 9


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ARTICLE V


REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS


SECTION 5.1 Organization and Qualification.... 9
SECTION 5.2 Capitalization.................... 10
SECTION 5.3 [Intentionally left blank]........ 10
SECTION 5.4 Subsidiaries...................... 10
SECTION 5.5 Authority; Non-Contravention; Approvals 11
SECTION 5.6 Financial Statements.............. 12
SECTION 5.7 Books of Account.................. 12
SECTION 5.8 Absence of Certain Changes of Events 12
SECTION 5.9 Absence of Undisclosed Liabilities 12
SECTION 5.10 Taxes............................ 13
SECTION 5.11 Title to Assets.................. 13
SECTION 5.12 Assets and Properties Complete... 14
SECTION 5.13 Access to Spring................. 14
SECTION 5.14 Water Quality.................... 14
SECTION 5.15 Contracts........................ 15
SECTION 5.16 Compliance with Agreements....... 15
SECTION 5.17 No Violation of Law.............. 15
SECTION 5.18 Litigation....................... 16
SECTION 5.19 Employee Benefit Plans; ERISA.... 16
SECTION 5.20 Labor Matters.................... 18
SECTION 5.21 Environmental Matters............ 19
SECTION 5.22 Trademarks and Intellectual
Property Compliance............ 20
SECTION 5.23 Insurance........................ 20
SECTION 5.24 Year 2000 Compliance............. 21
SECTION 5.25 Bank Accounts.................... 21
SECTION 5.26 Business Relations............... 21
SECTION 5.27 Potential Conflicts of Interest.. 22
SECTION 5.28 Disclosure....................... 22
SECTION 5.29 Brokers.......................... 22
SECTION 5.30 Resignation of Directors and
Officers....................... 22


ARTICLE VI


REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS


SECTION 6.1 Authority; Non-Contravention;
Approvals........................ 23
SECTION 6.2 Approval of Merger................ 23
SECTION 6.3 Title to Shares................... 23
SECTION 6.4 Tax-Free Reorganization........... 23
SECTION 6.5 Investment; No registration....... 24


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ARTICLE VII


ADDITIONAL AGREEMENTS


SECTION 7.1 Expenses and Fees.................. 24
SECTION 7.2 Confidentiality.................... 24
SECTION 7.3 Parent Stock....................... 24
SECTION 7.4 Payment of Obligations............. 25
SECTION 7.5 No Checks, Wires or Withdrawals.... 25


ARTICLE VIII


CONDITIONS


SECTION 8.1 Condition to Parent's Obligation
to Effect the Merger............ 25
SECTION 8.2 Conditions to the Company's
Obligation to Effect the Merger. 25


ARTICLE IX


POST-CLOSING OBLIGATIONS


SECTION 9.1 Agreement to Cooperate............ 26
SECTION 9.2 Public Statements................. 26
SECTION 9.3 Transition........................ 26
SECTION 9.4 Directors and Officers of Surviving
Corporation..................... 26
SECTION 9.5 Lock-up Agreements................ 26
SECTION 9.6 Completion of Minutes............. 26
SECTION 9.7 Execution of Further Documents.... 27


ARTICLE X


GENERAL PROVISIONS


SECTION 10.1 Survival of Representations and
Warranties..................... 27
SECTION 10.2 Validity......................... 27
SECTION 10.3 Indemnification.................. 27
SECTION 10.4 Notices.......................... 28
SECTION 10.5 Interpretation................... 29
SECTION 10.6 Miscellaneous.................... 29
SECTION 10.7 Counterparts..................... 29
SECTION 10.8 Parties In Interest.............. 29
SECTION 10.9 Exhibits and Schedules........... 29


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EXHIBITS - -------- Exhibit A Shareholders of Castle Rock Exhibit 4.8 Form of Employment Agreement Exhibit 8.1 Form of Opinion of Company's Counsel Exhibit 8.2 Form of Opinion of Parent's Counsel


SCHEDULES - --------- Schedule 4.2 Capitalization (Parent) Schedule 4.4 Litigation (Parent, Sub) Schedule 5.2 Capitalization (Castle Rock) Schedule 5.4 Subsidiaries (Castle Rock) Schedule 5.5(b) Debt, etc. affected by Merger (Castle Rock) Schedule 5.8 Absence of Certain Changes of Events (Castle Rock) Schedule 5.9 Absence of Undisclosed Liabilities (Castle Rock) Schedule 5.11 Title to Assets (Castle Rock) Schedule 5.12 Assets and Properties Complete (Castle Rock) Schedule 5.14 Water Quality (Castle Rock) Schedule 5.15 Contracts (Castle Rock) Schedule 5.17 No Violation of Law (Castle Rock) Schedule 5.18 Litigation (Castle Rock) Schedule 5.19 Employee Benefits Plans; ERISA (Castle Rock) Schedule 5.20 Labor Matters (Castle Rock) Schedule 5.22 Trademarks and Intellectual Property Compliance
(Castle Rock) Schedule 5.23 Insurance (Castle Rock) Schedule 5.24 Year 2000 Compliance (Castle Rock) Schedule 5.25 Bank Accounts (Castle Rock) Schedule 5.27 Conflicts of Interest (Castle Rock) Schedule 7.4 Payment of Obligations (Castle Rock)


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AGREEMENT AND PLAN OF MERGER


THIS AGREEMENT AND PLAN OF MERGER, dated as of October 15, 1997 and effective as of 9:00 a.m. EST on October 15, 1997 (the "Agreement"), is by and among AquaPenn Spring Water Company, Inc., a Pennsylvania corporation ("Parent"), Castle Rock Spring Water Company, Inc., a California corporation and a wholly owned subsidiary of Parent ("Subsidiary"), Dunsmuir Bottling Company, doing business as Castle Rock Spring Water Company, a California corporation (the "Company") and the shareholders of the Company listed in Exhibit A (the "Company Shareholders").


W I T N E S S E T H:


WHEREAS, the Boards of Directors of Parent and the Company have determined that the merger of Company with and into Subsidiary (the "Merger") is consistent with and in furtherance of the long-term business strategy of Parent and the Company, and is fair to and in the best interests of Parent and the Company and their respective shareholders; and


WHEREAS, Parent, Subsidiary and the Company intend the Merger to qualify as a tax-free reorganization under the provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").


NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:


ARTICLE I


THE MERGER


SECTION 1.1 The Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time (as defined in Section 1.2) in accordance with the California Corporations Code (the "CCC"), Company shall be merged with and into Subsidiary and the separate existence of Company shall thereupon cease. Subsidiary shall be the surviving corporation in the Merger and is hereinafter sometimes referred to as the "Surviving Corporation."


SECTION 1.2 Effective Time of the Merger. The Merger shall become effective at such time (the "Effective Time") as shall be stated in Articles of Merger, in a form mutually acceptable to Parent and the Company, to be filed with the Secretary of State of the State of California in accordance with the CCC (the "Merger Filing"). The Merger Filing shall be made simultaneously with or as soon as practicable after the closing of the transactions contemplated by this Agreement in accordance with Section 3.5.


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ARTICLE II


THE SURVIVING AND PARENT CORPORATIONS


SECTION 2.1 Certificate of Incorporation. The Articles of Incorporation of Subsidiary at and as of the Effective Time shall be the Articles of Incorporation of the Surviving Corporation following the Effective Time, and the name of the Surviving Corporation shall be Castle Rock Spring Water Company, Inc.


SECTION 2.2 Bylaws. The Bylaws of Subsidiary at and as of the Effective Time shall be the Bylaws of the Surviving Corporation following the Effective Time, and the name of the Surviving Corporation shall be Castle Rock Spring Water Company, Inc.


SECTION 2.3 Directors and Officers. The directors and officers of the Surviving Corporation following the Merger shall not change at the Effective Time, and such directors and officers shall serve in accordance with the Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified pursuant to Section 9.4.


ARTICLE III


MERGER CONSIDERATION


SECTION 3.1 Consideration.


(a) Cash Consideration and Adjustments. (i) On the Closing Date, each Company Shareholder shall be entitled to receive cash consideration in the amount set forth beside such Shareholder's name on Exhibit A, such cash consideration to be, in the aggregate, an amount equal to $1,450,712 (the "Cash Consideration"). One-half of each Company Shareholder's proportional share of the Cash Consideration shall be paid to each Company Shareholder on the Closing Date and the balance of the Cash Consideration for each Company Shareholder (in the aggregate, the "Escrow Cash") shall be placed in escrow with Ballard Spahr Andrews & Ingersoll, as Escrow Agent ("Escrow Agent") pursuant to that certain Escrow Agreement dated October 15, 1997 (the "Escrow Agreement"), and released as described in (iii), (iv) and (v) below.


(ii) Within 120 days of the date hereof, Parent shall satisfy or identify all debts, payables, liabilities and other obligations of the Company, as of the date hereof, identified in accordance with Generally Accepted Accounting Principles (the "Liabilities"); provided that "Liabilities" shall include all allowances and bill-backs to the Company's customers.


(iii) Upon completion by Parent of the satisfaction or identification of all Liabilities, and if the Liabilities, both satisfied and identified, exceed in the aggregate $4,650,000, then the cash, if any, to be released to the Company Shareholders shall be calculated as follows:


Escrow Cash - [Liabilities - $4,650,000].


The balance of the Escrow Cash shall be promptly returned to the Parent.


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If the amount by which the Liabilities exceed $4,650,000 is greater than the Escrow Cash, then the number of Escrow Shares to be returned to Parent shall be calculated as follows ("IPO", "IPO Price" and "Escrow Shares" shall have the meanings set forth in Section 3.1(b) below):


If the IPO has been consummated:


[(Liabilities - 4,650,000) - Escrow Cash] / (75% x IPO
Price)


If the IPO has not been consummated:


[(Liabilities - 4,650,000) - Escrow Cash] / 5


If the IPO has been consummated the balance of the Escrow Shares, if any, shall be released to the Company Shareholders after an adjustment, if any, pursuant to Section 3.1(b) below. If the IPO has not been consummated by February 15, 1998, the balance of the Escrow Shares shall be released to the Company Shareholders after an adjustment, if any, pursuant to Section 3.1(b) below.


If the amount by which the Liabilities exceed $4,650,000 is equal to or less than the Escrow Cash, the Escrow Shares shall be released to the Company Shareholders upon adjustment, if any, pursuant to and at the time stipulated in Section 3.1(b) below.


(iv) Upon completion by Parent of the satisfaction or identification of all Liabilities, and if the Liabilities, both satisfied and identified, are less than $4,650,000, then the Escrow Cash shall be released to the Company Shareholders, the Escrow Shares shall be released to the Company Shareholders upon adjustment, if any, pursuant to and at the time stipulated in Section 3.1(b) below and Parent shall promptly pay to the Company Shareholders an amount in the aggregate equal to the difference between $4,650,000 minus the Liabilities, both satisfied and identified.


(v) Upon completion by Parent of the satisfaction or identification of all Liabilities, and if the Liabilities, both satisfied and identified, equal $4,650,000, then the Escrow Cash shall be released to the Company Shareholders and the Escrow Shares shall be released to the Company Shareholders upon adjustment, if any, pursuant to and at the time stipulated in Section 3.1(b) below.


(vi) Parent shall regularly update the Company Shareholders regarding the identification of Liabilities and the Company Shareholders shall have the opportunity to contest the validity or amount of any Liability identified by Parent, provided that Parent shall resolve any dispute regarding the validity or amount of any Liability.


(b) Share Consideration and Adjustments. (i) On or promptly after the Closing Date, the Company Shareholders shall receive, in the aggregate, the number of shares of common stock of Parent ("Parent Stock") equal to one-half the number of shares obtained by dividing by $5.00 the result of subtracting the aggregate amount of Cash Consideration received by the Company Shareholders in (a) above from $3,000,002 ("Base Shares"). The balance of such shares of Parent Common Stock ("Escrow Shares") shall be placed in escrow with the Escrow Agent pursuant to the Escrow Agreement and adjusted as described in (ii), (iii), (iv) and (v) below. For the purposes of these provisions, "Total Shares" means the sum of Base Shares plus Escrow Shares.


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(ii) If 75% of the per share price (the "IPO Price") at which the Parent Stock is sold pursuant to an initial public offering of the Parent Stock, not including any over-allotment option, (the "IPO") is $5.00 per share, the number of Escrow Shares shall remain the same pending release pursuant to Section 3.1(a).


(iii) If 75% of the IPO Price is greater than $5.00, then the number of Escrow Shares to be released to the Company Shareholders pursuant to Section 3.1(a) shall be calculated as follows:


Escrow Shares - [Total Shares - [(Total Shares x 5) / (.75 x IPO Price)]].


The balance of the Escrow Shares shall be promptly returned to the Parent. If the IPO Price is such that the number of shares to be returned to the Parent is greater than the number of Escrow Shares, then the Company Shareholders shall sell such excess to the Parent at a price equal to $5.00 per share. To the extent that Base Shares plus Escrow Shares released to Company Shareholders ("Adjusted Shares") is less than Total Shares, Parent shall issue options to Company Shareholders for the difference between Total Shares and Adjusted Shares to be exercisable at the IPO Price for an exercise period of five years from the date of issuance.


(iv) If 75% of the IPO Price is less than $5.00, then the Escrow Shares will be released to the Company Shareholders pursuant to Section 3.1(a) and the number of additional shares the Parent Company shall issue to the Company Shareholders and place in escrow to be released pursuant to Section 3.1(a) shall be calculated as follows:


[(Total Shares x 5) / (.75 x IPO Price)] - Total Shares


(v) If the Parent has not made an initial public offering of its common shares by February 15, 1998, then, after completion by Parent of the satisfaction or identification of all Liabilities as set forth under Section 3(a)(iii), the Escrow Shares, as adjusted pursuant to Section 3.1(a)(iii), if appropriate, shall be released to the Company Shareholders.


(vi) The Company Shareholders shall be deemed, for federal income tax purposes and otherwise, to be the owners of the Escrow Shares while such shares are held by Escrow Agent. The Company Shareholders shall receive any regular or liquidating dividends paid on the Escrow Shares and shall be entitled to vote the Escrow Shares, while such shares are held by Escrow Agent.


(c) Each Company Shareholder shall receive the number of shares of Parent Stock set forth beside such Shareholder's name on Exhibit A.


(d) No share of Company Common Stock outstanding immediately prior to the Effective Time shall be deemed to be outstanding or to have any rights other than those set forth in this Section 3.1 after the Effective Time.


(e) Shares of Company Common Stock held by shareholders of the Company who have, prior to the taking of the vote of the Company's shareholders on the Merger, filed with the Company written demand for the appraisal of their shares of Company Common Stock in accordance with the applicable provisions of the CCC, shall not be deemed to be converted into the right to receive the Merger Consideration unless, and until such time as, such shareholders shall have withdrawn, failed to perfect,


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or shall have effectively lost, their right to appraisal of or payment for their shares of Company Common Stock under the CCC, at which time such shares shall be converted into the right to receive the Merger Consideration as provided in this Section 3.1. The Company shall give Parent prompt notice of any demand received by the Company for payment of shares of Company Common Stock from a Dissenting Shareholder, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demand. The Company agrees that it will not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demand for payment. Each Dissenting Shareholder who becomes entitled, pursuant to the provisions of the CCC, to the payment of the value of his, her or its shares shall receive payment therefor from Parent or Subsidiary (but only after the value thereof shall have been agreed upon or finally determined pursuant to the terms of this Agreement and as provided under the CCC). In the event that any Dissenting Shareholder shall have withdrawn, failed to perfect, or shall have effectively lost, his right to appraisal of and payment for his, her or its shares, Parent shall issue and deliver, upon surrender by such Dissenting Shareholder of his, her or its certificate or certificates representing shares of Company Common Stock, the Merger Consideration to which such Dissenting Shareholder may then be entitled under and pursuant to this Section 3.1.


(f) In the event that the Parent Stock is combined into a smaller number of shares, then all shares of Parent Stock owned by the Company Shareholders, including the Escrow Shares, and shares of Parent Stock to which the Company Shareholders are or may be entitled, shall be combined and the Company Shareholders shall be entitled to receive the same number of shares of Parent Stock as if Company Shareholders currently owned and held all of the shares held in escrow or to which Company Shareholders are or may be entitled.


SECTION 3.2 Conversion of Subsidiary Shares. At the Effective Time, by virtue of the Merger and without any action on the part of Parent as the sole shareholder of Subsidiary, each issued and outstanding share of common stock, no par value, of Subsidiary ("Subsidiary Common Stock") shall be converted into one share of common stock, no par value, of the Surviving Corporation.


SECTION 3.3 Exchange of Certificates.


(a) At the Effective Time:


(i) each holder of a certificate representing shares of Company Common Stock shall surrender such certificates (the "Company Certificates") for cancellation to the Secretary of Parent, together with a duly executed letter of transmittal and such other documents as the Secretary shall reasonably require;


(ii) upon surrender of the Company Certificates, the holder of such Company Certificates shall be entitled to receive, subject to the terms of Section 3.1 and the Escrow Agreement, in exchange therefor (A) a certificate representing that number of whole shares of Parent Common Stock and (B) a check for that portion of the Cash Consideration, into which the shares of Company Common Stock theretofore represented by the Company Certificates so surrendered shall have been converted pursuant to the provisions of Section 3.1, and the Company Certificates so surrendered shall be cancelled. Neither Parent nor Subsidiary shall be liable to a holder of shares of Company Common Stock for any shares of Parent Common Stock or dividends or distributions thereon delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.


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(b) Notwithstanding any other provision of this Agreement, no certificates or scrip for fractional shares of Parent Common Stock shall be issued in the Merger and no Parent Common Stock dividend, stock split or interest shall relate to any fractional security, and such fractional interests shall not entitle the owner thereof to vote or to any other rights of a security holder. In lieu of any such fractional shares, each holder of Company Common Stock who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock upon surrender of Company Certificates for exchange pursuant to this Article III shall be entitled to receive from the Exchange Agent a cash payment.


(c) From and after the Effective Time, all Company Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive in exchange therefor, upon surrender thereof at Closing, the Merger Consideration into which the aggregate number of shares of Company Common Stock represented by such certificate or certificate surrendered shall have been converted pursuant to this Agreement. Notwithstanding any other provision of this Agreement, (i) until holders or transferees of certificates theretofore representing shares of Company Common Stock have surrendered them for exchange as provided herein, no dividends shall be paid with respect to any shares of Parent Common Stock represented by such certificates and no payment for fractional shares shall be made and (ii) without regard to when such certificates representing shares of Company Common Stock are surrendered for exchange as provided herein, no interest shall be paid on any Parent Common Stock dividends or any payment for fractional shares. Upon surrender of a certificate which immediately prior to the Effective Time represented shares of Company Common Stock, there shall be paid to the holder of such certificate the amount of any dividends which became payable after the Effective Time, but which were not paid by reason of the foregoing, with respect to the number of whole shares of Parent Common Stock represented by the certificate or certificates issued upon such surrender.


(d) If any certificate for shares of Parent Common Stock is to be issued in a name other than that in which the certificate for shares of Company Common Stock surrendered in exchange therefor is registered, it shall be a condition of such exchange that the certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and the person requesting such exchange shall have paid to Parent or its transfer agent any applicable transfer or other taxes required by reason of such issuance.


(e) In the event any Company Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Company Certificate to be lost, stolen or destroyed, the Surviving Corporation shall issue in exchange for such lost, stolen or destroyed Company Certificate the ...