-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UhCSNOWHBcHMGK2kTsh43DSCupEtopZ0y4v6QF2qj3h1++XCgsIyU/v5nKeCPwr2 jWFzs/L9rH2RL9SOvCkcQA== 0001047469-98-039405.txt : 19981109 0001047469-98-039405.hdr.sgml : 19981109 ACCESSION NUMBER: 0001047469-98-039405 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19981106 GROUP MEMBERS: GROUPE DANONE GROUP MEMBERS: ZONEO ACQUISITION CORP. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AQUAPENN SPRING WATER COMPANY INC CENTRAL INDEX KEY: 0000823844 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 251541772 STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-54795 FILM NUMBER: 98739218 BUSINESS ADDRESS: STREET 1: 1 AQUAPENN DRIVE CITY: MILESBURG STATE: PA ZIP: 16853 BUSINESS PHONE: 8143555556 MAIL ADDRESS: STREET 1: 1 AQUAPENN DRIVE CITY: MILESBURG STATE: PA ZIP: 16853 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AQUAPENN SPRING WATER COMPANY INC CENTRAL INDEX KEY: 0000823844 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 251541772 STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-54795 FILM NUMBER: 98739219 BUSINESS ADDRESS: STREET 1: 1 AQUAPENN DRIVE CITY: MILESBURG STATE: PA ZIP: 16853 BUSINESS PHONE: 8143555556 MAIL ADDRESS: STREET 1: 1 AQUAPENN DRIVE CITY: MILESBURG STATE: PA ZIP: 16853 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GROUPE DANONE CENTRAL INDEX KEY: 0001048515 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 000000000 STATE OF INCORPORATION: I0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 7 RUE DE TEHERAN STREET 2: 75381 PARIS CEDEX 08 CITY: FRANCE STATE: I0 BUSINESS PHONE: 33144352020 MAIL ADDRESS: STREET 1: 7 RUE DE TEHERAN STREET 2: 75381 PARIS CEDEX 08 CITY: FRANCE STATE: I0 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GROUPE DANONE CENTRAL INDEX KEY: 0001048515 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 000000000 STATE OF INCORPORATION: I0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 7 RUE DE TEHERAN STREET 2: 75381 PARIS CEDEX 08 CITY: FRANCE STATE: I0 BUSINESS PHONE: 33144352020 MAIL ADDRESS: STREET 1: 7 RUE DE TEHERAN STREET 2: 75381 PARIS CEDEX 08 CITY: FRANCE STATE: I0 SC 14D1 1 SC 14D1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ AQUAPENN SPRING WATER COMPANY, INC. (Name of Subject Company) ZONEO ACQUISITION CORP. and GROUPE DANONE (Bidders) ------------------------ COMMON STOCK, NO PAR VALUE (Title of Class of Securities) ------------------------ 03838X109 (CUSIP Number of Class of Securities) ------------------------ EMMANUEL FABER GROUPE DANONE 7, RUE DE TEHERAN 75381 PARIS CEDEX 08, FRANCE 011 33 1 44 35 20 34 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) ------------------------ COPY TO: CLARE O'BRIEN, ESQ. SHEARMAN & STERLING 599 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 TELEPHONE: (212) 848-4000 CALCULATION OF FILING FEE
TRANSACTION AMOUNT OF VALUATION FILING FEE $115,888,526.00* $23,177.71**
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable Form or Registration Not No.: applicable Filing Party: Not applicable Date Filed: Not applicable
- -------------------------- * NOTE: The Transaction Value is calculated by multiplying $13.00, the per share tender offer price, by 8,448,913, the sum of the number of shares of Common Stock outstanding and the 465,589 shares of Common Stock subject to subscriptions and options outstanding. ** NOTE: The filing Fee is calculated by taking 1/50 of 1% of the Transaction Value. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Person Above Groupe Danone 2. Check the appropriate Box if a member of a Group (a) / / (b) / / 3. SEC Use Only 4. Source of Funds WC 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Incorporation France 7. Aggregate Amount Beneficially Owned by Each Reporting Person 1,851,313 shares that may be deemed beneficially owned pursuant to Shareholder Agreements described herein in "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase. 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented by Amount in Row (7) 20.8% 10. Type of Reporting Person CO
1. Name of Reporting Person S.S. or I.R.S. Identification No. of Person Above Zoneo Acquisition Corp. 2. Check the appropriate Box if a member of a Group (a) / / (b) / / 3. SEC Use Only 4. Source of Funds WC 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Incorporation Pennsylvania 7. Aggregate Amount Beneficially Owned by Each Reporting Person 1,851,313 shares that may be deemed beneficially owned pursuant to Shareholder Agreements described herein in "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase. 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented by Amount in Row (7) 20.8% 10. Type of Reporting Person CO
This Tender Offer Statement on Schedule 14D-1 (the "Statement") also constitutes a Statement on Schedule 13D with respect to the acquisition by Groupe Danone and Zoneo Acquisition Corp. of beneficial ownership of the shares of Common Stock referred to on the cover hereof. The item numbers and responses thereto below are in accordance with the requirements of Schedule 14D-1. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is AquaPenn Spring Water Company, Inc., which has its principal executive offices at One AquaPenn Drive, P.O. Box 938, Milesburg, Pennsylvania 16853-0938. (b) This Statement relates to the offer by Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME (the "Parent"), to purchase all of the issued and outstanding shares of Common Stock, no par value (the "Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company"), at a price of $13.00 per share net to the seller in cash, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase, dated November 6, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. At November 6, 1998, there were 8,448,913 shares outstanding. The information set forth in the Introduction and "Section 1. Terms of the Offer; Proration; Expiration Date" of the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market in which the Shares are traded and certain high and low sales prices for the Shares in such principal market set forth in "Section 6. Price Range of Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is filed by the Purchaser and the Parent. The information concerning the name, state or other place of organization, principal business and address of the principal office of each of the Purchaser and the Parent, and the information concerning the name, business address, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted, material occupations, positions, offices or employments during the last five years and citizenship of each of the executive officers and directors of the Purchaser and the Parent are set forth in the Introduction, "Section 8. Certain Information Concerning the Purchaser and the Parent" and Schedule I of the Offer to Purchase and are incorporated herein by reference. (e) and (f) During the last five years, none of the Purchaser nor the Parent, and, to the best knowledge of the Purchaser and the Parent, none of the persons listed in Schedule I of the Offer to Purchase, has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) The information set forth in "Section 8. Certain Information Concerning the Purchaser and the Parent," "Section 10. Background of the Offer; Contacts with the Company" and "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase is incorporated herein by reference. (b) The information set forth in the Introduction, "Section 7. Certain Information Concerning the Company," "Section 8. Certain Information Concerning the Purchaser and the Parent," "Section 10. "Background of the Offer; Contacts with the Company" and "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) The information set forth in "Section 9. Financing of the Offer and the Merger" of the Offer to Purchase is incorporated herein by reference. (b) Not applicable. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction, "Section 10. Background of the Offer; Contacts with the Company" and "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth in "Section 13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration" of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in "Section 8. Certain Information Concerning the Purchaser and the Parent" and "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, "Section 8. Certain Information Concerning the Purchaser and the Parent," "Section 10. Background of the Offer; Contacts with the Company" and "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and "Section 16. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in "Section 8. Certain Information Concerning the Purchaser and the Parent" of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements" of the Offer to Purchase is incorporated herein by reference. (b)-(c) and (e) The information set forth in "Section 15. Certain Legal Matters and Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in "Section 13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration" is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and Letter of Transmittal is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Form of Offer to Purchase dated November 6, 1998. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to Clients. (a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in the Wall Street Journal on November 6, 1998. (a)(8) Press Release issued by the Parent on November 2, 1998. (b) None. (c)(1) Agreement and Plan of Merger, dated November 2, 1998, among the Parent, the Purchaser and the Company. (c)(2) Registration Rights Agreement dated November 2, 1998, between the Parent, the Purchaser and the Company. (c)(3)(a) Shareholder Agreement dated November 2, 1998, between the Parent, the Purchaser and Edward J. Lauth, III. (c)(3)(b) Shareholder Agreement dated November 2, 1998, between the Parent, the Purchaser and Geoffrey F. Feidelberg. (c)(3)(c) Shareholder Agreement dated November 2, 1998, between the Parent, the Purchaser and Matthew J. Suhey. (c)(4)(a) Employment Agreement dated November 2, 1998, between Great Brands of Europe, Inc. and Edward J. Lauth, III. (c)(4)(b) Employment Agreement dated November 2, 1998, between Great Brands of Europe, Inc. and Geoffrey F. Feidelberg. (c)(4)(c) Consulting Agreement dated November 2, 1998, between Great Brands of Europe, Inc. and Matthew J. Suhey. (c)(5) Confidentiality Agreement between the Parent and the Company dated September 11, 1998. (d) None. (e) Not Applicable. (f) None.
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. November 6, 1998 ZONEO ACQUISITION CORP. By: /s/ MARK S. RODRIGUEZ ----------------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer
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. November 6, 1998 GROUPE DANONE By: /s/ EMMANUEL FABER ----------------------------------------- Name: Emmanuel Faber Title: Director of Corporate Development and Strategy
EXHIBIT INDEX
EXHIBIT NO. - ------------ (a)(1) Form of Offer to Purchase dated November 6, 1998. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to Clients. (a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in the Wall Street Journal on November 6, 1998. (a)(8) Press Release issued by the Parent on November 2, 1998. (b) None. (c)(1) Agreement and Plan of Merger, dated November 2, 1998, among the Parent, the Purchaser and the Company. (c)(2) Registration Rights Agreement dated November 2, 1998, between the Parent, the Purchaser and the Company. (c)(3)(a) Shareholder Agreement dated November 2, 1998, between the Parent, the Purchaser and Edward J. Lauth, III. (c)(3)(b) Shareholder Agreement dated November 2, 1998, between the Parent, the Purchaser and Geoffrey F. Feidelberg. (c)(3)(c) Shareholder Agreement dated November 2, 1998, between the Parent, the Purchaser and Matthew J. Suhey. (c)(4)(a) Employment Agreement dated November 2, 1998, between Great Brands of Europe, Inc. and Edward J. Lauth, III. (c)(4)(b) Employment Agreement dated November 2, 1998, between Great Brands of Europe, Inc. and Geoffrey F. Feidelberg. (c)(4)(c) Consulting Agreement dated November 2, 1998, between Great Brands of Europe, Inc. and Matthew J. Suhey. (c)(5) Confidentiality Agreement between the Parent and the Company dated September 11, 1998. (d) None. (e) Not Applicable. (f) None.
EX-99.(A)(1) 2 EXHIBIT 99(A)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF AQUAPENN SPRING WATER COMPANY, INC. AT $13.00 NET PER SHARE BY ZONEO ACQUISITION CORP. AN INDIRECT SUBSIDIARY OF GROUPE DANONE THE OFFER, PRORATION PERIOD (IF APPLICABLE) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, DECEMBER 7, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 80% OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, NO PAR VALUE (THE "SHARES"), OF AQUAPENN SPRING WATER COMPANY, INC. (THE "COMPANY"), ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) THE WAITING PERIOD UNDER THE HART-SCOTT- RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. SEE "SECTION 14. CONDITIONS TO THE OFFER," WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. IN THE EVENT ALL THE CONDITIONS TO THE OFFER HAVE BEEN SATISFIED OR WAIVED OTHER THAN THE MINIMUM CONDITION, AND IN THE EVENT SHARES CONSTITUTING AT LEAST 19.9% OF THE OUTSTANDING SHARES HAVE BEEN VALIDLY TENDERED AND NOT WITHDRAWN, THE PURCHASER MAY, AT ITS OPTION, PURCHASE ANY NUMBER OF TENDERED SHARES UP TO 19.9% OF THE THEN OUTSTANDING SHARES ON A PRO RATA BASIS. ------------------------------ THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. ------------------------------ THE PARENT AND THE PURCHASER HAVE ENTERED INTO SHAREHOLDER AGREEMENTS WITH EACH OF EDWARD J. LAUTH, III, GEOFFREY F. FEIDELBERG AND MATTHEW SUHEY (THE "PRINCIPAL SHAREHOLDERS"), PURSUANT TO WHICH, AMONG OTHER THINGS, THE PRINCIPAL SHAREHOLDERS HAVE GRANTED TO THE PURCHASER THE OPTION TO ACQUIRE THEIR SHARES AT $13.00 PER SHARE (SO LONG AS SUCH PURCHASE DOES NOT CAUSE THE AGGREGATE NUMBER OF SHARES ACQUIRED BY THE PURCHASER PURSUANT TO THE OFFER (ASSUMING THAT THE MINIMUM CONDITION IS NOT SATISFIED) AND THE SHAREHOLDER AGREEMENTS TO EXCEED 19.9% OF THE THEN ISSUED AND OUTSTANDING SHARES), HAVE AGREED TO TENDER AND SELL (AND NOT WITHDRAW PRIOR TO THE TERMINATION OR EXPIRATION OF THE OFFER OR THE TERMINATION OF THE MERGER AGREEMENT) THEIR SHARES PURSUANT TO THE OFFER AND HAVE GRANTED TO THE PURCHASER AN IRREVOCABLE PROXY TO VOTE THEIR SHARES, AMONG OTHER THINGS, IN FAVOR OF THE LONG-FORM MERGER, IF APPLICABLE, IN EACH CASE UPON THE TERMS AND SUBJECT TO THE CONDITIONS THEREOF. THE PRINCIPAL SHAREHOLDERS BENEFICIALLY OWN AN AGGREGATE OF 1,851,313 SHARES (OR APPROXIMATELY 20.8% OF THE COMPANY'S SHARES ON A FULLY DILUTED BASIS). SEE "SECTION 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; THE MERGER AGREEMENT; AND RELATED AGREEMENTS." ------------------------------ IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Shares should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Shares, and any other required documents, to Harris Trust Company of New York (the "Depositary") (at the Depositary's address set forth on the back cover of this Offer to Purchase) or tender such Shares pursuant to the procedure for book-entry transfer set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" or (2) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. A shareholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedure for guaranteed delivery set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares." Questions or requests for assistance may be directed to MacKenzie Partners, Inc. (the "Information Agent") or to J.P. Morgan Securities Inc. (the "Dealer Manager") at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery and other related materials may also be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. ------------------------------ THE DEALER MANAGER FOR THE OFFER IS: J.P. MORGAN & CO. TABLE OF CONTENTS
PAGE ----- INTRODUCTION.................................................................................................... 3 1. Terms of the Offer; Proration; Expiration Date....................................................... 5 2. Acceptance for Payment and Payment for Shares........................................................ 7 3. Procedures for Accepting the Offer and Tendering Shares.............................................. 8 4. Withdrawal Rights.................................................................................... 10 5. Certain Federal Income Tax Consequences.............................................................. 11 6. Price Range of Shares; Dividends..................................................................... 11 7. Certain Information Concerning the Company........................................................... 12 8. Certain Information Concerning the Purchaser and the Parent.......................................... 15 9. Financing of the Offer and the Merger................................................................ 20 10. Background of the Offer; Contacts with the Company................................................... 20 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements................................................................................... 23 12. Dividends and Distributions.......................................................................... 38 13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration..... 38 14. Conditions to the Offer.............................................................................. 39 15. Certain Legal Matters and Regulatory Approvals....................................................... 41 16. Fees and Expenses.................................................................................... 45 17. Miscellaneous........................................................................................ 45 Schedule I Directors and Executive Officers of the Parent and the Purchaser.......................... I-1 Schedule II Sections 1930(a) and 1571-80 (Subchapter D of Chapter 15) of the Pennsylvania Business Corporation Law...................................................................................... II-1
2 To the Holders of Common Stock of AquaPenn Spring Water Company, Inc.: INTRODUCTION Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME (the "Parent"), hereby offers to purchase all outstanding shares of common stock, no par value (the "Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company"), at a price of $13.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by the Purchaser pursuant to the Offer. The Purchaser will pay all charges and expenses of J.P. Morgan Securities Inc. ("J.P. Morgan"), which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), Harris Trust Company of New York (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See "Section 16. Fees and Expenses." THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. Each of Lazard Freres & Co. LLC ("Lazard") and Parker/Hunter Incorporated ("Parker"), financial advisors to the Company, has delivered to the Board its written opinion that the consideration to be received by the shareholders of the Company pursuant to each of the Offer and the Merger is fair to such shareholders from a financial point of view. A copy of the opinion of each of Lazard and Parker is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to the shareholders herewith. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 80% OF THE ISSUED AND OUTSTANDING SHARES OF THE COMPANY ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) THE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. SEE "SECTION 14. CONDITIONS TO THE OFFER," WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. IN THE EVENT ALL THE CONDITIONS TO THE OFFER HAVE BEEN SATISFIED OR WAIVED OTHER THAN THE MINIMUM CONDITION, AND IN THE EVENT SHARES CONSTITUTING AT LEAST 19.9% OF THE OUTSTANDING SHARES HAVE BEEN VALIDLY TENDERED AND NOT WITHDRAWN, THE PURCHASER MAY, AT ITS OPTION, PURCHASE ANY NUMBER OF TENDERED SHARES UP TO 19.9% OF THE THEN OUTSTANDING SHARES ON A PRO RATA BASIS. THE PARENT AND THE PURCHASER HAVE ENTERED INTO SHAREHOLDER AGREEMENTS WITH EACH OF EDWARD J. LAUTH, III, GEOFFREY F. FEIDELBERG AND MATTHEW SUHEY (THE "PRINCIPAL SHAREHOLDERS"), PURSUANT TO WHICH, AMONG OTHER THINGS, THE PRINCIPAL SHAREHOLDERS HAVE GRANTED TO THE PURCHASER THE OPTION TO ACQUIRE THEIR SHARES AT $13.00 PER SHARE (SO LONG AS SUCH PURCHASE DOES NOT CAUSE THE AGGREGATE NUMBER OF SHARES ACQUIRED BY THE PURCHASER PURSUANT TO THE OFFER (ASSUMING THAT THE MINIMUM CONDITION IS NOT SATISFIED) AND THE SHAREHOLDER AGREEMENTS TO EXCEED 19.9% OF THE THEN ISSUED AND OUTSTANDING SHARES), HAVE 3 AGREED TO TENDER AND SELL (AND NOT WITHDRAW PRIOR TO THE TERMINATION OR EXPIRATION OF THE OFFER OR THE TERMINATION OF THE MERGER AGREEMENT) THEIR SHARES PURSUANT TO THE OFFER AND HAVE GRANTED TO THE PURCHASER AN IRREVOCABLE PROXY TO VOTE THEIR SHARES IN FAVOR OF, AMONG OTHER THINGS, THE LONG-FORM MERGER, IF APPLICABLE, IN EACH CASE UPON THE TERMS AND SUBJECT TO THE CONDITIONS THEREOF. THE PRINCIPAL SHAREHOLDERS BENEFICIALLY OWN AN AGGREGATE OF 1,851,313 SHARES (OR APPROXIMATELY 20.8% OF THE COMPANY'S SHARES ON A FULLY DILUTED BASIS). SEE "SECTION 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE MERGER; THE MERGER AGREEMENT; AND RELATED AGREEMENTS." The Offer is being made pursuant to an Agreement and Plan of Merger dated November 2, 1998 (the "Merger Agreement") among the Parent, the Purchaser and the Company. The Merger Agreement provides among other things, that, subject to the satisfaction of the conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Pennsylvania Business Corporation Law of 1988, as amended ("Pennsylvania Law"), the Purchaser will be merged with and into the Company (the "Merger"). The Merger will take place as soon as practicable after either (i) the purchase of Shares pursuant to the Offer, so long as, among other conditions, the Minimum Condition is satisfied (any such Merger being the "Short-Form Merger"), or (ii) among other conditions, the Merger Agreement is adopted by the affirmative vote of a majority of the votes cast by all holders of Shares entitled to vote thereon (any such Merger being the "Long-Form Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will become an indirect subsidiary of the Parent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares held in the treasury of the Company, owned by the Purchaser, the Parent or any direct or indirect subsidiary of the Parent or of the Company, and other than Shares held by shareholders, if any, who shall have dissented and demanded the right to receive the fair value of their Shares under Sections 1930 and 1571 through 1580 of the Pennsylvania Law) will be canceled and converted automatically into the right to receive $13.00 in cash, or any greater amount per Share that may be paid pursuant to the Offer, without interest (the "Merger Consideration"). The Merger Agreement is more fully described in "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements." Under Pennsylvania Law, if the Purchaser acquires at least 80% of the then outstanding Shares, the Purchaser will be able to adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, without a vote of the Company's shareholders. In such event, the Parent, the Purchaser and the Company have agreed to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without approval of the Company's shareholders, in accordance with Pennsylvania Law. See "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements." The consummation of the Short-Form Merger is subject to the satisfaction or waiver of certain conditions. See "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement and Related Agreements." If, however, the Purchaser does not acquire at least 80% of the then outstanding Shares pursuant to the Offer, under Pennsylvania Law and the Company's Articles of Incorporation, the Long-Form Merger must be approved by the affirmative vote of a majority of the votes cast by all holders of Shares entitled to vote on a proposal to approve the Long-Form Merger. The Long-Form Merger would therefore require a longer period of time to effect than the Short-Form Merger. The consummation of the Long-Form Merger is subject to the satisfaction or waiver of certain other conditions. See "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements." 4 Concurrently with the execution of the Merger Agreement, Edward J. Lauth, III, Chief Executive Officer of the Company, Geoffrey F. Feidelberg, Chief Operating Officer and Chief Financial Officer of the Company, and Matthew Suhey each entered into a shareholder agreement, dated November 2, 1998, with the Parent and the Purchaser (each a "Shareholder Agreement"). The Principal Shareholders beneficially own 1,851,313 Shares, in the aggregate (or approximately 20.8% of the outstanding Shares calculated on a fully diluted basis). Pursuant to each Shareholder Agreement, each Principal Shareholder has granted to the Purchaser the option to purchase the Principal Shareholder's Shares for $13.00 per Share, so long as, among other conditions, the number of Shares purchased by the Purchaser pursuant to the option does not cause the aggregate number of Shares, including, without limitation, any Shares acquired by the Purchaser pursuant to the Offer (assuming the Minimum Condition is not satisfied) and the other Shareholder Agreements, to be held by the Purchaser following such exercise to exceed 19.9% of the then issued and outstanding Shares. In addition, pursuant to each Shareholder Agreement, the Principal Shareholder thereunder has agreed to tender and sell (and not withdraw prior to termination or expiration of the Offer or the termination of the Merger Agreement) their Shares pursuant to the Offer, and has appointed the Purchaser as such Shareholder's true and lawful attorney and proxy to vote such Principal Shareholder's Shares in favor of, among other things, the adoption of the Merger Agreement and the Long-Form Merger, if applicable. The options under each Shareholder Agreement terminate upon the earlier of the Effective Time and the close of business on the 30th day following termination of the Merger Agreement. The Shareholder Agreements are more fully described in "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements." In addition, concurrently with the execution of the Merger Agreement, the Purchaser, the Parent and the Company have entered into a Registration Rights Agreement, and an indirect subsidiary of the Parent has entered into employment agreements with Edward J. Lauth, III and Geoffrey F. Feidelberg and a consulting agreement with Matthew Suhey, in each case to be effective as of the closing date of the Merger and as more fully described in "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements." The Company has advised the Purchaser that as of November 2, 1998, approximately 8,448,913 Shares were issued and outstanding, 35,095 Shares were held in the treasury of the Company, 352,808 Shares were reserved for issuance pursuant to certain employee stock options or otherwise, warrants for 75,100 Shares were issued and outstanding and 37,681 Shares had been subscribed for but not purchased pursuant to the Company's 1996 Employee Stock Purchase Plan. As a result, as of such date, the Minimum Condition would be satisfied if 7,131,602 Shares were tendered in the Offer. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, without limitation, the Minimum Condition and, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the Purchaser will pay, as promptly as practicable after the expiration of the Offer, for all Shares validly tendered and not withdrawn prior to the Expiration Date (as hereinafter defined), as permitted by "Section 4. Withdrawal Rights." The term "Expiration Date" means 12:00 midnight, New York City time, on Monday, December 7, 1998, unless and until the Purchaser, subject to the terms and conditions of the Merger Agreement, shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire PROVIDED that the Offer may be extended without the consent of the Company only until January 4, 1998. If all the conditions to the Offer are satisfied or waived, other than the Minimum Condition, and the Purchaser exercises its right to purchase any number of tendered Shares up to 19.9% of the then 5 outstanding Shares, such Shares will be purchased on a pro rata basis (adjusted to avoid the purchase of fractional shares). Because of the difficulty of determining the precise number of Shares properly tendered, the Purchaser does not expect to be able to announce the final proration factor until approximately seven New York Stock Exchange ("NYSE") trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Shareholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from their brokers. The Purchaser will not pay for any Shares accepted for payment pursuant to the Offer until the final proration factor is known. The Purchaser expressly reserves the right, subject to the terms and conditions of the Merger Agreement, at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any of the conditions specified in "Section 14. Conditions to the Offer," by giving oral or written notice of such extension to the Depositary; PROVIDED that the Offer may be extended without the consent of the Company only until January 4, 1999, and the Purchaser may not, without the prior written consent of the Company, extend the Offer if the failure to satisfy any of the conditions to the Offer was caused by or resulted from the failure of the Parent or the Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by the Parent or the Purchaser of any material representation or warranty of either of them contained in the Merger Agreement. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Shares. See "Section 4. Withdrawal Rights." Subject to the applicable regulations of the Securities and Exchange Commission (the "Commission"), the Purchaser also expressly reserves the right, subject to the terms and conditions of the Merger Agreement (i) to postpone the acceptance for payment of, or payment for, any Shares tendered, pending receipt of any regulatory approval specified in "Section 15. Certain Legal Matters and Regulatory Approvals," (ii) to terminate the Offer upon the occurrence of any of the conditions specified in "Section 14. Conditions to the Offer," and (iii) to waive any condition or otherwise amend the Offer in any respect, by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. The Merger Agreement provides that, without the prior written consent of the Company, the Purchaser will not (i) decrease the Minimum Condition, (ii) decrease the price per Share payable in the Offer below $13.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being the "Per Share Amount"), (iii) change the form of consideration to be paid in the Offer, (iv) reduce the maximum number of Shares to be purchased in the Offer, or (v) impose conditions to the Offer in addition to those set forth in "Section 14. Conditions to the Offer." The Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires the Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) the Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of this paragraph), any Shares upon the occurrence of any of the conditions specified in "Section 14. Conditions to the Offer" without extending the period of time during which the Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. 6 If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Purchaser will extend the Offer to the extent required by Rules l4d-4(c) and l4d-6(d) under the Exchange Act. Subject to the terms of the Merger Agreement, if, prior to the Expiration Date, the Purchaser should decide to decrease the number of Shares being sought or to increase or decrease the consideration being offered in the Offer, such decrease in the number of Shares being sought or such increase or decrease in the consideration being offered will be applicable to all shareholders whose Shares are accepted for payment pursuant to the Offer and, if at the time notice of any such decrease in the number of Shares being sought or such increase or decrease in the consideration being offered is first published, sent or given to holders of such Shares, the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that such notice is first so published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided the Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment, and will pay for, all Shares validly tendered prior to the Expiration Date and not properly withdrawn as promptly as practicable after the later to occur of (i) the Expiration Date, (ii) the expiration or termination of the applicable waiting period under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iii) the satisfaction or waiver of the conditions to the Offer set forth in "Section 14. Conditions to the Offer." Subject to applicable rules of the Commission, the Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory approvals specified in "Section 15. Certain Legal Matters and Regulatory Approvals" or in order to comply in whole or in part with any other applicable law. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation"), if such procedure is available, of any book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares," (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) and (iii) any other documents required under the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation that states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such book-entry confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. 7 For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from the Purchaser and transmitting such payments to tendering shareholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid, regardless of any delay in making such payment. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares," such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, the Purchaser increases the consideration to be paid per Share pursuant to the Offer, the Depositary will pay such increased consideration for all such Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a holder of Shares validly to tender Shares pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or any Agent's Message (in the case of any book-entry transfer) and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, 8 or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member in good standing in the Security Transfer Agent Medallion Signature Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share Certificates evidencing such Shares are not immediately available or such shareholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such shareholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal, are received by the Depositary within three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram, telex or facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by the Purchaser. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination shall be final and binding on all parties. The Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for 9 payment of which may, in the opinion of its counsel, be unlawful. The Purchaser also reserves the absolute right to waive any condition of the Offer or any defect or irregularity, in the tender of any Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of the Purchaser, the Parent, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth above, a tendering shareholder irrevocably appoints designees of the Purchaser as such shareholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such shareholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of the Purchaser will, with respect to the Shares for which the appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares, the Purchaser must be able to exercise full voting rights with respect to such Shares. The acceptance for payment by the Purchaser of Shares pursuant to any of the procedures described above will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH SHAREHOLDER WHO IS NOT OTHERWISE EXEMPT MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after January 5, 1999. If the Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this "Section 4. Withdrawal Rights." Any such delay will be by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this 10 Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares," any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. None of the Purchaser, the Parent, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in "Section 3. Procedures for Accepting the Offer and Tendering Shares." 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer or in the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. In general, a shareholder will recognize gain or loss for U.S. federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's adjusted tax basis in such Shares. Assuming the Shares constitute capital assets in the hands of the U.S. shareholder, such gain or loss will be capital gain or loss and, in the case of an individual shareholder, will be taxable at a minimum rate of 20% when the Shares tendered pursuant to the Offer or converted pursuant to the Merger were held in excess of 12 months. Gain or loss will be calculated separately for each block of Shares tendered pursuant to the Offer or converted pursuant to the Merger. The deduction of capital losses is subject to certain limitations. Prospective investors should consult their own tax advisors in this regard. In general, in order to prevent backup federal income tax withholding at a rate of 31% on the cash consideration to be received in the Offer or pursuant to the Merger, each shareholder who is not otherwise exempt from such requirements must provide such shareholder's correct taxpayer identification number (and certain other information) by completing the Substitute Form W-9 in the Letter of Transmittal. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF SHAREHOLDERS, SUCH AS FINANCIAL INSTITUTIONS, BROKER-DEALERS, PERSONS WHO RECEIVED PAYMENT IN RESPECT OF OPTIONS TO ACQUIRE SHARES, SHAREHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN CORPORATIONS. THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON CURRENT LAW. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally traded on the NYSE and quoted under the symbol "APN." The following table sets forth, for the quarters indicated, the high and low sales prices per Share on the NYSE as reported by the Dow Jones News Service. Since the Company's 11 initial public offering of Shares pursuant to a prospectus dated January 29, 1998, the Company has not declared or paid dividends on its Common Stock.
HIGH LOW --------- --------- Fiscal Year 1998: Second Quarter.... $13 7/16 $ 8 3/8 Third Quarter..... 12 1/8 8 1/2 Fourth Quarter.... 10 5 1/4 First Quarter Fiscal Year 1999 (through November 5, 1998)............... 12 3/4 4 1/4
On October 30, 1998, the last full trading day prior to the announcement of the execution of the Merger Agreement and of the Purchaser's intention to commence the Offer, the closing price per Share as reported on the NYSE was $9.6875. On November 5, 1998, the last full trading day prior to the commencement of the Offer, the closing price per Share as reported on the NYSE was $12.625. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither the Purchaser nor the Parent assumes any responsibility for the accuracy or completeness of the information concerning the Company furnished by the Company or contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to the Purchaser or the Parent. GENERAL. The Company is a Pennsylvania corporation with its principal executive offices located at One AquaPenn Drive, P.O. Box 938, Milesburg, Pennsylvania 16853-0938. The Company bottles and distributes non-sparkling natural spring water products to regional and national customers under retailers' and other customers' private labels and under its proprietary brand labels. FINANCIAL INFORMATION. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the audited financial statements contained in the Company's Registration Statement on Form S-1 declared effective January 29, 1998 (the "Form S-1"), and the unaudited financial statements contained in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (the "Form 10-Q"). The pro forma Statement of Operations data (which gives effect to the acquisition of Dunsmuir Bottling Company, (d/b/a/ Castle Rock Spring Water) ("Castle Rock") as if it had occurred as of October 1, 1996) and the pro forma Balance Sheet data (which gives effect to the acquisition of Castle Rock as if it had occurred as of September 30, 1997) set forth below should be read in conjunction with the Financial Statements of Castle Rock (Dunsmuir Bottling Company) and the notes thereto and the Unaudited Pro Forma Combined Financial Data and the notes thereto included in the Form S-1. The pro forma financial data set forth below are not necessarily indicative of the financial position or results of operations that would have been achieved had the acquisition of Castle Rock been consummated as of such dates, or that may be achieved in the future. More comprehensive financial information is included in the Form S-1, the Form 10-Q and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to such reports and other documents, including the financial statements and related notes contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below. 12 AQUAPENN SPRING WATER COMPANY, INC. SELECTED ANNUAL CONSOLIDATED FINANCIAL INFORMATION
YEARS ENDED SEPTEMBER 30, ---------------------------------------------------------- PRO FORMA 1995 1996 1997 1997 ------------- ------------- ------------- ------------- STATEMENT OF OPERATIONS DATA: Net revenues...................................... $ 22,956,053 $ 28,240,741 $ 38,015,315 $ 45,819,395 Cost of goods sold................................ 18,153,355 21,271,313 28,316,938 34,391,766 ------------- ------------- ------------- ------------- Gross profit...................................... 4,802,698 6,969,428 9,698,377 11,427,629 Selling, general and administrative............... 3,290,609 4,313,480 5,126,583 7,276,731 ------------- ------------- ------------- ------------- Income from operations............................ 1,512,089 2,655,948 4,571,794 4,150,898 Non-operating income (expense), net............... (738,739) (180,720) 119,713 (117,796) ------------- ------------- ------------- ------------- Income before income taxes and cumulative effect of change in accounting principle............... 773,350 2,475,228 4,691,507 4,033,102 Income tax expense................................ 135,000 990,000 1,904,752 1,714,323 ------------- ------------- ------------- ------------- Income before cumulative effect of change in accounting principle............................ 638,350 1,485,228 2,786,755 2,318,779 Cumulative effect of change in accounting for income taxes in accordance with FASB 109........ -- -- -- -- ------------- ------------- ------------- ------------- Net income........................................ $ 638,350 $ 1,485,228 $ 2,786,755 $ 2,318,779 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Net income per common share(1).................... $ 0.16 $ 0.26 $ 0.47 $ 0.38 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Weighted average number of common shares outstanding..................................... 3,884,708 5,620,741 5,951,844 6,110,745 OTHER OPERATIONS DATA: EBITDA (2)........................................ $ 2,888,231 $ 4,613,823 $ 7,285,186 $ 7,158,553 PRO FORMA 1995 1996 1997 1997 ------------- ------------- ------------- ------------- CONSOLIDATED BALANCE SHEET DATA: Working capital................................... $ 2,068,414 $ 2,304,684 $ 3,096,318 $ 644,984 Total assets...................................... 17,916,037 19,516,355 26,580,185 34,740,069 ------------- ------------- ------------- ------------- Notes payable, including current portion.......... 2,830,872 1,808,464 4,817,467 9,536,121 Stockholders' equity.............................. 12,796,169 14,649,421 18,064,347 20,130,064 ------------- ------------- ------------- -------------
- ------------------------ (1) For information concerning the number of shares used in the computation of net income per common share, see Note 1 to the Consolidated Financial Statements contained in Form S-1. (2) "EBITDA" represents earnings before interest expense, income tax expense, depreciation and amortization, including amortization of leasehold improvements, acquisition and development costs, and debt expense and discount or premium relating to any indebtedness. EBITDA is not presented herein as an alternative measure of operating results (as determined in accordance with GAAP) or cash flow (as determined in accordance with GAAP). See the Consolidated Statements of Cash Flows of the Company for the amounts of cash flows from each of investing, financing and operating activities for fiscal 1995, 1996 and 1997. ------------------------ 13 SELECTED INTERIM CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ---------------------- 1998 1997 1998 1997 ----------- --------- ----------- --------- (UNAUDITED) (UNAUDITED) NET REVENUES..................................................... $ 17,356 $ 12,890 $ 36,401 $ 25,311 COST OF GOODS SOLD............................................... 12,614 9,210 28,170 18,947 ----------- --------- ----------- --------- GROSS PROFIT................................................... 4,742 3,680 8,231 6,364 SALES AND PROMOTION.............................................. 2,681 1,027 4,665 2,194 GENERAL AND ADMINISTRATIVE....................................... 735 478 2,011 1,305 ----------- --------- ----------- --------- 3,416 1,505 6,676 3,499 ----------- --------- ----------- --------- INCOME FROM OPERATIONS........................................... 1,326 2,175 1,555 2,865 OTHER INCOME, (EXPENSE).......................................... 100 19 349 79 ----------- --------- ----------- --------- INCOME BEFORE INCOME TAX EXPENSE................................. 1,426 2,194 1,904 2,944 INCOME TAX EXPENSE............................................... 579 879 773 1,184 ----------- --------- ----------- --------- NET INCOME....................................................... $ 847 $ 1,315 $ 1,131 $ 1,760 ----------- --------- ----------- --------- ----------- --------- ----------- --------- INCOME PER COMMON SHARE BASIC.................................... $ 0.11 $ 0.30 $ 0.17 $ 0.41 ----------- --------- ----------- --------- ----------- --------- ----------- --------- DILUTED........................................................ $ 0.10 $ 0.22 $ 0.15 $ 0.30 ----------- --------- ----------- --------- ----------- --------- ----------- --------- SHARES USED IN COMPUTING INCOME PER COMMON SHARE BASIC.......................................................... 7,822 4,418 6,842 4,320 ----------- --------- ----------- --------- ----------- --------- ----------- --------- DILUTED........................................................ 8,409 5,920 7,445 5,821 ----------- --------- ----------- --------- ----------- --------- ----------- ---------
14 The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection at the Commission's regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Information regarding the public reference facilities may be obtained from the Commission by telephoning 1-800-SEC-0330. The Commission also maintains an Internet site on the World Wide Web at http://www.sec.gov that contains reports, proxy statements and other information. Copies of such materials may also be obtained by mail, upon payment of the Commission's customary fees, by writing to its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. 8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. The Purchaser is a newly incorporated Pennsylvania corporation organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with the Offer and the Merger. The principal offices of the Purchaser are located at 208 Harbor Drive, Stamford, Connecticut 09902. The Purchaser is an indirect subsidiary of the Parent. Until immediately prior to the time that the Purchaser will purchase Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incidental to its formation and capitalization and the transactions contemplated by the Offer and the Merger. Because the Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information regarding the Purchaser is available. The Parent is a SOCIETE ANONYME organized under the laws of the Republic of France. Its principal offices are located at 7, rue de Teheran, 75008 Paris, France. The Parent believes it is one of the world's leading producers of packaged foods and beverages. The name, citizenship, business address, principal occupation or employment, and five-year employment history for each of the directors and executive officers of the Purchaser and the Parent and certain other information are set forth on Schedule I hereto. Set forth below is certain selected consolidated financial information relating to the Parent and its subsidiaries for the Parent's last three fiscal years, which has been excerpted or derived from the audited consolidated financial statements contained in the Parent's Annual Report on Form 20-F for the fiscal year ended December 31, 1997, and from the unaudited summary financial statements contained in the Parent's Report on Form 6-K for the month of September, 1998, in each case filed with or furnished by the Parent to the Commission. Such financial information was prepared in accordance with generally accepted accounting principles in France ("French GAAP"), which differ in certain respects from accounting principles generally accepted in the United States ("US GAAP"). More comprehensive financial information is included in such reports and other documents filed by the Parent with the Commission, and the following financial information is qualified in its entirety by reference to such reports and other documents, including the financial information and related notes contained therein. Such reports and other documents may be inspected and copies may be obtained from the offices of the Commission in the same manner (other than from the World Wide Web) as set forth with respect to information about the Company in "Section 7. Certain Information Concerning the Company." 15 GROUPE DANONE SELECTED ANNUAL CONSOLIDATED FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31, -------------------------- 1997(1) 1997 1996 1995 --------- ------------ ------------ ------------ (IN MILLIONS, EXCEPT PER SHARE DATA) CONSOLIDATED INCOME STATEMENT DATA: AMOUNTS IN ACCORDANCE WITH FRENCH GAAP: Net sales................................................ $ 14,699 FF 88,476 FF 83,940 FF 79,450 Cost of goods sold....................................... (8,137) (48,975) (47,523) (45,494) Selling expenses......................................... (3,959) (23,831) (21,896) (20,235) General and administrative expenses...................... (900) (5,419) (5,005) (4,655) Research and development expenses........................ (126) (758) (667) (625) Other income and expense (2)............................. (243) (1,464) (1,371) (1,423) --------- ------------ ------------ ------------ Operating income (1)..................................... 1,334 8,029 7,478 7,018 Non-recurring items (1).................................. 7 40 -- (1,800) Interest expense (net)................................... (185) (1,116) (1,245) (1,254) Provision for income taxes............................... (492) (2,962) (2,395) (1,496) Minority interests....................................... (89) (538) (614) (437) Equity in net earnings of affiliated companies........... 35 211 158 102 --------- ------------ ------------ ------------ Net income............................................... $ 609 FF 3,664 FF 3,382 FF 2,133 Earnings per Share (basic) (4)........................... $ 8.58 FF 51.62 FF 47.55 FF 30.59 Earnings per Share (diluted) (4)......................... 8.32 50.07 46.33 30.96 Earnings per ADS (diluted) (4)(5)........................ 1.66 10.01 9.27 6.19 Dividends per Share (including the "avoir fiscal")....... 4.61 27.75 25.50 24.00 Dividends per ADS (4)(5) (including the "avoir fiscal")............................................... 0.92 5.55 5.10 4.80 APPROXIMATE AMOUNTS IN ACCORDANCE WITH U.S. GAAP: (6) Net income............................................... $ 558 FF 3,361 FF 3,093 FF 1,874 Earnings per Share (basic)............................... 7.87 47.35 43.49 26.88 Earnings per Share (diluted) (4)......................... 7.68 46.24 42.68 26.88 Earnings per ADS (diluted) (4)(5)........................ 1.54 9.25 8.53 5.38
YEAR ENDED DECEMBER 31, -------------------------- 1997(1) 1997 1996 1995 --------- ------------ ------------ ------------ (IN MILLIONS) CONSOLIDATED BALANCE SHEET DATA AMOUNTS IN ACCORDANCE WITH FRENCH GAAP: Marketable securities, cash and cash equivalents......... $ 1,052 FF 6,344 FF 5,681 FF 7,025 Current assets........................................... 4,903 29,509 32,056 31,855 Total assets............................................. 16,379 98,588 100,871 93,168 Net debt (7)............................................. 3,000 18,054 21,575 16,995 Stockholders' equity..................................... 7,097 42,717 40,383 36,254 APPROXIMATE AMOUNTS IN ACCORDANCE WITH U.S. GAAP: (6) Stockholders' equity..................................... 6,685 40,239 37,643 33,109 Total assets............................................. 16,218 97,616 99,409 90,768
16
YEAR ENDED DECEMBER 31, ------------------------- 1997(1) 1997 1996 1995 --------- ----------- ------------ ----------- (IN MILLIONS, EXCEPT PERCENTAGES) CASH FLOW STATEMENT DATA: AMOUNTS IN ACCORDANCE WITH FRENCH GAAP: Cash flow from operating activities........................ $ 1,454 FF 8,754 FF 7,947 FF 7,146 Cash flow from investing activities: Capital expenditures..................................... (868) (5,226) (4,484) (4,103) Investments in companies (net of divestitures)........... 596 3,585 (6,690) (3,599) --------- ----------- ------------ ----------- (273) (1,641) (11,174) (7,702) Cash flow from financing activities........................ (1,100) (6,619) 3,306 1,067 OTHER DATA EBITDA(8).................................................. 2,136 12,855 11,922 11,283 Depreciation and amortization.............................. 802 4,826 4,444 4,265 Cost of goods sold as a percentage of net sales............ -- 55.4% 56.6% 57.3% Operating income as a percentage of net sales.............. -- 9.1% 8.9% 8.8%
- ------------------------ (1) Translated solely for convenience into dollars at the Noon Buying Rate on December 31, 1997, of FF 6.0190 per $1.00. (2) Other income and expense includes the amortization of goodwill which amounted to FF 616 million, FF 513 million and FF 466 million, in the years ended December 31, 1997, 1996 and 1995, respectively. (3) Beginning in 1994, gains and losses on disposals of companies, restructuring costs and certain other exceptional items have been shown separately as non-recurring items. See Note 1.Q to the Consolidated Financial Statements in the Form 20-F. In 1995, the FF 1,800 million of non-recurring items related entirely to restructuring costs. The effect of this charge on net income, after taxes and minority interests, was FF 997 million. In 1997, the FF 40 million non-recurring profit had a negative impact of FF 32 million on net income after taxes and minority interests. See Note 2 of the accompanying Consolidated Financial Statements in the Form 20-F. (4) Basic Earnings per Share is based on an average number of shares of 70,979,870, 71,120,542 and 69,717,356 as of December 31, 1997, 1996 and 1995, respectively. Diluted Earnings per Share and ADS are based on the average number of Shares outstanding during the year assuming full conversion of all common stock equivalents and convertible bonds and taking into account the related reduction in interest charges, net of tax. Such average number of shares was 79,092,534, 79,076,442 and 78,239,580 for the years ending December 31, 1997, 1996 and 1995, respectively. (5) Data given per ADS reflects the ratio of one fifth of one share per ADS. (6) For a description of the reconciliation to U.S. GAAP, see Note 2 to the Consolidated Financial Statements in the Form 20-F and "Differences between French GAAP and U.S. GAAP" below. (7) Net debt is defined as long-term debt (including convertible bonds) plus short term debt and bank overdrafts less marketable securities, cash and cash equivalents. (8) Earnings before Interest, Tax, Depreciation and Amortization where earnings are operating income. The Group has included EBITDA because it is commonly requested and used by investors and analysts to provide a consistent measure to analyze and compare companies on the basis of operating performance. EBITDA should not be considered as an alternative to net income (determined in accordance with generally accepted accounting principles) as an indication of the Group's financial performance or to cash flow from operating activities (determined in accordance with generally 17 accepted accounting principles) as a measure of the Group's liquidity set forth below is a table reconciling EBITDA to net income.
YEAR ENDED DECEMBER 31, ------------------------------------------------ 1997(A) 1997 1996 1995 --------- ----------- ----------- ----------- (IN MILLIONS) Net income................................. $ 609 FF 3,664 FF 3,382 FF 2,133 Equity in net earnings of affiliated companies................................ (35) (211) (158) (102) Minority interests......................... 89 538 614 437 Provision for income taxes................. 492 2,962 2,395 1,496 Interest expense (net)..................... 185 1,116 1,245 1,254 Non-recurring items........................ (7) (40) -- 1,800 Depreciation and Amortization.............. 802 4,826 4,444 4,265 --------- ----------- ----------- ----------- EBITDA..................................... $ 2,136 FF 12,855 FF 11,922 FF 11,283
-------------------------------------- (a) Translated solely for convenience into dollars at the Noon Buying Rate on December 31, 1997 of FF 6.0190 per $1.00. SELECTED INTERIM UNAUDITED CONSOLIDATED FINANCIAL INFORMATION SEPTEMBER 15, 1998 (FF MILLIONS)
FIRST HALF FIRST HALF 1997 1998 CHANGE/ACTUAL LIKE FOR LIKE ------------- ----------------- ----------------- ---------------- SALES...................................... 43,808 43,157 -1.5% +6.6% OPERATING INCOME........................... 3,839 4,206 +9.6% +16.0% OPERATING MARGIN........................... 8.8% 9.7% +90bp EXCEPTIONALS............................... -- (100) NET INTEREST EXPENSES...................... (502) (503) INCOME BEFORE TAXES........................ 3,337 3,603 TAXES...................................... (1,298) (1,446) NET INCOME................................. 1,857 1,968
DIFFERENCES BETWEEN FRENCH GAAP AND US GAAP The financial statements have been prepared in accordance with French GAAP which differs in certain significant respects from US GAAP. These differences have been reflected in the financial statements and mainly relate to the following items. BRAND NAMES AMORTIZATION Under French GAAP, the brand names which have been separately identified on the acquisition of subsidiaries are not amortized. Under US GAAP, intangible assets such as brand names must be amortized over the period estimated to be benefitted, which may not exceed forty years. For the purpose of reconciliation to US GAAP, brand names are amortized over a forty-year period. GOODWILL RELATING TO THE ACQUISITION OF FOREIGN SUBSIDIARIES Goodwill relating to the acquisition of foreign subsidiaries are translated in the Parent's or any of its Subsidiaries' accounts using an historical exchange rate when US GAAP requires the use of the closing 18 exchange rate. Under US GAAP, the difference is part of the "Translation adjustments" component of stockholders' equity. Amortization of goodwill is computed on the basis of gross values translated at the historical exchange rate. Under US GAAP, the annual amortization charge is translated at the average exchange rate during the year. STOCK OPTIONS The Parent generally grants to its or any of its subsidiaries' eligible employees a discount from the market price for shares subscribed for pursuant to share subscription or share purchase plans. Accounting for this discount is not addressed by French GAAP and these transactions have no effect on the statement of income. Under US GAAP, the discount, measured at the date of grant, is considered as compensation to employees. The effect of the decrease to retained earnings and increase to stockholders' equity for the amount of compensation expense is reflected as a US GAAP adjustment. AVAILABLE-FOR-SALE SECURITIES Under French GAAP, the unrealized gains and losses on available-for-sale securities are neither recorded by companies fully integrated, nor by equity investors. Under US GAAP, available-for-sale securities are carried at market value, with the unrealized result recorded directly in equity. DEFERRED INCOME TAXES ON BRAND NAMES Deferred income taxes on brand names are not recorded, while the goodwill arising on the acquisition of the related subsidiaries is not increased by the amount of such deferred tax liability. Under US GAAP, a deferred tax liability computed at the local rate applicable to long-term capital gains is recorded, and goodwill is increased by the same amount. The deferred tax liability is reversed to profit as the related intangible asset is amortized, whereas the amortization charge of the additional goodwill matches this profit. Had US GAAP been applied, deferred income taxes (long-term liabilities) and goodwill would be increased by FF 2,782 million as of December 31, 1997 (FF 2,839 million as of December 31, 1996). Goodwill amortization, offset by an equal amount of deferred tax benefit of FF 84 million, FF 99 million and FF 94 million for 1997, 1996 and 1995, respectively, exists under US GAAP. PURCHASE ACCOUNTING--FAIR VALUE Purchase accounting, applied to a less than wholly owned subsidiary, results in all of the assets and liabilities of the purchased subsidiary being recorded at fair values when the parent purchases its majority interest, and the minority interests in the subsidiary net assets are adjusted to reflect its share of the revalued net assets (excluding goodwill). Under US GAAP, no write-up in fair value of the net assets of the subsidiary related to the minority interest should occur. Accordingly, the write-up of fair values in brand names related to the minority interest should be reversed, thus decreasing brand names and minority interests by FF 1,490 million as of December 31, 1997 (FF 1,864 million as of December 31, 1996). The remainder of the write-ups to fair value in other net assets related to the minority interests are not considered material. Except as described in this Offer to Purchase, (i) none of the Purchaser, the Parent or, to the best knowledge of the Purchaser and the Parent, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of the Purchaser, the Parent or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any Shares and (ii) none of the Purchaser, the Parent or, to the best knowledge of the Purchaser and the Parent, any of the persons or entities referred to above or any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. 19 Except as provided in the Merger Agreement and as otherwise described in this Offer to Purchase, none of the Purchaser, the Parent or, to the best knowledge of the Purchaser and the Parent, any of the persons listed in Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, since October 1, 1995, neither the Purchaser nor Parent nor, to the best knowledge of the Purchaser and the Parent, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer to Purchase, since October 1, 1995, there have been no contacts, negotiations or transactions between any of the Purchaser, the Parent, or any of their respective subsidiaries or, to the best knowledge of the Purchaser and the Parent, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required by the Purchaser to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $120,000,000. The Purchaser will obtain all of such funds from the Parent. The Parent will provide such funds from available cash. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. BACKGROUND OF THE OFFER. Ever since its launch of a spring water product on the US market in 1996 through its indirect US subsidiaries, Great Brands of Europe, Inc. ("Great Brands") and Dannon International Brands, Inc. ("DIB"), under the brand name "Dannon", the Parent has observed rapid, steady growth of its sales in this business. In response to this growth, the Parent began seeking a means of expanding its production capacity for the US and other markets in the Spring of 1998. Over the course of the Spring and Summer of 1998, several strategic options were considered by the management of Great Brands and DIB, including greenfield expansion, joint-ventures, co-packing agreements and acquisitions. During that period, the concept of some form of transaction with the Company emerged as a possible alternative. Great Brands and DIB had previously entered into a short-term co-packing arrangement with the Company starting in 1997, pursuant to which Great Brands and DIB paid the Company approximately $2,266,000 for co-packing services. At that point, Great Brands' and DIB's management considered a range of possible transactions, including another co-packing agreement with the Company, an acquisition or joint venture with respect to one of the Company's production facilities, a minority shareholding position or an outright acquisition of the Company. In late August 1998, management discussions among the Parent, Great Brands and DIB took place, all of which concluded that these strategic alternatives should be pursued further. On August 31, 1998, a representative of the Parent contacted a representative of Lazard to discuss the Parent's assessment of the industrial and strategic opportunities that might be represented by a possible acquisition of or industrial joint venture with the Company. In the course of that discussion, the Parent's representative inquired as to the Company's probable level of interest in a strategic transaction and was informed that, although the Lazard representative had no first-hand basis for speculating about the Company's likely reaction to an approach by the Parent, there was no reason to believe that the Company would not be interested in hearing the Parent's views on possible strategic transactions. Such representatives of the Parent and Lazard also had a general discussion about the Company, including its share price since its initial public offering on January 29, 1998. In early September, the Company engaged Lazard as its financial advisor, and subsequently entered into an engagement letter with Lazard on September 11, 1998. 20 On September 1, 1998, a representative of the Parent met with representatives of Lazard at Lazard's offices in New York City. At that meeting, the parties went over the same issues as were discussed in the telephone conversation of August 31, 1998. During that meeting, the Parent's representative also asked questions related to the process that would be involved in a possible acquisition of or joint venture with the Company, including the level of due diligence that could be performed with respect to a public company and whether special arrangements could be entered into with significant shareholders of the Company. After that discussion, management of Great Brands and the Parent determined that Mr. Mark Rodriguez, CEO of Great Brands and DIB, should approach the Company about the possibility of pursuing a strategic transaction. On September 6, 1998, Mr. Rodriguez met with Mr. Edward J. Lauth, III, President and CEO of the Company. During this preliminary discussion, Mr. Rodriguez indicated that a business combination between the Company and the Parent could make strong business sense. Mr. Lauth indicated that he thought an acquisition of the Company by the Parent should be considered by the Company's management and Board. Mr. Rodriguez and Mr. Lauth had very preliminary discussions on price during which Mr. Lauth stated that no transaction could be agreed upon if the value of the transaction were to be based on the Company's then current share price which, in Mr. Lauth's view, did not represent the real long-term value of the Company. The parties concluded that negotiations focused on a possible transaction between the Company and the Parent should proceed, and that the Company would not engage in similar discussions with other parties for a period of approximately 30 days. Mr. Rodriguez reported the substance of this discussion to management of the Parent on September 7, 1998. On September 8, 1998, a representative of the Parent had a telephone conversation with a Lazard representative during which the two parties continued their discussion of a possible transaction with the Company. There was a further telephone conversation between Lazard and the Parent on September 10, 1998. In that conversation, Lazard stressed that the Company was not, in fact, "for sale" and that the Company was only interested in pursuing a strategic combination with the Parent as a result of the significant synergies represented by such a transaction. Lazard suggested that the Parent would have to act quickly if it was interested in a business combination with the Company. The Parent's representative indicated that the Parent was willing to act quickly and was prepared to proceed with a due diligence review of the Company. Shortly thereafter, representatives of Lazard, the Company and the Parent began negotiating the terms of the confidentiality and standstill agreement which was executed on September 11, 1998. The Parent and the Company agreed that the Parent would complete its due diligence investigation by October 15, 1998, with a view to submitting a proposal for the acquisition of the Company on such date. 21 On September 15, 1998, a meeting was held at Lazard's New York office between Lazard and representatives of the Parent and the Company. The purpose of the meeting was to hear Mr. Lauth's view of the business and prospects of the Company, to agree on the next steps to be taken by the parties, to discuss the due diligence process and to arrange meetings with the Company's Chief Financial Officer and Chief Operating Officer to gain a more detailed understanding of the Company's business. On September 18, 1998, the Parent retained J.P. Morgan as its financial advisor with respect to the possible acquisition by the Parent of the Company. Over the next few weeks, a number of meetings, on-site visits to the Company's facilities, calls and other activities took place between the Parent, Great Brands, DIB, the Company, Lazard, J.P. Morgan, counsel to the Company (Ballard Spahr Andrews & Ingersoll, LLP) and counsel to the Parent (Shearman & Sterling) in furtherance of the Parent's due diligence efforts. On October 8, 1998, a meeting between management of the Parent and Great Brands was held in New York City to review progress on the transaction made to date. The preliminary conclusion reached at this meeting was that, while no information had emerged from the due diligence process that might prevent an acquisition from being pursued, it appeared that some capital expenditures might be required if the Parent were to acquire the Company. Management contacted representatives of Lazard on October 9, 1998 to discuss the Parent's views regarding the capital expenditures that it believed would be required. In addition, the parties determined that the October 15, 1998 meeting, which had been scheduled for discussion of the Parent's formal acquisition proposal, would instead be used to discuss the parties' business models and valuation assumptions. On October 15, 1998, representatives of the Parent and the Company and their respective financial advisors met in Lazard's New York offices to discuss various matters, including the valuation of the Company, issues surrounding general competition trends in the US market for bottled spring water and the Company's medium term business plans developed in response to these competition issues. At the end of the meeting, the parties agreed that the Parent would communicate its final position to the Company on October 22, 1998. Between October 15, 1998 and October 22, 1998, several telephone conversations took place between all of the parties involved, in the course of which various issues were discussed. Management of the Parent, Great Brands and DIB continued to hold internal meetings to discuss the Parent's potential acquisition of the Company, and concluded, among other things, that the capital expenditures that would be required if the Parent acquired the Company would be lower than originally estimated, and, in any event, would be substantially lower than the capital expenditures that the Parent would be required to make if it did not acquire the Company. On October 22, 1998, the Parent indicated to Lazard that it might be prepared to pay $13 per share if the Company would be willing to agree to certain conditions, including, among other things, negotiation of an acceptable acquisition agreement, negotiation of a facility investment agreement between the Company and the Parent, the execution of a registration rights agreement between the Parent and the Company, the execution of shareholder agreements with the Company's principal shareholders, and the negotiation of satisfactory employment or consulting agreements by employees of or consultants to the Company following the acquisition of the Company by the Parent. In addition, the Parent indicated that it needed to complete its financial, operational and legal due diligence investigation of the Company. On October 24, 1998, Lazard contacted the Parent and reported that, after a number of informal conversations among Company management and a meeting with the Board, the Company would be willing to attempt to negotiate a transaction based on a share price of $13 and satisfactory resolution of the other conditions outlined above. On October 25, 1998, the Parent's legal advisors delivered to the Company and its advisors an initial draft of the Merger Agreement. On Monday, October 26, 1998, representatives of the Parent, the Company and their respective advisors met in the offices of Lazard to discuss a number of topics, including the terms of the draft Merger Agreement and the status of the Parent's due diligence. During the course of the week of October 26, 1998, the parties negotiated the terms of the Merger Agreement, agreed on the 22 basic terms of the proposed Facility Investment Agreement and negotiated the terms of the Registration Rights Agreement. In addition, the Parent and Messrs. Lauth, Feidelberg and Suhey negotiated the terms of employment or consulting contracts, respectively, and agreed on the terms of the Shareholder Agreements. Following approval by the Board on November 1, 1998 and approval of the Board of Directors of the Purchaser and final approval by Parent management, the Merger Agreement was executed and delivered on November 2, 1998. The Employment Agreements, the Suhey Agreement, the Registration Rights Agreement and the Shareholder Agreements referred to above were also executed and delivered at such time. The transaction was publicly announced by both the Company and the Parent through press releases issued before the opening of the financial markets in the United States on November 2, 1998. 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; THE MERGER AGREEMENT; AND RELATED AGREEMENTS. PURPOSE OF THE OFFER. The purpose of the Offer and the Merger is for the Parent to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is for Parent to acquire all Shares not purchased pursuant to the Offer. Upon consummation of the Merger, the Company will become an indirect subsidiary of the Parent. The Offer is being made pursuant to the Merger Agreement. Under Pennsylvania Law, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 80% of the outstanding Shares, the Purchaser will be able to approve the Merger without a vote of the Company's shareholders. In such event, the Parent, the Purchaser and the Company have agreed in the Merger Agreement to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without approval of the Company's shareholders. If, however, the Purchaser does not acquire at least 80% of the then outstanding Shares pursuant to the Offer, under Pennsylvania Law and the Company's Articles of Incorporation, the Long-Form Merger must be approved by the affirmative vote of holders of a majority of the votes cast by all holders of Shares entitled to vote on a proposal to approve the Long-Form Merger. The Long-Form Merger would therefore require a longer period of time to effect than the Short-Form Merger. If on the initial scheduled Expiration Date of the Offer, the Minimum Condition has not been satisfied, at the Parent's request, the Company has agreed, in the Merger Agreement, to convene a meeting of its shareholders as soon as practicable after such request for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby, in accordance with Pennsylvania Law. PLANS FOR THE COMPANY. It is expected that, initially following the Merger, the business and operations of the Company will, except as set forth in this Offer to Purchase, be continued by the Company substantially as they are currently being conducted. Except as indicated in this Offer to Purchase, the Parent does not have any present plans or proposals which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any Subsidiary, a sale or transfer of a material amount of assets of the Company or any Subsidiary or any material change in the Company's capitalization or dividend policy or any other material changes in the Company's corporate structure or business, or the composition of the Board or the Company's management. However, the Parent has been and will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger, and will take such actions as it deems appropriate under the circumstances then existing. The Parent intends to seek additional information about the Company during this period. Thereafter, the Parent intends to review such information as part of a comprehensive review of the Company's business, operations, capitalization and management with a view to optimizing exploitation of the Company's potential in conjunction with the Parent's businesses. It is expected that the business and 23 operations of the Company would form an important part of the Parent's future business plans in the United States. DISSENTERS RIGHTS. NO DISSENTERS RIGHTS ARE AVAILABLE IN CONNECTION WITH THE OFFER. However, if the Merger is consummated, shareholders who do not sell their Shares pursuant to the Offer and who fully comply with the statutory dissenters procedures set forth in Pennsylvania Law, the relevant portions of which are attached to this Offer to Purchase as Schedule II, will be entitled to receive in connection with the Merger, instead of the Merger Consideration, cash for the fair value of their Shares (which may be more than, equal to, or less than the Merger Consideration) as determined pursuant to the procedures prescribed by Pennsylvania Law. Merely voting against the Merger Agreement (if a vote of the Company's shareholders is required to effect the Merger under Pennsylvania Law) will not perfect a shareholder's dissenters rights. Shareholders are urged to review carefully the dissenting shareholders' rights provisions of Pennsylvania Law, a description of which is provided below and the full text of which is attached to this Offer to Purchase as Schedule II and incorporated herein by reference. SHAREHOLDERS WHO FAIL TO COMPLY STRICTLY WITH THE APPLICABLE PROCEDURES WILL FORFEIT THEIR DISSENTERS RIGHTS IN CONNECTION WITH THE MERGER. See Schedule II to this Offer to Purchase. Sections 1571-80 of Pennsylvania Law ("Subchapter D") and 1930(a) of Pennsylvania Law, copies of which are attached to this Offer to Purchase as Schedule II, entitle any holder of record of Shares who objects to the Merger, in lieu of receiving the consideration for such Shares provided under the Merger Agreement, to demand in writing that such shareholder be paid in cash the fair value of such shareholder's Shares. Section 1572 of Pennsylvania Law defines "fair value" as: "The fair value of shares immediately before the effectuation of the corporate action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action." Any shareholder contemplating making demand for fair value is urged to review carefully the provisions of Subchapter D, particularly the procedural steps required to perfect such shareholder's dissenters rights thereunder. DISSENTERS RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SUBCHAPTER D ARE NOT FULLY AND PRECISELY SATISFIED. The following summary does not purport to be a complete statement of the provisions of Subchapter D of Pennsylvania Law and is qualified in its entirety by reference to Schedule II to this Offer to Purchase and Pennsylvania Law. FILING NOTICE OF INTENTION TO DEMAND FAIR VALUE Before the vote of the shareholders is taken on the Long-Form Merger, the dissenting shareholder must deliver to the Company a written notice of intention to demand that he be paid the fair value of such shareholder's Shares if the Long-Form Merger is effected. Such written notice must be sent to the Secretary of the Company at P.O. Box 938, One AquaPenn Drive, Milesburg, Pennsylvania 16853-0938. Neither the tendering of Shares in the Offer, nor a vote against the Merger, is sufficient to satisfy the requirement of delivering a written notice to the Company. In addition, the shareholder must not effect any change in the beneficial ownership of such shareholder's Shares from the date of filing the notice with the Company through the consummation of the Long-Form Merger, and Shares for which payment of fair value is sought must not be voted in favor of the Long-Form Merger, and the shareholder must vote against, or abstain from voting in favor of, the Long-Form Merger. Failure of a dissenting shareholder to comply with any of the foregoing will result in the forfeiture of any right to payment of fair value for such shareholder's Shares. RECORD OWNERS AND BENEFICIAL OWNERS A record holder of Shares held in whole or in part for the benefit of another person may assert dissenters rights as to fewer than all of the Shares registered in such shareholder's name only if such shareholder dissents with respect to all the Shares beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf such shareholder dissents. A beneficial owner 24 of Shares who is not the record holder may assert dissenters rights with respect to Shares held on such shareholder's behalf if such shareholder submits to the Company the written consent of the record holder not later than the time of assertion of dissenters rights. A beneficial owner may not dissent with respect to fewer than all of the Shares owned by such shareholder whether or not such Shares are registered in such shareholder's name. NOTICE TO DEMAND PAYMENT If the Long-Form Merger is approved at a meeting of the Company's shareholders, the Company shall mail to all dissenters who gave due notice of their intention to demand payment of fair value and who refrained from voting in favor of the Long-Form Merger a notice stating where and when a demand for payment must be sent and certificates for Shares deposited in order to obtain payment. The notice shall be accompanied by a copy of Subchapter D of Pennsylvania Law and a form for demanding payment. The time set for the receipt of demands and the deposit of certificates shall not be less than 30 days from the mailing of the notice. Failure by a shareholder to demand payment or deposit certificates pursuant to such notice will cause such shareholder to lose all right to the payment of the fair value of such shareholder's Shares. If the Long-Form Merger has not been effected within 60 days after the date set for demanding payment and depositing certificates, the Company shall return any certificates that have been deposited. The Company, however, may at any later time send a new notice regarding demand for payment and deposit of certificates with like effect. If the Merger is effected as a Short-Form Merger, without a vote of the Company's shareholders, the Company shall mail to all shareholders who are entitled to dissent and demand payment of the fair value of their Shares, a notice of the adoption of the plan of merger effecting the Short-Form Merger. The notice shall also state where and when a demand for payment must be sent and certificates for Shares deposited in order to obtain payment and must be accompanied by a copy of Subchapter D of Pennsylvania Law and a form for demanding payment. The time set for the receipt of demands and the deposit of certificates shall not be less than 30 days from the mailing of the notice. Failure by a shareholder to demand payment or deposit certificates pursuant to such notice will cause such shareholder to lose all right to the payment of the fair value of such shareholder's Shares. If the Merger has not been effected within 60 days after the date set for demanding payment and depositing certificates, the Company shall return any certificates that have been deposited. The Company, however, may at any later time send a new notice regarding demand for payment and deposit of certificates with like effect. PAYMENT OF FAIR VALUE OF SHARES Promptly after the consummation of the Merger or upon timely receipt of demand for payment if the Merger has already been effected, the Company shall either remit to dissenters who have made timely demand and deposited their certificates the amount the Company estimates to be the fair value of their Shares or give written notice that no remittance will be made under Section 1577 of Pennsylvania Law. Such remittance or notice will be accompanied by (i) the closing balance sheet and statement of income of the Company for a fiscal year ending not more than 16 months prior to the date of remittance or notice together with the latest available interim financial statements, (ii) a statement of the Company's estimate of the fair value of the Shares, and (iii) a notice of the right of the dissenting shareholder to demand payment or supplemental payment, as the case may be, accompanied by a copy of Subchapter D of Pennsylvania Law. If the Company does not remit the amount of its estimate of the fair value of the Shares, it shall return all certificates that have been deposited and may make a notation thereon that a demand for payment has been made. If Shares with respect to which notation has been so made shall be transferred, each new certificate issued therefor shall bear a similar notation together with the name of the original dissenting holder or owner of such Shares. A transferee of such Shares shall not acquire by such transfer any rights in the 25 Company other than those that the original dissenter had after making demand for payment of fair value for such Shares. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES If a dissenting shareholder believes that the amount estimated or paid by the Company for such dissenting shareholder's Shares is less than their fair value, the shareholder may send to the Company such shareholder's own estimate of the fair value which shall be deemed a demand for payment of the amount or the deficiency. If the dissenter does not file such dissenter's own estimate of fair value within 30 days after the mailing by the Company of its remittance or estimate of fair value, the dissenter shall be entitled to no more than the amount remitted to such shareholder or estimated by the Company. VALUATION PROCEEDINGS Within 60 days after the latest of (i) the consummation of the Merger, (ii) timely receipt of any demands for payment and (iii) timely receipt of any shareholder estimates of fair value, if any demands for payment remain unsettled, the Company may file in court an application for relief requesting that the fair value of the Shares be determined by the court. Each dissenter whose demands have not been settled shall be made a party to the proceeding and shall be entitled to recover the amount by which the fair value of such Shareholder's Shares is found to exceed the amount, if any, previously remitted, plus interest. Such dissenter shall also be entitled to interest on such amount from consummation of the Merger until the date of payment at such rate as is fair and equitable under the circumstances, taking into account all relevant factors including the average rate currently paid by the Company on its principal bank loans. If the Company fails to file an application within the 60-day period, any dissenter who has not settled such dissenter's claim may do so in the name of the Company within 30 days after the expiration of this 60-day period. If no dissenter files an application within such 30-day period, each dissenter who has not settled such dissenter's claim shall be paid no more than the Company's estimate of the fair value of such dissenter's Shares and may bring an action to recover any amount not previously remitted. COSTS AND EXPENSES OF VALUATION PROCEEDINGS The costs and expenses of any valuation proceedings, including the reasonable compensation and expenses of any appraiser appointed by the court, shall be determined by the court and assessed against the Company except that any part of such costs and expenses may be assessed as the court deems appropriate against all or some of the dissenters whose action in demanding supplemental payment is found by the court to be dilatory, obdurate, arbitrary, vexatious or in bad faith. The court may also assess the fees and expenses of counsel and experts for any or all of the dissenters against the Company if the Company fails to comply substantially with Subchapter D of Pennsylvania Law or acts in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner. The court can also assess any such fees or expenses incurred by the Company against a dissenter if such dissenter is found to have acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner. If the court finds that the services of counsel for any dissenter were of substantial benefit to the other dissenters and should not be assessed against the Company, it may award to such counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefitted. OTHER In addition to the appraisal rights discussed above, shareholders also have certain rights ("Subchapter 25E Rights") under Subchapter 25E of the Pennsylvania Law ("Subchapter 25E") which will become applicable prior to the Effective Time in the event that the Purchaser (or a group of related persons, or any other person or group of related persons) were to acquire Shares representing at least 20% of the voting power of the Company, in connection with the Offer or otherwise (a "Control Transaction"). In such event, shareholders of the Company would have the right to demand "fair value" of such shareholders' Shares 26 and to be paid such fair value upon compliance with the requirements of Subchapter 25E. Under Subchapter 25E, "fair value" may not be less than the highest price per share paid by the controlling person or group at any time during the 90-day period ending on and including the date of the Control Transaction, plus an increment, if any, representing any value, including, without limitation, any proportion of value payable for acquisition of control of the Company, that may not be reflected in such price. The Purchaser believes that the Offer Price represents the fair value of the Shares within the meaning of Subchapter 25E. Subchapter 25E Rights would attach immediately upon consummation of a Control Transaction and require that any shareholder seeking such appraisal must make a demand for fair value within a reasonable time after the notice to shareholders that a Control Transaction has occurred is given by the controlling person or group in accordance with Subchapter 25E, which time period may be specified in such notice, as well as comply with the other procedures of Subchapter 25E. Subchapter 25E Rights are available only with respect to shares of a registered corporation held by a shareholder after the occurrence of a Control Transaction; accordingly, Subchapter 25E Rights would not be available with respect to any Shares tendered in the Offer and accepted for payment. Section 1712 of Pennsylvania Law provides that a director of a Pennsylvania corporation stands in a fiduciary relation to such corporation and must perform such director's duties as a director in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. Section 1105 of Pennsylvania Law provides in substance that a shareholder of a Pennsylvania corporation shall not have any right to obtain, in the absence of fraud or fundamental unfairness, an injunction against any proposed merger, nor any right to claim the right to valuation and payment of the fair value of such shareholder's Shares because of the merger, except that such shareholder may dissent and claim such payment if and to the extent provided in Subchapter D of Pennsylvania Law Chapter 15, described above. Absent fraud or fundamental unfairness, such dissenters rights are the exclusive remedy of such shareholders. However, the United States Court of Appeals, Third Circuit, interpreting the predecessor statute to Section 1105 of Pennsylvania Law in HERSKOWITZ V. NUTRISYSTEM, INC., concluded that dissenters rights co-exist with common law causes of action, such as rescission or money damages, in the context of an action for breach of fiduciary duty or misrepresentation in a cash-out merger. Shareholders should be aware that due to the enactment of Pennsylvania Law in 1988 it is unclear whether the decision in Herskowitz remains applicable to dissenters rights. IN VIEW OF THE COMPLEXITIES OF THESE PROVISIONS OF PENNSYLVANIA LAW, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER SHOULD CONSULT THEIR OWN LEGAL COUNSEL. SEE SCHEDULE II ATTACHED HERETO FOR A REPRODUCTION OF THE TEXT OF THE RELEVANT SECTIONS OF PENNSYLVANIA LAW. THE MERGER AGREEMENT The following is a summary of the Merger Agreement, a copy of which is filed as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed by the Purchaser and the Parent with the Commission in connection with the Offer. Such summary is qualified in its entirety by reference to the Merger Agreement. THE OFFER. The Merger Agreement provides that the Purchaser will commence the Offer as promptly as reasonably practicable after the date thereof, but in no event later than five business days after the initial public announcement of the Purchaser's intention to commence the Offer. The obligation of the Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject to the Minimum Condition and certain other conditions described in "Section 14. Conditions to the Offer." In the event that Shares constituting at least 19.9% of the then outstanding Shares have been validly tendered and not withdrawn prior to the expiration of the Offer, and all the conditions to the Offer have been satisfied other than the Minimum Condition, the Purchaser may, at its option, purchase for the Per Share Amount any number of such Shares constituting in the aggregate no more than 19.9% of the then 27 outstanding Shares, on a pro rata basis if a greater number of Shares shall have been tendered into the Offer by the holders of the Shares. The Purchaser expressly reserves the right to waive any condition to the Offer, to increase the price per Share payable in the Offer, and to make any other changes in the terms and conditions of the Offer. However, no change may be made, without the prior written consent of the Company that (i) decreases the Minimum Condition, (ii) decreases the price per Share payable in the Offer below the Per Share Amount, (iii) changes the form of consideration to be paid in the Offer, (iv) reduces the maximum number of Shares to be purchased in the Offer or (v) imposes conditions to the Offer in addition to those described on "Section 14. Conditions to the Offer." The Per Share Amount will, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition), the Purchaser will pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn. If on the initial scheduled expiration date (which will be twenty business days after the date of the commencement of the Offer) of the Offer, all the conditions to the Offer have not been satisfied or waived, the Offer may be extended from time to time until January 4, 1999, without the consent of the Company. However, the Purchaser may not, without the prior written consent of the Company, extend the Offer if the failure to satisfy any of the conditions to the Offer was caused by or resulted from the failure of the Parent or the Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by the Parent or the Purchaser of any material representation or warranty of either of them contained in the Merger Agreement. THE MERGER. The Merger Agreement provides that, upon the terms and subject to the conditions thereof and in accordance with Pennsylvania Law, at the Effective Time, the Purchaser will be merged with and into the Company and the Company will continue as the Surviving Corporation and will become an indirect subsidiary of Parent. Upon consummation of the Merger, each issued and outstanding Share (other than any Shares held in the treasury of the Company, owned by the Purchaser, the Parent or any direct or indirect subsidiary of Parent or of the Company and any outstanding Shares which are held by shareholders who have demanded the right to receive the fair value of their Shares under Pennsylvania Law) will be canceled and converted automatically into the right to receive an amount equal to the Per Share Amount (the "Merger Consideration"). Pursuant to the Merger Agreement, each share of common stock, par value $0.01 per share, of the Purchaser issued and outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. CHARTER DOCUMENTS; INITIAL DIRECTORS AND OFFICERS. The Merger Agreement provides that, at the Effective Time, the Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, will be the Articles of Incorporation of the Surviving Corporation. The Merger Agreement also provides that the By-laws of the Company, as in effect immediately prior to the Effective Time, will be the By-laws of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such By-laws. Pursuant to the Merger Agreement, the directors of the Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and the officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified in accordance with the Articles of Incorporation and By-laws of the Surviving Corporation. SHAREHOLDERS' MEETING. The Merger Agreement provides that, in the event that at the initial Expiration Date, the Minimum Condition shall not have been satisfied, at the request of the Parent, the Company, acting through the Board, will, in accordance with applicable law and the Company's Articles of Incorporation and Bylaws, duly call, give notice of, convene and hold a special meeting of its shareholders as soon as practicable following such request for the purpose of considering and taking action on the Long-Form Merger in accordance with the terms and conditions of the Merger Agreement. In the event that the 28 Parent, the Purchaser or any of their assignees acquire Shares pursuant to the Offer constituting at least 80% of the then outstanding Shares, the parties have agreed, subject to the terms and conditions of the Merger Agreement, to take all necessary and appropriate action to cause the Short-Form Merger to become effective as soon as practicable after such acquisition, without approval of the Company's shareholders, in accordance with Section 1924(b)(1)(ii) of Pennsylvania Law. FILINGS. The Merger Agreement provides that the Company will, as soon as practicable following the commencement of the Offer, file the proxy statement to be sent to the shareholders in connection with the Long-Form Merger (the "Proxy Statement") with the Commission, and will use its best efforts to have the Proxy Statement cleared by the Commission as promptly as practicable following such filing. The Company has agreed that the Proxy Statement will include the unanimous recommendation of the Board that the holders of the Shares adopt the Merger Agreement and the Long-Form Merger. CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement, the Company has agreed that, between the date of the Merger Agreement and the Effective Time, unless the Parent will otherwise agree in writing, the businesses of the Company and its subsidiaries will be conducted only in, and the Company and its subsidiaries will not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company will use its reasonable best efforts to preserve substantially intact the business organization of the Company and its subsidiaries, to maintain adequate insurance coverage, to keep available the services of the current officers, employees and consultants of the Company and its subsidiaries and to preserve the current relationships of the Company and its subsidiaries with customers, suppliers and other persons with which the Company or any of its subsidiaries has significant business relations. By way of amplification and not limitation of the foregoing, except as expressly contemplated by the Merger Agreement, neither the Company nor any subsidiary thereof will, between the date of the Merger Agreement and the Effective Time, directly or indirectly do, or propose to do, any of the following without the prior written consent of the Parent: (a) amend or otherwise change its Articles of Incorporation or By-laws or equivalent organizational documents; (b) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of capital stock of any class of the Company or any of its subsidiaries, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any of its subsidiaries or (ii) any assets of the Company or any of its subsidiaries, except in the ordinary course of the business consistent with past practice; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof or any assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, pledge in respect of or otherwise as an accommodation become responsible for the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past practice; (iii) enter into any contract or agreement with any direct competitor of the Parent or any affiliate thereof, or any other contract or agreement, except contracts or agreements entered into in the ordinary course of business, consistent with past practice and that require payments by or to the Company or any of its subsidiaries (A) with respect to such contracts or agreements with a term of more than one year, in an aggregate amount of less than U.S. $100,000 and (B) with respect to such contracts or agreements with a term of one year 29 or less, in an aggregate amount of less than U.S. $250,000; (iv) terminate, cancel or request any material change in, or agree to any material change in, any material contract set forth in Section 3.17 of the Disclosure Schedule attached to the Merger Agreement; (v) authorize one or more capital expenditures that are, in the aggregate, in excess of U.S. $75,000 for the Company and any of its subsidiaries taken as a whole, other than capital expenditures with respect to projects that have commenced prior to the date of the Merger Agreement, or with respect to which equipment has been ordered prior to the date of the Merger Agreement, so long as, with respect to such projects, the Parent has been informed in writing thereof prior to the date of the Merger Agreement and, with respect to such orders, the Company discusses with the Parent or its representatives, promptly after the date of the Merger Agreement, such orders and the intended uses of the equipment the subject thereof, PROVIDED that the Company shall report on the progress of any such project in accordance with Section 5.02 of the Merger Agreement; or (vi) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this paragraph (e); (f) increase the compensation payable or to become payable to its officers, employees or consultants, except for increases in accordance with past practices in salaries or wages of employees of the Company or any of its subsidiaries who are not officers of the Company, or grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of the Company or any of its subsidiaries, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (g) take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivable); (h) make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (i) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the Company's balance sheet dated June 30, 1998, or subsequently incurred in the ordinary course of business and consistent with past practice; (j) make any material alterations or modifications to any of the water sources used by the Company, including, without limitation, any new boreholes or any new wells; or (k) announce an intention, enter into any formal or informal agreement, or otherwise make a commitment, to do any of the foregoing. NO SOLICITATION. Neither the Company nor any Subsidiary will, directly or indirectly, through any officer, director, agent or otherwise, solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or any material portion of the assets of, or any equity interest in, the Company or any Subsidiary or any business combination with the Company or any Subsidiary (a "Takeover Proposal") or participate in any negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing. However, if the Board determines in good faith, after consultation with and based on the written advice of independent legal counsel, that it is necessary to do so in order to comply with its fiduciary duties under Pennsylvania law, the Company may, in response to a Superior Proposal (as defined below) that was not solicited by it or that did not otherwise result from a breach of its obligations described above, and subject 30 to providing prior written notice of its decision to take such action to the Parent and compliance with the second following paragraph, (i) furnish information with respect to the Company and its subsidiaries to any person making a Superior Proposal pursuant to a confidentiality agreement no less favorable to the Company than the Confidentiality Agreement dated September 11, 1998, between the Parent and the Company, and (ii) participate in discussions or negotiations regarding such Superior Proposal. For purposes of the Merger Agreement, "Superior Proposal" means any proposal made by a third party (A) to acquire, directly or indirectly, more than 50% of the combined voting power of the Shares then outstanding or all or substantially all the assets of the Company and its subsidiaries, (B) that is otherwise on terms that the Board determines in its good faith judgment (after consultation with, and based upon the written advice of, a financial advisor of nationally recognized reputation and independent legal counsel) to be more favorable to the Company and its shareholders than the transactions contemplated by the Merger Agreement, (C) for which financing, to the extent required, is then committed, and (D) for which, in the good faith judgment of the Board, no regulatory approvals, including antitrust approvals, are required that could not reasonably be expected to be obtained. The Merger Agreement also provides that the Company will notify the Parent promptly if any Takeover Proposal, or any inquiry or contact with any person with respect thereto, is made and will, in the notice, indicate the identity of the person making the Takeover Proposal, offer, inquiry or contact and the terms and conditions of the Takeover Proposal, inquiry or contact. The Company will keep the Parent reasonably informed of the status and details, including amendments or proposed amendments to any request or Takeover Proposal. The Company has agreed not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Company is a party. The Merger Agreement also provides that the Board will not (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to the Parent or the Purchaser its approval and recommendation of the Merger Agreement and the transactions contemplated in the Merger Agreement, (ii) approve or recommend or propose to approve or recommend any Takeover Proposal that is not a Superior Proposal approved or recommended in accordance with the provisions set forth above, or (iii) enter into any agreement with respect to any Takeover Proposal. Notwithstanding the foregoing, if the Board determines in good faith, after consultation with and based on the written advice of independent legal counsel, that it is necessary to do so in order to comply with its fiduciary duties under Pennsylvania law, the Board may withdraw or modify its approval and recommendation of the Merger Agreement and the transactions contemplated in the Merger Agreement, approve or recommend a Superior Proposal or enter into an agreement with respect to a Superior Proposal, at any time after midnight on the fifth business day following the Parent's receipt of written notice that the Board has received a Superior Proposal, specifying the terms and conditions of the Superior Proposal and the identity of the person making the Superior Proposal. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that the Articles of Incorporation and Bylaws of the Surviving Corporation will contain provisions no less favorable with respect to indemnification than are set forth in Article VII of the Bylaws of the Company, which provisions will not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at the Effective Time were directors, officers, employees, fiduciaries or agents of the Company, unless such modification is required by law. The Merger Agreement also provides that the Company will, to the fullest extent permitted by law, indemnify and hold harmless, and, after the Effective Time, the Surviving Corporation will indemnify and hold harmless, each current and former director, officer, employee, fiduciary and agent of the Company and each Subsidiary against all costs and expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, criminal, 31 administrative or investigative, arising out of or pertaining to any action or omission in their capacity as an officer, director, employee, fiduciary or agent, whether occurring before or after the Effective Time, for a period of six years after the date hereof. In the event of any such claim, action, suit, proceeding or investigation, (i) the Company or the Surviving Corporation, as the case may be, will pay the reasonable fees and expenses of counsel selected by the indemnified parties, which counsel will be reasonably satisfactory to the Company or the Surviving Corporation and (ii) the Company and the Surviving Corporation will cooperate in the defense of any such matter. The Surviving Corporation will use its reasonable best efforts to maintain in effect for three years from the Effective Time, if available, the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute policies of at least the same coverage containing terms and conditions that are not materially less favorable) with respect to matters occurring prior to the Effective Time. However, in no event will the Surviving Corporation be required to expend more than an amount per year equal to 150% of current annual premiums paid by the Company for such insurance. The Merger Agreement provides that, in accordance with the terms of the Company's stock option plans, the Company will cause each outstanding option to purchase Shares granted under the stock option plans to, immediately prior to the Effective Time, become exercisable regardless of the installment provisions contained in the stock option plans and to be terminated at the Effective Time. Furthermore, the Company will use its reasonable best efforts to obtain the consent of other holders of options to purchase Shares, to the termination, immediately prior to the Effective Time, of the stock options held by them pursuant to their respective option agreements. Each such option holder will be paid by the Company, at or immediately prior to the Effective Time with respect to each stock option, in consideration of such termination, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Amount over the applicable exercise price under the option by (ii) the number of Shares the option holder could have purchased if he or she had exercised the options in full immediately prior to the Effective Time. The Merger Agreement provides that the Company will use its reasonable best efforts to obtain the consent of Edward J. Lauth, III, James D. Hammond and Marion I. Hammond, and Nancy J. Davis to the termination, immediately prior to the Effective Time, of the warrants held by each of them pursuant to the Warrants dated as of April 6, 1995, the Warrant dated as of November 21, 1995, and the Warrant dated as of August 28, 1996, respectively. Each such holder of warrants will be paid by the Company, at or immediately prior to the Effective Time with respect to each warrant, in consideration of termination, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Amount over the applicable exercise price under the warrant by (ii) the number of Shares the holder could have purchased had he or she exercised the warrant in full immediately prior to the Effective Time. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties of the parties thereto including representations concerning the Company's corporate organization and qualification, subsidiaries, Articles of Incorporation and By-laws, capitalization, authority, shareholder vote required under Pennsylvania Law, no conflicts, filings with the Commission and other governmental authorities, compliance with law, financial statements (including a representation that the Company's audited financial statements for the year ended September 30, 1998, to be delivered to the Parent will not be "materially less favorable" (as defined in the Merger Agreement) than the preliminary year-end financial statements), absence of certain changes or events, litigation, employment benefit matters, labor matters, intellectual property, tangible property, real property, taxes, insurance, environmental matters, material contracts, brokers, financial advisors and Pennsylvania Law. CONDITIONS TO CONSUMMATION OF THE SHORT-FORM MERGER. The Merger Agreement provides that the respective obligations of each party to effect the Short-Form Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) no administrative, governmental or regulatory 32 authority or body, domestic or foreign (a "Governmental Entity"), or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the acquisition of Shares by the Parent or the Purchaser or any affiliate of either of them or the consummation of the Short-Form Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Transactions; and (b) the Purchaser or its permitted assignee has purchased all Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED, HOWEVER, that this condition shall not be applicable to the obligations of the Parent or the Purchaser if, in breach of the Merger Agreement or the terms of the Offer, the Purchaser or such assignee fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. CONDITIONS TO CONSUMMATION OF THE LONG-FORM MERGER. The Merger Agreement provides that the respective obligations of each party to effect the Long-Form Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) the Merger Agreement and the Long-Form Merger have been adopted by the affirmative vote of a majority of the votes cast by all holders of Shares entitled to vote thereon; (b) any waiting period (and any extension thereof) applicable to the consummation of the Long-Form Merger under the HSR Act has expired or been terminated; (c) no Governmental Entity or foreign, United States or state court of competent jurisdiction has enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the consummation of the Long-Form Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Long-Form Merger. Pursuant to the terms of the Merger Agreement, the obligations of the Parent and the Purchaser to effect the Long-Form Merger are also subject to the following conditions at or as of the Effective Time: (a) the representations and warranties of the Company in the Merger Agreement and of each Shareholder in the respective Shareholder Agreement that are qualified as to materiality are true and correct and all such representations and warranties that are not so qualified are true and correct in all material respects, in each case on or as of the Effective Time (other than representations and warranties that address matters only as of a certain date which shall be true and correct in the same manner as of such certain date); (b) the Company has performed in all material respects all obligations and complied in all material respects with each agreement and covenant of the Company to be performed or complied with by it under the Merger Agreement and each Shareholder has performed in all material respects all obligations and complied in all material respects with each agreement and covenant of such Shareholder to be performed or complied with by such Shareholder under the applicable Shareholder Agreement; (c) all consents, approvals and authorizations required to be obtained to consummate the Long-Form Merger have been obtained from all Governmental Entities, except for such consents, approvals and authorizations the failure of which to obtain would not have a material adverse effect on the Parent or the Purchaser (assuming that the Long-Form Merger shall have been effected); (d) no events set forth in paragraph (a), (b), (j) or (k) of the conditions to the Offer set forth in "Section 14. Conditions to the Offer" has occurred; and (e) no change, condition, event or development that has a Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company has occurred since June 30, 1998. The obligation of the Company to effect the Long-Form Merger is also subject to the following conditions at or as of the Effective Time: (a) the representations and warranties of the Parent and the Purchaser in the Merger Agreement that are qualified as to materiality are true and correct and all such representations and warranties that are not so qualified are true and correct in all material respects, in each case on or as of the Effective Time (other than representations and warranties which address matters only as of a certain date which shall be true and correct in the same manner as of such certain date); and (b) the Parent and the Purchaser have performed in all material respects all obligations and complied in all material respects with each agreement and covenant of the Parent and the Purchaser, respectively, to be 33 performed or complied with by it under the Merger Agreement, and the Company has received a certificate from a duly authorized officer of the Parent to such effect. TERMINATION. The Merger Agreement may be terminated and the Merger and the other transactions contemplated thereby may be abandoned at any time prior to the Effective Time, notwithstanding any requisite adoption of the Merger Agreement and the transactions contemplated hereby by the shareholders of the Company: (a) by mutual written consent duly authorized by the Boards of Directors of the Parent, the Purchaser and the Company; or (b) by the Parent, the Purchaser or the Company if (x) the Effective Time has not occurred on or before March 31, 1999; PROVIDED, HOWEVER, that this right to terminate is not 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 Effective Time to occur on or before such date or (y) a Governmental Entity or foreign, United States or state court of competent jurisdiction has enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the consummation of the Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Merger. In addition, the Merger Agreement may be terminated, and the Merger and the other transactions contemplated hereby may be abandoned at any time prior to the earlier of the expiration or termination of the Offer without the Minimum Condition having been satisfied and the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated hereby by the shareholders of the Company: (a) by the Parent, upon approval of its Board of Directors, if due to a failure to satisfy any of the conditions set forth in "Section 14. Conditions to the Offer," the Purchaser has (1) failed to commence the Offer within five business days following the date of the Merger Agreement, (2) terminated the Offer without having accepted any Shares for payment or (3) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer; unless such action or inaction under (1), (2) or (3) was caused by or resulted from the failure of the Parent or the Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by the Parent or the Purchaser of any material representation or warranty of either of them contained in the Merger Agreement; (b) by the Company, upon approval of the Board, if due to a failure to satisfy any of the conditions set forth in "Section 14. Conditions to the Offer," the Purchaser has (1) failed to commence the Offer within five business days following the date of the Merger Agreement, (2) terminated the Offer without having accepted any Shares for payment or (3) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such action or inaction under (1), (2) or (3) was caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in the Merger Agreement or the material breach by the Company of any material representation or warranty of it contained in the Merger Agreement; (c) by the Company, in connection with entering into a definitive agreement with respect to a Superior Proposal in accordance with the "No Solicitation" provisions described above; PROVIDED that the Company has complied with its obligations under such provisions, and that it makes simultaneous payment of the Fee and Expenses discussed below; or (d) by the Parent, if the Board shall have modified or withdrawn in a manner adverse to the Parent and the Purchaser its approval and recommendation of the Merger Agreement and the transactions contemplated thereby or shall have approved or recommended to the Company's shareholders a Superior Proposal. The Merger Agreement may be terminated and the Long-Form Merger may be abandoned at any time prior to the Effective Time but after the expiration or termination of the Offer without the Minimum Condition having been satisfied, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated thereby by the shareholders of the Company: (a) by the Parent in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in the Merger Agreement that (A) would give rise to the failure of the condition relating to the Company's representations and warranties or covenants set forth above and (B) cannot be 34 or has not been cured within 20 days after the giving by the Parent of written notice to the Company or upon the occurrence of any of the events set forth in paragraph (a), (b) or (c) of the conditions to the offer set forth in "Section 14. Conditions to the Offer"; (b) by the Company in the event of a breach by the Parent or the Purchaser of any of their respective representations, warranties, covenants or other agreements contained in the Merger Agreement that (A) would give rise to the failure of a condition relating to the Parent's and the Purchaser's representations and warranties or covenants set forth above and (B) cannot be or has not been cured within 20 days after the giving by the Company of written notice to the Parent and the Purchaser; or (c) by the Parent or the Company if the shareholders of the Company do not approve the Merger Agreement at the shareholders' meeting convened for such purpose, or any adjournment or postponement thereof. FEES AND EXPENSES. The Merger Agreement provides that in the event that (i) the Merger Agreement is terminated pursuant to clause (c) or (d) of the second preceding paragraph or (ii) any person has commenced, or publicly announced and not withdrawn its intention to commence, a tender or exchange offer for 20% or more (or which, assuming the maximum amount of securities that could be purchased, would result in any person beneficially owning 20% or more) of the then outstanding Shares or otherwise for the direct or indirect acquisition of the Company or all or a substantial portion of its assets and (A) the Offer has remained open for at least 20 business days, (B) the Minimum Condition has not been satisfied, (C) the Merger Agreement has been terminated pursuant to clause (c) of the preceding paragraph and (D) within six months following the date of termination of the Merger Agreement, a Takeover Proposal between the Company and such other person shall have been consummated, then, in any such event, the Company will pay the Parent promptly (but in no event later than one business day after the first of such events has occurred) a fee of U.S.$3,400,000 (the "Fee"), payable in immediately available funds, plus all Expenses up to U.S.$750,000 in the aggregate. The term "Expenses" means all out-of-pocket expenses and fees of each of the Parent, the Purchaser and their respective shareholders and affiliates (including, without limitation, fees and expenses payable to all banks, investment banking firms, other financial institutions and other persons and their respective agents and counsel for arranging, committing to provide or providing any financing for the transactions contemplated by the Merger Agreement or structuring the transactions contemplated by the Merger Agreement and all fees of counsel, accountants, experts and consultants to the Parent and the Purchaser, and all printing and advertising expenses and all costs and expenses incurred by or on behalf of the Parent and the Purchaser in connection with the collection under and enforcement of this Fee and Expenses provision) actually incurred or accrued by any of them or on their behalf in connection with the transactions contemplated by the Merger Agreement, including, without limitation, the financing thereof, and actually incurred or accrued by banks, investment banking firms, other financial institutions and other persons and assumed by the Parent and the Purchaser in connection with the negotiation, preparation, execution and performance of the Merger Agreement, the structuring and financing of the Transactions and any financing commitments or agreements relating thereto. Except as set forth above, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement will be paid by the party incurring such expenses, whether or not any transaction is consummated. FACILITY INVESTMENT AGREEMENT. Pursuant to the terms of the Merger Agreement, the Company has agreed to enter into, as promptly as practicable but in no event more than twenty days from the date of the Merger Agreement, at the Parent's request, an agreement with the Parent on terms and conditions annexed to the Merger Agreement, which provide, among other things, for the construction of a new PET bottling production line at the Company's facility in Florida. THE SHAREHOLDER AGREEMENTS The Parent, the Purchaser and each Shareholder have also entered into a Shareholder Agreement pursuant to which the Shareholder has agreed to tender irrevocably to the Purchaser pursuant to the Offer 35 the Shares held by such Shareholder and any Shares acquired by such Shareholder pursuant to the exercise of any options or warrants held by such Shareholder (collectively, the "Option Shares") at the Per Share Amount (as of November 2, 1998, Edward J. Lauth, III, owned 1,022,854 Shares and options or warrants for the purchase of 75,100 Shares, constituting approximately 12.32% of the outstanding Shares on a fully diluted basis; Geoffrey F. Feidelberg owned 149,727 Shares and options or warrants for the purchase of 225,480 Shares, constituting approximately 4.21% of the outstanding Shares on a fully diluted basis; and Matthew Suhey owned 378,152 Shares, constituting approximately 4.24% of the outstanding Shares on a fully diluted basis). Each Shareholder also has granted to the Purchaser an irrevocable option to purchase, upon the termination of the Merger Agreement, all Option Shares at the Per Share Amount (each, an "Option"). In addition, each Shareholder has appointed the Purchaser, or any nominee of the Purchaser, during the term of the Option, as his attorney and proxy to vote each of the Option Shares (i) in favor of the adoption of the Merger Agreement and the Long-Form Merger and the other transactions contemplated by the Merger Agreement, (ii) against any proposal for any recapitalization, merger, sale of assets or other business combination between the Company and any person (other than the Merger) or any other action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or which could result in any of the conditions to the Company's obligations under the Merger Agreement not being fulfilled and (iii) in favor of any other matter relating to consummation of the transactions contemplated by the Merger Agreement. The Purchaser also has the discretionary right to require each Shareholder to exercise all of his vested options in the Shares, whereupon all Shares resulting from such exercise shall automatically become Option Shares subject to the Purchaser's Option. The Purchaser is entitled to exercise the Stock Option at any time following the termination of the Merger Agreement until the close of business on the 30th day following such termination. The obligation of each Shareholder to deliver the Option Shares upon exercise of the Option is subject to (i) any waiting periods under the HSR Act applicable to such exercise of the Option having expired or been terminated, (ii) there being no preliminary or permanent injunction or other order by any court of competent jurisdiction prohibiting or otherwise restraining such exercise of the Option, and (iii) the number of Shares to be purchased by the Purchaser pursuant to the exercise of the Option does not cause the aggregate number of Shares, including any Shares acquired by the Purchaser pursuant to Section 1.01 of the Merger Agreement and the other Shareholder Agreements, to be held by the Purchaser immediately following such exercise, to exceed 19.9% of the then issued and outstanding Shares. Each Shareholder Agreement provides that all payments made by the Purchaser to the respective Shareholder shall be made by wire transfer in immediately available funds to an account designated by such Shareholder and simultaneously therewith such Shareholder will deliver his Option Shares at the applicable closing of such purchase. THE EMPLOYMENT AGREEMENTS On November 2, 1998, Great Brands entered into employment agreements with each of Edward J. Lauth, III, and Geoffrey F. Feidelberg (the "Employment Agreements") and a consulting agreement with Matthew Suhey (the "Suhey Agreement"). The Employment Agreements each have a term of one year that will commence at the Effective Time. Mr. Feidelberg's Employment Agreement is automatically renewable for additional one-year terms unless either party gives notice of its intent to terminate at least ninety days prior to the first anniversary of the Effective Time (the "Anniversary Date"). Under the Employment Agreements, Messrs. Lauth and Feidelberg (the "Executives") will receive annual base salaries of $200,000 and $160,000, respectively, which may be increased, but not decreased annually. Beginning calendar year 1999, the Executives will also be entitled to participate in Great Brands' executive bonus program pursuant to which each Executive may be awarded up to 35% of his base salary based upon the results of Great Brands' North American operations as well as his meeting certain personal objectives. 36 Mr. Lauth's Employment Agreement provides for severance benefits in an amount equal to one year's base salary, bonus, and benefits if Mr. Lauth resigns for "good reason" (as defined in the Employment Agreements), or if his employment is terminated by Great Brands other than for "cause" (as defined in each of the Employment Agreements) or disability (an "Involuntary Termination"). Mr. Feidelberg's Employment Agreement provides for one year's base salary and benefits if Mr. Feidelberg suffers an Involuntary Termination on or after the Anniversary Date, and two year's base salary and benefits if he suffers an Involuntary Termination prior to the Anniversary Date. The Employment Agreements also provide that upon an Involuntary Termination, each Executive will receive, in equal monthly installments, an amount equal to the Company's matching contribution to the Company 401(k) Plan, for a one-year period based on the Executive's contribution rate on the date of termination. In addition, each of the Executives has agreed not to compete with Great Brands or its parent or subsidiaries (the "Group") or to solicit the clients, prospective clients, employees, consultants or independent contractors of the Group for a period of up to two years following the termination of his employment, depending on the circumstances of his departure. The Executives have also agreed that they will not, at any time during or after their employment terms, disclose or otherwise utilize any confidential or proprietary information obtained during their employment other than in the performance of their duties on behalf of Great Brands or with the prior consent of Great Brands. Pursuant to the Employment Agreements, the Executives were granted, subject to the approval of the Parent's Board of Directors, stock options (the "Employment Stock Options") which will be exercisable for ordinary shares of the Parent that will become 100% vested on the second anniversary of the date of grant and Mr. Feidelberg was granted 1,500 Employment Stock Options that will become 100% vested on the fifth anniversary of the date of grant. If the Executives are terminated for "cause" or resign without "good reason", any unvested Employment Stock Options will immediately lapse. The Suhey Agreement has a term of one year and is automatically renewable for an additional one-year period unless either party gives notice of its intent to terminate at least ninety days prior to the Anniversary Date. Under the Suhey Agreement, Mr. Suhey is entitled to an annual consulting fee of $250,000 per year. Mr. Suhey is also entitled to a $50,000 lump sum bonus in the event that on or before the end of the sixth month after the Effective Time (the "Bonus Period"), the volume of Mr. Suhey's account base existing on November 2, 1998, increases sufficiently so as to equal the "water category growth rate" based on the most current available syndicated data. In addition, as soon as practicable after the Effective Time, Mr. Suhey and the Company will agree upon a bonus formula or determination method (the "Bonus Formula") to measure Mr. Suhey's success in securing new accounts for Great Brands during the period prior to the Anniversary Date. After the Anniversary Date, Mr. Suhey will be entitled to receive a bonus of up to $50,000 pursuant to the Bonus Formula. The Suhey Agreement may be terminated by either Great Brands or Mr. Suhey at any time, for any reason or for no stated reason. If the Suhey Agreement is terminated by Great Brands or by mutual agreement of the parties prior to the Anniversary Date, Mr. Suhey is entitled to a lump sum amount equal to the portion of the consulting fee that Mr. Suhey would have received for the period beginning on the date of termination and ending on the Anniversary Date. In addition, Mr. Suhey has agreed not to compete with the Group or to solicit the clients, prospective clients, employees, consultants or independent contractors of the Group for a period of one year following the termination of the Suhey Agreement. Mr. Suhey has also agreed that he will not, at any time during or after the consulting term, disclose or utilize any confidential or proprietary information obtained during his consultancy other than in the performance of his duties on behalf of Great Brands or with the prior written consent of Great Brands. THE REGISTRATION RIGHTS AGREEMENT The Purchaser, the Parent and the Company have entered into, concurrently with the Merger Agreement, a Registration Rights Agreement (the "Registration Rights Agreement"). Pursuant to the terms of the Registration Rights Agreement, the Purchaser or its assignees under the Merger Agreement, 37 at any time after it acquires Shares may, with respect to at least 20% of the Shares which have been purchased by the Purchaser pursuant to the Merger Agreement or any Shareholder Agreement (the "Registrable Shares") demand that the Company file a registration statement under the Securities Act of 1933, as amended ("Securities Act"), covering the registration of such Registrable Shares. In addition, if at any time, the Company determines that it will file a registration statement under the Securities Act (other than a registration statement on a Form S-4 or S-8 as filed in connection with an exchange offer or an offering of securities solely to the Company's existing shareholders) on any form that would also permit the registration of the Registrable Shares and such filing is to be on its behalf and/or on behalf of selling holders of its securities for the general registration of its common stock to be sold for cash, the Company will promptly give the Purchaser or its assignees under the Merger Agreement written notice of such determination setting forth the date on which the Company proposes to file such registration statement, which date shall be no earlier than fifteen (15) days from the date of such notice, and advising the Purchaser or its assignees under the Merger Agreement of their right to have Registrable Shares included in such registration. Upon the written request of any Purchaser or its assignees under the Merger Agreement received by the Company no later than ten days after the date of receipt of the Company's notice, the Company will use its reasonable efforts to cause to be registered under the Securities Act all of the Registrable Shares that each such Holder has so requested to be registered. 12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the Company shall not, between the date of the Merger Agreement and the Effective Time, without the prior written consent of the Parent, (a) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of any shares of capital stock of any class of the Company or any subsidiary of the Company or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any subsidiary of the Company, (b) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, or (c) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock. See "Section 11. Purpose of the Offer; Plans for the Company after the Offer and the Merger; the Merger Agreement; and Related Agreements." 13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION. The purchase of Shares by the Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. The Purchaser intends to cause the Shares not to be listed for quotation on the NYSE following consummation of the Offer. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NYSE for confirmed listing and may be delisted from the NYSE. According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the number of record holders of at least 100 Shares should fall below 1,200, the number of publicly held Shares (exclusive of holdings of officers, directors and their families and other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall below 600,000, or the aggregate market value of publicly held Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements of the NYSE for continued listing and the listing of Shares is discontinued, the market for the Shares could be adversely affected. If the NYSE were to delist the Shares, it is possible that the Shares would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or other sources. The extent of the public market for such and the availability of such quotations would depend, however, upon such factors as the number of shareholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act 38 as described below, and other factors. The Parent and the Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares of whether it would cause future market prices to be greater or lesser than the Per Share Amount. The Shares are currently "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for reporting on the National Association of Securities Dealers Automated Quotation System. The Purchaser currently intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration are met. 14. CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Offer, the Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Minimum Condition is not satisfied, (ii) any applicable waiting period under the HSR Act has not expired or been terminated prior to the expiration of the Offer or (iii) at any time on or after the date of the Merger Agreement, and prior to the acceptance for payment of Shares, any of the following conditions exists: (a) there has been instituted or is pending any action or proceeding (other than actions or proceedings which, in the good faith reasonable judgment of the Parent, after consultation with independent legal counsel, do not have any basis in fact or a reasonable likelihood of success on the merits) before any court or Governmental Entity, (i) challenging or seeking to make illegal, materially delay or otherwise directly or indirectly restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by the Parent, the Purchaser or any other affiliate of the Parent, the purchase of Shares pursuant to any Shareholder Agreement, or the consummation of any other transaction contemplated by the Merger Agreement, or seeking to obtain material damages in connection with any transaction contemplated by the Merger Agreement; (ii) seeking to prohibit or limit materially the ownership or operation by the Company, the Parent or any of their subsidiaries of all or any material portion of the business or assets of the Company, the Parent or any of their subsidiaries, or to compel the Company, the Parent or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company, the Parent or any of their subsidiaries, as a result of the transactions contemplated by the Merger Agreement; (iii) seeking to impose or confirm limitations on the ability of the Parent, the Purchaser or any other affiliate of the Parent to exercise effectively full rights of ownership of any Shares, including, 39 without limitation, the right to vote any Shares, except as specifically provided in Pennsylvania Law, acquired by the Purchaser pursuant to the Offer, any Shareholder Agreement or otherwise on all matters properly presented to the Company's shareholders, including, without limitation, the approval and adoption of the Merger Agreement and the transactions contemplated hereby; (iv) seeking to require divestiture by the Parent, the Purchaser or any other affiliate of the Parent of any Shares; or (v) which otherwise has a Material Adverse Effect (as defined in the Merger Agreement) or which would materially adversely affect the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) or prospects of the Parent; (b) there has been any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, entered, enforced, promulgated, amended, issued or deemed applicable to (i) the Parent, the Company or any subsidiary or affiliate of the Parent or the Company or (ii) any transaction contemplated by the Merger Agreement, by any legislative body, court, Governmental Entity, other than the routine application of the waiting period provisions of the HSR Act to the Offer, any Shareholder Agreement or the Merger, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; PROVIDED, HOWEVER, that the Parent shall have used reasonable efforts to cause any such judgment, order or injunction to be vacated or lifted; (c) there has occurred, since June 30, 1998, any change, condition, event or development that has a Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company; (d) there has occurred (i) any general suspension of, or limitation on prices for, trading in securities of the Company on the New York Stock Exchange for a period in excess of 2 hours (excluding emergencies or limitations resulting solely from physical damage, interference with such exchange not related to market conditions, or any trading halt triggered solely as a result of a specified decrease in a market index) (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or France, (iii) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, on, or other event that, in the reasonable judgment of the Purchaser, affects, the extension of credit by banks or other lending institutions, (iv) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or (v) in the case of any of the foregoing existing on the date hereof, a material acceleration or worsening thereof; (e) it has publicly disclosed or the Parent or the Purchaser has otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the then outstanding Shares has been acquired by any person, other than the Parent or any of its affiliates; (f) any representation or warranty of the Company in the Merger Agreement or of any Shareholder in the respective Shareholder Agreement that is qualified as to materiality is not true and correct or any such representation or warranty that is not so qualified is not true and correct in any material respect, in each case when made on or immediately following the expiration of the Offer as though made on or as of such date, except those representations and warranties that address matters only as of a certain date which shall not be true and correct as of such certain date; (g) the Company has failed to perform in any material respect any material obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement or the Shareholders have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of any Shareholder to be performed or complied with by such Shareholder under the respective Shareholder Agreement; 40 (h) the Merger Agreement has been terminated in accordance with its terms; (i) the Purchaser and the Company have agreed that the Purchaser terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; (j) any Option Consent or Warrant Consent have not been obtained immediately prior to the expiration of the Offer; or (k) the Parent and the Purchaser have not received immediately prior to the expiration of the Offer the opinions of Ballard Spahr Andrews & Ingersoll, LLP, as to the matters set forth in Sections 3.04 and 3.21 of the Merger Agreement, and of McQuaide Blasko, as to the matters set forth in Section 3.01 of the Merger Agreement, in each case in form and substance satisfactory to the Parent and the Purchaser; which, in the sole judgment of the Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by the Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with the Offer and with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and the Parent and may be asserted by the Purchaser or the Parent regardless of the circumstances giving rise to any such condition or may be waived by the Purchaser or the Parent in whole or in part at any time and from time to time in their sole discretion. The failure by the Parent or the Purchaser at any time to exercise any of the foregoing rights is not deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances is not deemed a waiver with respect to any other facts and circumstances; and each such right is deemed an ongoing right that may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. GENERAL. Based upon its examination of publicly available information with respect to the Company and the review of certain information furnished by the Company to the Parent and discussions of representatives of Parent with representatives of the Company during Parent's investigation of the Company (see "Section 10. Background of the Offer; Contacts with the Company"), neither the Purchaser nor the Parent is aware of any license or other regulatory permit that appears to be material to the business of the Company and the Subsidiaries, taken as a whole, which might be adversely affected by the acquisition of Shares by the Purchaser pursuant to the Offer, or, except as set forth below, of any approval or other action by any domestic (federal or state) or foreign governmental, administrative or regulatory authority or agency which would be required prior to the acquisition of Shares by the Purchaser pursuant to the Offer. Should any such approval or other action be required, it is the Purchaser's present intention to seek such approval or action. The Purchaser does not currently intend, however, to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any such action or the receipt of any such approval (subject to the Purchaser's right to decline to purchase Shares if any of the conditions in "Section 14. Conditions to the Offer" shall have occurred). There can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company, the Purchaser or the Parent or that certain parts of the businesses of the Company, the Purchaser or the Parent might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or other action or in the event that such approval was not obtained or such other action was not taken. The Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions, including conditions relating to the legal matters discussed in this "Section 15. Certain Legal Matters and Regulatory Approvals." See "Section 14. Conditions to the Offer." STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, shareholders, executive offices or places of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States held that the Illinois Business Takeover Act, 41 which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable only under certain conditions. The Pennsylvania Takeover Disclosure Law ("PTDL") purports to regulate certain attempts to acquire a corporation which (1) is organized under the laws of Pennsylvania or (2) has its principal place of business and substantial assets located in Pennsylvania. In CRANE CO. V. LAM, 509 F. SUPP. 782 (E.D. PA. 1981), the United States District Court for the Eastern District of Pennsylvania preliminarily enjoined, on grounds arising under the United States Constitution, enforcement of at least the portion of the PTDL involving the pre-offer waiting period thereunder. Section 8(a) of the PTDL provides an exemption for any offer to purchase securities as to which the board of directors of the target company recommends acceptance to its shareholders, if at the time such recommendation is first communicated to shareholders the offeror files with the Pennsylvania Securities Commission ("PSC") a copy of the Schedule 14D-1 and certain other information and materials, including an undertaking to notify security holders of the target company that a notice has been filed with the PSC which contains substantial additional information about the offer and which is available for inspection at the PSC's principal office during business hours. The Board has unanimously approved the transactions contemplated by the Merger Agreement and recommended acceptance of the Offer and the Merger to the Company's shareholders. While reserving and not waiving its right to challenge the validity of the PTDL or its applicability to the Offer, the Purchaser is making a Section 8(a) filing with the PSC in order to qualify for the exemption from the PTDL. Pursuant to Section 10 of the PTDL, the Purchaser will submit the appropriate $100 notice filing fee along with the Section 8(a) filing. Additional information about the Offer has been filed with the Pennsylvania Securities Commission pursuant to the Pennsylvania Takeover Disclosure Law and is available for inspection at the Pennsylvania Securities Commission's office at Eastgate Office Building, 1010 North 7th Street, Harrisburg, PA 17102-1410, during business hours. Chapter 25 of Pennsylvania Law contains other provisions relating generally to takeovers and acquisitions of certain publicly owned Pennsylvania corporations such as the Company that have a class or series of shares entitled to vote generally in the election of directors registered under the Exchange Act (a "registered corporation"). The following discussion is a general and highly abbreviated summary of certain features of such chapter, is not intended to be complete or to completely address potentially applicable exceptions or exemptions, and is qualified in its entirety by reference to the full text of Chapter 25 of Pennsylvania Law. In addition to other provisions not applicable to the Offer or the Merger, Subchapter 25D of Pennsylvania Law includes provisions requiring approval of a merger of a registered corporation with an "interested shareholder" in which the "interested shareholder" is treated differently from other shareholders, by the affirmative vote of the shareholders entitled to cast at least a majority of the votes that all shareholders other than the interested shareholder are entitled to cast with respect to the transaction without counting the votes of the interested shareholders. This disinterested shareholder approval requirement is not applicable to a transaction (i) approved by a majority of disinterested directors, (ii) in which the consideration to be received by shareholders is not less than the highest amount paid by the interested shareholder in acquiring such shareholder's shares, or (iii) effected without submitting the Merger to a vote of shareholders as permitted in Section 1924(b)(1)(ii) of the Pennsylvania Law. The Purchaser currently believes that the disinterested shareholders approval requirement of Subchapter 25D will not be applicable to the contemplated Merger because of prior disinterested Board approval. The Company has represented to the Purchaser that Subchapter 25D is not applicable to the contemplated Merger. Subchapter 25E of Pennsylvania Law, which addresses "control transactions," requires under certain circumstances any person who acquires at least 20% of the voting power of a registered corporation to 42 offer to purchase up to the balance of the voting shares of the corporation at the price determined under the statute, which may not be less than the highest price per share paid by the controlling person or group at any time during the 90-day period ending on and including the date of the control transaction, plus an increment representing any value, including without limitation, any proportion of value payable for any acquisition of control of the corporation, that may not be reflected in such price. A "control transaction" will occur if the Purchaser acquires voting power over 20% or more of the Shares of the Company by purchasing Shares pursuant to the Offer. See "Section 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and Related Agreements." Subchapter 25F of Pennsylvania Law prohibits under certain circumstances certain "business combinations," including mergers and sales of pledges of significant assets, of a registered corporation with an "interested shareholder" for a period of five years. Subchapter 25F exempts, among other things, business combinations approved by the board of directors prior to a shareholder becoming an interested shareholder, transactions with interested shareholders who beneficially owned shares with at least 15% of the total voting power of a corporation on March 23, 1988 and remain so, and transactions involving a company whose bylaws or articles of incorporation provide that Subchapter F shall not be applicable to such corporation. The Company has represented to the Purchaser that the Merger has been duly and validly authorized by all necessary corporate action pursuant to Subchapter 25F. Subchapter 25G of Pennsylvania Law, relating to "control-share acquisitions," prevents under certain circumstances the owner of a control-share block of shares of a registered corporation from voting such shares unless a majority of the "disinterested" shares approve the restoration of such voting rights. Failure to obtain such approval may result in a forced sale by the control-share owner of the control-share block to the corporation at a possible loss. The purchase by the Purchaser of Shares may be deemed to constitute a control-share acquisition, with the result that the Purchaser would not have voting rights with respect to such control-shares unless the voting rights are restored by a disinterested shareholder vote. Subchapter 25H of Pennsylvania Law, relating to disgorgement by certain controlling shareholders of a registered corporation, provides that under certain circumstances any profit realized by a controlling person from the disposition of shares of the corporation to any person (including to the corporation under Subchapter 25G or otherwise) will be recoverable by the corporation. Subchapter 25I of Pennsylvania Law entitles "eligible employees" of a registered corporation to a lump sum payment of severance compensation under certain circumstances if the employee is terminated, other than for willful misconduct connected with the work of the employee, within 90 days before voting rights lost as a result of a control-share acquisition are restored by a vote of disinterested shareholders. Subchapter 25J of Pennsylvania Law provides protection against termination or impairment under certain circumstances of "covered labor contracts" of a registered corporation as a result of a "business combination transaction" if the business operation to which the covered labor contract relates was owned by the registered corporation at the time voting rights are restored by shareholder vote after a control-share acquisition. The Company has represented to the Purchaser that Subchapters 25I and 25J are not applicable to the transactions contemplated by the Merger Agreement. Section 2504 of Pennsylvania Law provides that the applicability of Chapter 25 of Pennsylvania Law to a registered corporation having a class or series of shares entitled to vote generally in the election of directors registered under the Exchange Act or otherwise satisfying the definition of a registered corporation under Section 2502(1) of Pennsylvania Law shall terminate immediately upon the termination of the status of the corporation as a registered corporation. The Purchaser intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of the registration of the Shares are met. Except for the filing pursuant to section 8(a) of the PTDL described above, neither the Purchaser nor the Parent has currently complied with any state takeover statute or regulation; however the Purchaser intends to comply with Subchapter 25E to the extent it is applicable upon consummation of the Offer. The 43 Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, Purchaser may not be obliged to accept for payment or pay for any Shares tendered pursuant to the Offer. ANTITRUST. Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer are subject to such requirements. See "Section 2. Acceptance for Payment and Payment for Shares." Pursuant to the HSR Act, promptly after the date hereof, the Parent will file a Premerger Notification and Report Form in connection with the purchase of Shares pursuant to the Offer with the Antitrust Division and the FTC. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar day waiting period following the filing by the Parent. Accordingly, the waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer will expire at 11:59 p.m., New York City time, on the day that is fifteen calendar days from the date of such filing, unless such waiting period is earlier terminated by the FTC and the Antitrust Division or extended by a request from the FTC or the Antitrust Division for additional information or documentary material prior to the expiration of the waiting period. Pursuant to the HSR Act, the Parent intends to request early termination of the waiting period applicable to the Offer. There can be no assurance, however, that the 15-day HSR Act waiting period will be terminated early. Thereafter, the waiting period could be extended only by court order. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer may, but need not, be extended and, in any event, the purchase of and payment for Shares will be deferred until 10 days after the request is substantially complied with, unless the extended period expires on or before the date when the initial 15-day period would otherwise have expired, or unless the waiting period is sooner terminated by the FTC and the Antitrust Division. Only one extension of such waiting period pursuant to a request for additional information is authorized by the HSR Act and the rules promulgated thereunder, except by court order. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See "Section 4. Withdrawal Rights." It is a condition to the Offer that the waiting period applicable under the HSR Act to the Offer expire or be terminated. See "Section 2. Acceptance for Payment and Payment for Shares" and "Section 14. Conditions to the Offer." The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by the Purchaser pursuant to the Offer. At any time before or after the purchase of Shares pursuant to the Offer by the Purchaser, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the divestiture of Shares purchased by the Purchaser or the divestiture of substantial assets of the Parent, the Company or their respective subsidiaries. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. Based upon an examination of information available to Parent relating to the businesses in which the Parent, the Company and their respective subsidiaries are engaged, the Parent and the Purchaser believe that the Offer will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer on antitrust grounds 44 will not be made or, if such a challenge is made, what the result would be. See "Section 15. Conditions to the Offer" for certain conditions to the Offer, including conditions with respect to litigation. 16. FEES AND EXPENSES. Except as set forth below, the Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. J.P. Morgan is acting as Dealer Manager in connection with the Offer and has provided certain financial advisory services in connection with the acquisition of the Company. Pursuant to an engagement letter dated September 18, 1998, the Parent has agreed to pay J.P. Morgan a fee of $500,000 upon the public announcement of the signing of the Merger Agreement, and a fee of $500,000 upon the completion of the Merger. The Parent has also agreed to reimburse J.P. Morgan for all reasonable out-of-pocket expenses incurred by J.P. Morgan, including reasonable fees and expenses of legal counsel, and to indemnify J.P. Morgan against certain liabilities and expenses in connection with its engagement. The Purchaser and Parent have retained MacKenzie Partners, Inc., as the Information Agent, and Harris Trust Company of New York, as the Depositary, in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telecopy, telegraph and personal interview and may request banks, brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners. As compensation for acting as Information Agent in connection with the Offer, the Information Agent will be paid a fee of $7,000 and will also be reimbursed for certain out-of-pocket expenses and may be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. The Purchaser will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the Depositary against certain liabilities and expenses in connection therewith, including under federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser for customary handling and mailing expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, the Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer Manager or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, Parent and the Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, furnishing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in "Section 7. Certain Information Concerning the Company" (except that they will not be available at the regional offices of the Commission). ZONEO ACQUISITION CORP. November 6, 1998 45 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. Set forth below is the name, current residence or business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of the Parent.
PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Frank Riboud.............................. Chairman and Chief Executive Officer of Groupe Danone since 1996; Groupe Danone Director of Groupe Danone since 1992; Director of Victoire (17, rue 7, rue de Teheran de la Banque, 75002 Paris, France) since 1995; Director of Abi 75008 Paris Holdings Limited (1London Bridge (c/o Price Waterhouse) SE1 9QL, France London, United Kingdom) since 1995; Director of Associated Biscuits Citizen of France International Ltd (United Kingdom--Food Production) since 1995; Director of Star S.p.A (Via Matteotti 142, 2004 Agragate Brianza Milano, Italy) since 1995; Director of Fiat (Via Nizza 250, 10121 Turin, Italy--Car Manufacturer); Director of Clover Holdings Limited (219, Golf Club Terrace, Roodeport 1709, South Africa) since 1996; Director of Aguas Minerales (Av, Juan b. Justo 1015, Buenos Aires, Argentina--Water Production) since 1996; Director of Strauss Dairies Ltd (Lohamei Ha'getaot, Israel) since 1996; Director of Starlux S.A. (Via Congost, S/N, 08160 Montmelo, Spain) from 1995 until 1997; Director of Semoulerie de Bellevue (4, rue de Boileau, 69006 Volvic, France) from 1995 until 1997; Director of Clover S.A. Limited (219, Golf Club Terrace, Roodeport 1709, South Africa) from 1996 until 1998.
I-1
PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Michel David-Weill........................ Vice-Chairman and Director of Groupe Danone; Chairman of the 6, place d'Alleray Compensation Committee of Groupe Danone; Chairman of Maison Lazard 75015 Paris International (France--Finance); Chairman of Lazard Freres & Co. LLC France (USA--Finance); General Partner and Chairman of Lazard Partners LP Citizen of France (USA-- Finance); Chairman of Eurafrance (France); Vice-Chairman of Lazard Brothers & Co. Ltd (England--Finance); Managing Partner of Lazard Freres & Cie. (France--Finance); Managing Partner of Maison Lazard & Cie. (France--Finance); Managing Partner of Partena (France); Managing Partner of Partemiel (France); Manager of Parteger (France); Manager of Parteman (France); Member of the Supervisory Board of Publicis (France--Advertising); Director of Maison Lazard S.A. (France--Finance); Director of La France Vie (France); Director of La France Participation et Gestion (France) since 1997; Director of S.A. de la rue imperiale de Lyon (France); Director of F.P.G. (France); Director of Pearson plc (England); Director of Euralux (Luxembourg); Director of Exor Group (Luxembourg); Director of ITT Industries (USA); Director of I.F.I. S.p.A. (Italy), Permanent Representative of Lazard Freres & Cie. to the Board of Cie. de Credit (France); Chairman of the Supervisory Board of SOVAC (France-- Banking) from 1982 until 1995; Director of Instituto Finanziario Industriale Internatianal S.A. (Luxembourg) from 1973 until 1994. Philippe Lenain........................... Director of Groupe Danone since 1991; President of Copart Groupe Danone B.V.-Cokoladovny Partners (Amsteldijk 166, 1079 LH Amsterdam, 7, rue de Teheran Netherlands) since 1995; Director of Eco- Emballages (44, avenue 75008 Paris Georges Pompidou, 92300 Levallois- Perret, France--Packaging) since France 1995; Director of Nord Est (10, rue d'Athenes, 75009 Paris); Director Citizen of France of Egidio Galbani S.p.A. (25 Via Fabio Filzi, 20124 Milano, Italy) since 1990; Director of San Miguel (Urgel 240, 08036 Barcelona, Spain) since 1992; Permanent representative of Finalim IV to the Board of Spacecode since 1996; President of Lyon Air (8, avenue Condorcet, 69100 Villeurbanne, France) since 1994.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Umberto Agnelli........................... Director of Groupe Danone; Member of the Strategy and Nomination Italy Advisory Committee of Groupe Danone; Chairman of IFIL S.p.A. (Italy) Citizen of Italy since 1983; Chairman of CARFIN S.r.l. (Italy) since 1983; Co-Chairman of Business Group Italia- Giappone (Italy); Vice-Chairman of Giovanni Agnelle e C. Sapaz (Italy) since 1995; Vice-Chairman and Director of IFI S.p.A. (Italy) since 1981; Director of Piaggio S.p.A. (Italy--Automobile Manufacturer) since 1988; Director of Universite Luiss (Italy); Member of the Supervisory Board and Member of the Strategy Committee of Worms & Cie. (France--Banking) since 1997; Member of the Advisory Committee of Allianz Versicherungs A.G. (Germany) since 1980; Member of the International Advisory Board of Fiat S.p.A. (Italy--Car Manufacturer); Member of the Strategy and Financial Committee of Groupe Danone from 1988 until 1996; Director of Worms & Cie. from 1990 until 1997; Member of the International Advisory Committee of U.A.P. (France-- Insurance) from 1991 until 1994; Dominique Auburtin........................ Director of Groupe Danone; Chairman of Worms & Cie. (France--Banking) France since 1998; Chairman of the Supervisory Board of Saint Louis Sucre Citizen of France S.A. (France--Sugar Production); Director of Athena Immobilier (France--Real Estate); Director of CAR S.A. (France); Director of La Boetie & Associes (France); Director of Les Petites Affiches (France-- Publishing); Director of Permal Group (France); Director of Arjo Wiggins Appleton (England); Member of the Supervisory Board of Worms & Cie. Developpement (France--Finance); Permanent Representative of Societe Fermiere et de Participations to the Board of Societe Fonciere de Joyenval (France--Real Estate); Permanent Representative of W Participations to the Boards of Antonin Rodet, Pechel Industries and Societe Fermiere et de Participations; Permanent Representative of Worms & Cie. to the Boards of Espace Expansion (France) and Arjomari-Prioux (France); Manager of Worms & Cie. before 1998; Chairman of Athena Immobilier before 1998; Chairman of S.A. de Transactions Immobileres et Commerciales (France--Real Estate) before 1998; Chairman of Societe Fermiere et de Participations before 1998; Chairman of W Participations before 1998; Vice-Chairman of Saint Louis before 1998; Director of Cie. Nationale de Navigation Foncina before 1998; Director of Worms Voyage before 1998; Director of La Rinascente before 1998; Executive Officer of SOMEAL before 1998.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Yves Boel................................. Director of Groupe Danone since 1972; Chairman of S.A Sofina c/o Sofina S.A. (Belgium) since 1988; Chairman, Managing Director of S.A. Union 38, rue de Naples Financiere Boel (Belgium--Finance) since 1973; Vice-Chairman of S.A. B 1050 Brussels Tractebel (Belgium) since 1987; Director of S.A. Societe de Belgium Participations Industrielles (Belgium--Investment) since 1988; Citizen of Belgium Director of Eurafrance, France, since 1988; Director of S.A. Royale Belge (Belgium) since 1984; Director of S.A. Gib (Belgium) since 1974; Director of S.A. Mecaniver (Belgium) since 1989; Director of S.A. Petrofina, (Belgium) since 1986; Member of the Strategy and Nomination Advisory Committee of Groupe Danone from 1982 until 1996; President of Sidro S.A. from 1968 until 1996; Vice-Chairman of General de Banque (Belgium--Banking) from 1977 until 1997; Director of United Meridan Corporation from 1987 to 1994; Chairman of Sovay S.A. from 1991 to 1996. Yves Cannac............................... Director of Groupe Danone; Member of the Audit Committee of Groupe CEGOS Danone; Counsel to CEGOS (France) since 1998; Director of Caisse des 204, Rond Point du Pont de Sevres Depots-Developpement (France) since 1995; Director of Societe 92516 Boulogne Cedex Generale (France--Banking) since 1997; Director of AGF France (France--Insurance) since 1996; Director of Die Akademie (Germany) Citizen of France since 1997; Member of the Strategy and Nomination Advisory Committee of Groupe Danone from 1985 until 1996; Chief Executive Officer of CEGOS from 1994 until 1998. Philippe Corbiere......................... Director of Groupe Danone; Chairman of Les Receptions de France S.A. Les Receptions de France SA Scott Traiteur Scott Traiteur since 1981; Chairman of Societe Michel-Prie S.A. 60 rue Anatole France (France) since 1987; Director of Societe Antillaise de Production de 92300 Levallois-Perret Yaourts (France) since 1985; Director of Intrama S.A. (France) since France 1989; Member of the Advisory Board of Agro Industrie Consultant Citizen of France (France) until 1994.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Luca Fossati.............................. Director of Groupe Danone since 1996; Chairman of Dafofin Holding Findim Investment-Gradinata Forge 2 S.A. (50 Val Fleuri-L 1526 Luxembourg) since 1995; Chairman of Findim 6900 Massagno Finanziaria Industrial Immobiliare Mobiliare S.p.A Switzerland (Italy--Investment) since 1995; Chairman of Foodfin S.A. Luxembourg, Citizen of Italy Luxembourg, since 1995; Chairman of Sirim S.p.A., (Italy) since 1995; Chairman of Star Stabilimento Alimentare S.p.A. (Italy) since 1995; Director of Consortium S.p.A. (Italy) since October 1995; Director of Estrella Limited (United Kingdom) since December 1986; Director of Egidio Galbani S.p.A (Italy) since April 1995; Director of IFIL Finanziaria di Partccipazioni S.p.A (Italy-- Investment) since June 1995; Director of Sofimpi S.p.A. (Italy) since 1982; Director of Iberfindim S.A (Spain) since October 1997; Member of the Strategic and Financial Committee of Groupe Danone from 1995 to 1996; Chairman of Findim Sviluppo S.p.A from 1995 to 1996; Chairman of Cassinassa S.r.l. (Italy) until 1995; Chairman of Crosina S.r.l. (Italy) until 1995; Chairman of Estados S.r.l. (Italy) until 1994; Director of Starlux S.A. (Spain) from 1989 until 1993 and from 1995 until 1997; Director of Euro Findim B.V. (Netherlands) from 1991 to 1994; Director of Stella S.r.l. (Italy) until 1995. Jean Gandois.............................. Director of Groupe Danone; Chairman of the Board of Cockerill-Sambre Cockerill-Sambre Group S.A. (Belgium) since 1987; Director of Banque Nationale de Paris 187, chaussee de la Hulpe (France--Banking); Director of Eurafrance; Director of Societe 1170 Bruxelles Generale de Belgique (Belgium); Director of Frecolux (Luxembourg); Belgium Director of Air Liquide Espana (Spain--Gas); Director of Sogepa Spa Citizen of France (Italy) since April 1996; Director of Air Liquide Italia (Italy-- Gas); Member of the Supervisory Board of Peugeot S.A. (France--Car Manufacturer), Compagnie Financiere de Paribas (France--Banking), Suez-Lyonnaise des Eaux (France--Utilities), Vallourec (France-Steel tubing), Akzo Nobel (Netherlands), and Siemens A.G (Germany-- Electronics); President of Pechiney International S.A. from 1989 to 1994; Director of Compagnie Francaise Philips (France--Electronics); Director of Forges de Clabecq (Belgium); Director of American National Can (USA-- Packaging) from 1991 until 1994; Director of Europa Metalli (Italy) from 1988 to 1994; Director of Howmet Corporation (USA) from 1986 to 1994; Director of Pechiney Corporation (USA--Packaging) from 1986 to 1994. Xavier Gardinier.......................... Director of Groupe Danone; Chairman of Gepag (France) since 1981; 61, rue de Berri Director of Cortambert S.A. (France) since 1987; Director of GFC 75008 Paris (USA); Member of the Strategic and Financial Committee of Groupe France Danone from 1984 until 1986; Director of Compagnie de Naviguation Citizen of France Mixte from 1978 until 1995.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Francis Gautier........................... Director of Groupe Danone; Chairman of Saint-Honore Vie et Sante (47, Groupe Danone rue du Faubourg Saint Honore, 75008 Paris, France) since 1992; 7, rue de Teheran Director of Groupement des Industries Agricoles Alimentaires et de 75008 Paris Grande Consommation (30, avenue Roosvelt, 75008 Paris, France--Food France Production) since 1976; Member of the Surpervisory Board of Dauphin Citizen of France OTA (15, rue de Milan, 75009 Paris, France) since 1990; Vice-Chairman of Font Vella (324 Gran Via Las Cortes Catalanas, 08004 Barcelona, Spain) from 1984 until 1997; Director of Compagnie Europeenne de Publication (20, avenue Hoche, 75008 Paris, France--Publishing) from 1979 until 1997; Director of Italaquae Spa (Via Appia Nuova 700, 0178 Roma, Italy) from 1993 until 1996; Director of Metrologie International (Tour d'Asnieres-4, avenue Laurent Cely, 92606 Asnieres, France) from 1997 until July 1998; Director of Scia Spa (Via Nicolo Porpora 9, 0198 8 Roma, Italy) from 1987 until 1997; Director of Sifit (Via Appia Nuova 700, Roma, Italy) from 1989 until 1995. Jean-Claude Haas.......................... Director of Groupe Danone; General Partner of Lazard Freres & Cie 121, boulevard Haussmann (Banking); Managing Director of Lazard Brothers & Co Ltd (Banking); 75008 Paris Director of Pathe (France-- Movie Production); Director of Fonds France Partenaires-Gestion (France--Finance); Director of Eurafrance; Citizen of France Managing Partner of Lazard Instruments Financiers & Cie (France--Derivative) from 1986 until 1995; Managing Partner of Maison Lazard Developpement from 1990 until 1996; Director of Corning France from 1979 until 1995; Director of Pearson plc from 1990 to 1996; Permanent Representative of Lazard Freres & Cie to the Board of Gemofim from 1986 until 1997. Philippe Jaeckin.......................... Director and Executive Vice-President of Groupe Danone; Chairman of Groupe Danone GB Glico (4-6, rue Edouard Vaillant, 91200 Athis-Mons, France) since 7, rue de Teheran 1987; Chairman of Boshevik (Russia) since 1997; Chairman of Saiwa 75008 Paris (Via Cecchi 6, 16131 Genonva, Italy) since 1989; Chairman of France L'Alsacienne (France--Food Production) from 1987 to 1994. Citizen of France
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Christian Laubie.......................... Director, Senior Executive Vice-President and Chief Financial Officer Groupe Danone of Groupe Danone; Member of the Strategy and Nomination Advisory 7, rue de Teheran Board of Groupe Danone; Chairman of Cie Financiere Belin (avenue 75008 Paris Ambroise Croizat-Bois de l'Epine, 91130 Ris Orangis, France) since France 1998; Director of Mecaniver (avenue de Broqueville 12 bte 3, B1150 Citizen of France Bruxelles, Belgium) since 1986; Director of Slivam (168, rue de Rivoli, 75001 Paris, France); Director of Victoire (17, rue de la Banque, 75002 Paris); Director of ABI Ltd. and ABI Holdings Ltd. (No. 1 London Bridge (c/o Price Waterhouse) SE1 9QL London, England) since 1995; Director of Star S.p.A. (Via Matteoti 142, 20041 Agrate Brianza Milan, Italy) since 1998; Director of Lodahlim B.V. (Nachtwachtlaan 20, 1058 EA Amsterdam, Netherlands) since 1990; Director of San Miguel (Urgel 240, 08036 Barcelona, Spain) since 1994; Director of Wadia BSN India Ltd. (Neville House, Cursimbhoy Road, Ballard Es, India) since 1993; Director of BIL--Britannia Industries Ltd. (5/1 A Hungerford Street, 700017 Calcutta, India) since 1995; Member of the Supervisory Board of NV Vereenigde Glasfabrieken and NBAVG-Nationaal Bezit (Buitenhavenweg 114-116, PO BOX 46-3100AA Scieda, Netherlands) since 1990; Permanent Representative of Groupe Danone to the Board of Heudebert (4, rue Edouard Vaillant, 91207 Athis Mons, France--Food Production) since 1988; Permanent Representative of S.A. des Biscuits Belin to the Board of LU (avenue Ambroise Croizat-Bois de l'Epine, 91130 Ris Orangis, France) since 1995; Vice-Executive Officer of Groupe Danone from 1994 until 1996; Director of VMC (41, rue Pierre Maitre, 51100 Reims, France) from 1985 until 1994; Director of W&R Jacob PLC (Belgard Road-Tallaght, Dublin, Ireland) from 1990 until 1995; Executive Officer of Cie. Financiere Belin from 1990 until 1998. Georges Lecallier......................... Director of Groupe Danone; Chairman of Chateau La Haye; Director of Groupe Danone Bil-Britannia Industries Ltd (51 A Hungerford Street, 700 017 7, rue de Teheran Calcutta, India) since 1995; Director of Mecaniver (Av de Broqueville 75008 Paris 12 bte 3, B 1150 Bruxelles, Belgium) since 1984; Member of France Surpervisory Board of NV Vereenigde Glasfabrieken (Buitenhavenweg Citizen of France 114-116, PO Box 46-3100 AA Schienda, Netherlands) since 1989; Director of NV National Bezit Van Aandeelen Vereenigde Glasfabrieken (Netherlands) since 1989; Permanent Representative of Groupe Danone to the Boards of Alfabanque (France-- Banking) since November 1998, Brasseries Kronenbourg (France--Brewery) since March 1989, and of Saeme (France) since 1989.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Jacques Nahmias........................... Director of Groupe Danone; Managing Director of Petrofrance S.A. (42, c/o Petrofrance avenue Raymond Poincare, 75116 Paris, France--Oil, Gas, 42, avenue Raymond Poincare Petrochemicals); Chairman of Propetrol S.A.(France--Oil, Gas, 75116 Paris Petrochemicals) since 1982; Chairman of Promife S.A. (France) from France 1984 to December 1997; Chairman of Casas Altas S.A. (Spain) from Citizen of France March 1993 to March 1998; Director of Petrofrance S.A. from 1979 until 1997; Director of S.F.I. Petrofrance S.A. from 1987 until 1997. Antoine Riboud............................ Director and Honorary Chairman of Groupe Danone; Chairman of the Groupe Danone Strategy and Nomination Advisory Committee of Groupe Danone; 7, rue de Teheran Vice-Chairman of Mahou S.A. (Paseo Imperial 32, 28005 Madrid, Spain) 75008 Paris since 1980; Director of Pathe (5, boulevard Malesherbes, 75008 Paris, France France) since Avril 1996; Director of Eurafrance (12, avenue Percier, Citizen of France 75008 Paris, France) since 1972; Director of S.A.I.P. (11, rue Beranger, 75003 Paris, France) from July 1996 to June 1998; Director of L'Air Liquide (France--Gas) since 1991; Director of Renault (34, quai du Rond Point du Jour, 92100 Boulogne Billancour, France--Car Manufacturer) since March 1995; Chairman and Chief Executive Officer of Groupe Danone from 1966 until 1996; Director of Chargeurs Reunis (5, boulevard Malesherbes, 75008 Paris, France) from 1982 until 1996; Director of Pechiney (Immeuble Balzac, 92048 Paris-La Defense 5-Cedex 68, France) from 1987 until 1994; Director of Vmc (41, rue Pierre Maitre, 51100 Reims, France) from 1984 until 1995. Edouard de Royeres........................ Director and Honorary Chairman of Groupe Danone; Member of the France Strategy and Nomination Advisory Committee of Groupe Danone; Chairman Citizen of France of Fondation du Patrimoine (France); Director of Air Liquide S.A. (France--Energy); Director of L'Oreal (France--Cosmetics); Director of Sodexho (France-Catering); Director of Solvay (Belgium); Chairman of Air Liquide S.A. before 1998; Chairman of La Soudure Autogene Francaise (France) before 1998; Director of Banque de Gestion Prive-SIB (France--Banking) before 1998; Director of Pechiney Internationale (France--Aluminium Manufacturing) before 1998; Director of Banque Nationale de Paris (France--Banking) before 1998.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Jerome Seydoux............................ Director of Groupe Danone; Member of the Strategy and Nomination Pathe Advisory Board of Groupe Danone; Chairman and Chief Executive Officer 5, boulevard Malesherbes of Pathe; Chairman of Financiere de la Vallee Blanche 75008 Paris (France--Finance) since 1992; Chairman of Financiere du Mont-Blanc France (France--Finance) since 1992; Chairman of British Sky Broadcasting Citizen of France (England) since 1998; Chairman of the Supervisory Board of Le Cezanne (France) since 1992; Executive Officer of Fornier S.A. (France) since 1982; Executive Officer of Chargeurs (France) since 1996; Member of the Supervisory Board of Accor (France-- Tourism) since 1997; Receiver of France 5 and S.E.P.C. (France) since 1997 and until 2000; Director of Chargeurs since 1996; Director of Cie. Deutsch (France) since 1968; Director of Fornier S.A. since 1982; Director of Renn Productions (France) since 1987; Permanent Representative of Financiere du Mont-Blanc to the Board of Societe Touristique du Mont-Blanc (France--Tourism) since 1993; Permanent Representative of Pathe to the Board of Pricel (France) since 1997; Permanent Representative of Pathe to the Board of AMLF (France) since 1996; Permanent Representative of Pathe to the Board of Chargetex 6 (France) since 1996; Permanent Representative of Pathe to the Board of Alphatex (France) since 1996; Chairman of Chargeurs until 1996; Chairman of S.E.P.C. until 1996; Chairman of France 5 until 1996; Chairman of Pathe Cinema until 1994; Chairman of Pathe palace until 1997; Director of BSN until 1994; Director of Heljer S.A. until 1995; Director of BSB Holdings until 1996; Director of BskyB Ltd. from 1994 until 1998. Yves Theves............................... Director of Groupe Danone; Chairman of IB S.A. (France) since 1992; France Chairman of ESAL S.A. (France) since 1983; Executive Officer and Citizen of France Director of Convergences Gestion S.A. (France) since 1988; Director of SIPAREX (France) since 1988; Director of Groupe Saint-Jean (France) since 1991; Director of ETC (France) from 1992 until 1996.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Jacques Vincent........................... Vice-Chairman, Senior Executive Vice-President and Chief Operating Groupe Danone Officer of Groupe Danone; Vice-Chairman of Clover S.A. (219 Golf Club 7, rue de Teheran Terrace, Roodepoort 1709, South Africa) since 1996; Director of 75008 Paris Brasseries Kronenbourg (68 route d'Oberhausbergen-BP-37, 67037 France Strasbourg Cedex, France--Brewery) since 1997; Director of SAEME (22, Citizen of France avenue des Sources BP 87, 74503 Evian Cedex, France) since 1997; Director of ABI Ltd. and ABI Holdings Ltd. (No. 1 London Bridge (c/o Price Waterhouse), SE1 9QL London, England) since 1995; Director of Egidio Galbani S.p.A. (25 Via Fabio Fitzi, 20124 Milano, Italy) since 1991; Director of Delta Dairy SA (3 Kerkyras Str., Tavros, Greece) since 1993; Director of Strauss Dairies Ltd (Lohamei Ha'gataot, Israel) since 1996; Director of BIL--Britannia Industries Ltd. (5/1 A Hungerford Street, 700017 Calcutta, India) since 1995; Director of Villa Alpina (Morganti 8180--1557 Loma Herrnosa, Buenos Aires, Argentina); Director of Aguas Minerales (Av. Juan B. Justo 1015, Buenos Aires, Argentina--Water Production) since 1998; Director of Birra Peroni Industriale (Via Birolli 8, 00155 Rome, Italy) since 1998; Director of Aguas Minerales from 1996 until 1998; Director of LVSA (32730 Villecomtal sur Arrois, France) from 1989 until 1996; Director of Continental Biscuits Ltd. (PIDC House Dr. Ziauddi, Karrachi 4, Pakistan) from 1995 until 1996; Director of Wadia BSN India Ltd. (Neville House, Cursimbhoy Road, Ballard Es, India) from 1995 until 1996; Member of the Supervisory Board of Mildes Sp. Z.O.O. (Ui Swierczyniecka 85431501 Bierun, Poland) from 1995 until 1995; Member of the Supervisory Board of Wola Sp. Z.O.O. (9/23 Redutowa Street, 01 103 Warsaw, Poland) from 1994 until 1998. Paul Lepercq.............................. Honorary Director of Groupe Danone; Chairman of Lepercq Group Lepercq International Ltd Bermuda; Director of Groupe Danone from June 1970 to May 1992; Member Sterling House Penthouse of Groupe Danone Audit Committee since January 1997. 16 Wesley Street Hamilton HM11 Citizen of France Daniel Carasso............................ Honorary Chairman of Groupe Danone; Director of Danone S.A. since Groupe Danone 1988. 7, rue de Teheran 75008 Paris France Citizen of Spain
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Geoffroy Pinoncely........................ Member of the Executive Committee of Groupe Danone; Chairman of the Groupe Danone Supervisory Board of BSB--Birkel Sonnen Bassermann (Postfach 1220, 7, rue de Teheran Birkelstasse, Germany) since 1997; Member of the Supervisory Board of 75008 Paris Danone Holding A.G. (Heindrich Wieland Strasse 170, 8000 Munchen France 83-Post 830 354, Germany) since 1997; Director of Cie. Gervais Danone Citizen of France (126/130, rue Jules Guesde, 92300 Levallois-Perret, France); Director of Editions Beausejour (16, rue Camille Pelletan, 92300 Levallois-Perret, France--Publisher); Director of Cabinet Remy (France); Director of Lea and Perrins of America (1209 Orange Street, Wilmington, DE 198001, USA) since 1988; Director of Lea and Perrins Inc. (15-01 Pollitt Drive, Fair Lawn, NJ 07140, USA) since 1988; Director of Gelax S.p.A. (Piazza della Chiesa-Pontetetto, Lucca, Italy); Permanent Representative of Cie. Gervais Danone to the Board of Marie Surgeles France (29, rue Eugene Henaff, 94400 Vitry sur Seine, France--Food Production) since 1998; Chairman of Segma Liebig Maille (4, avenue Laurent Cely-Tour d'Asnieres, 92600 Asnieres, France--Food Production) from 1988 until 1996; Chairman of Liebig Benelux (Liebiglaan 11, 2900 Schoten, Belgium--Food Production) from 1989 until 1995; Chairman of Stoeffler (Z.I. Boulevard de l'Europe, 67210 Obernai, France) from 1992 until 1996; Chairman of Semoulerie de Bellevue (4, rue Boileau, 69006 Lyon, France) from March 1997 until December 1997; Director of Starlux Espagne (Via Congost, S/N, 08160 Montmelo, Spain) from 1992 until 1997; Director of Liebig Maille Amora (France-- Food Production) from 1980 until 1997; Director of Liebig Benelux until 1997; Director of Panzani William Saurin (4, rue Boileau BP 6452, 69413 Lyon Cedex 06, France); Director of Bledina (383, rue Philippe Heron, 69654 Villefranche-sur- Saone, France--Food Production) from 1989 until 1998; Director of Gallia from 1987 until 1998; Director of Star S.p.A. (Via Matteotti 142, 20041 Agrate Brianza Milano, Italy) from 1992 until 1998; Director of Pycasa la Cocinera (Torrejon de Ardoz, Cita de Loeches, 49 Madrid) from 1995 until 1998; Director of B.E. International Foods (Grafton House-1371 Mollison Avenue, EN3 7JZ Enfield, England) from 1993 until 1997. Jan Bennink............................... Senior Vice-President, Dairy Worlwide of Groupe Danone; Chairman of Groupe Danone Bledina S.A. (France) since 1998; Director of Egidio Galbini S.p.A. 7, rue de Teheran (25 Via Fabio Filzi 25, 20124 Milan,Italy) since 1995; Director of 75008 Paris Clover S.A. Ltd. (219 Golf Club Terrace race, Roodepport 1709, South France Africa) since 1996; Permanent Representative of Vilcontal Alimentaire Citizen of the Netherlands (rue des Pyrenees, 64110 Rontignon, France); Director of LVSA from 1996 until 1997; Member of the Supervisory Board of MILDES from 1995 until 1998.
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PRESENT PRINCIPAL OR EMPLOYMENT NAME AND FIVE YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Jean-Rene Buisson......................... Senior Vice-President and Member of the Executive Committee of Groupe Groupe Danone Danone; Executive Officer in charge of Human Ressources of Groupe 7, rue de Teheran Danone; Chairman of SEAT (France) since 1997; Director and Executive 75008 Paris Officer of Brasseries Kronenbourg (France--Brewery) from1992 until France 1996; Director and Chief Executive Officer of Kanterbrau Citizen of France (France--Brewery) from 1995 until 1996; Director of Tepral (France) from 1993 until 1997. Simon Israel.............................. Senior Vice-President Asia Pacific of Groupe Danone; Chairman of 1 Temasek Avenue #34-02 Wahaha Joint-Ventures (China) since 1988; Chairman of Wuhan Dongda Millenia Tower Brewery Co. L (China) since 1988; Chairman of Wuhan Euro Dongxihu Singapore 039192 Brewery (China) since 1988; Chairman of Wuhan Xingyinge Brewery Citizen of New Zealand Co.(China) since 1988; Commissioner of Tirta Investama (GP AQUA) (Indonesia) since 1996; Commissioner of PT Tirta Investama (Indonesia) since 1998; Director of Jinja Investments Pte. Ltd. (Singapore) since 1988; Director of Griffin's Foods Limited since 1988; Director of Br. Brands (Malaysia) SDN since 1988; Director of Best Corporation Limited (New Zealand) since 1988; Chairman of Amoy Trading Ltd. (Hong Kong) since 1997; Chairman of Amoy Food Ltd. (Hong Kong) since 1997; Regional Vice-President of Sara Lee (152 Beach Road #28-01, The Gate Way East, Singapore 189721) from 1991 until March 1996.
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. Set forth below is the name, business address, citizenship and the present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of the Purchaser.
NAME, CITIZENSHIP AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD CURRENT BUSINESS ADDRESS DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ------------------------------------------ --------------------------------------------------------------------- Marina Menu............................... Officer of Groupe Danone; Division Sales Manager for Danone Dairy Groupe Danone from December 1991 to January 1995; International Marketing Director 7, rue de Teheran for the Biscuit Division from February 1996 until September 1996; 75008 Paris General Manager Minute Maid Danone from October 1996 to March 1998; France General Manager Water International since April 1998. Citizen of Venezuela Mark S. Rodriguez......................... Chief Executive Officer of Great Brands of Europe, Inc. 208 Harbor Drive Stamford, CT 06902 Citizen of the United States of America
I-12
NAME, CITIZENSHIP AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD CURRENT BUSINESS ADDRESS DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ------------------------------------------ --------------------------------------------------------------------- Michel Botbol............................. V.P. Finance and Customer Relations of Great Brands of European and 208 Harbor Drive Danone International Brands; Division Sales Manager for Belin Stamford, CT 06902 Biscuits (France) from January 1994 until December 1994; Strategic Citizen of France Business Manager for the Export Division of Groupe Danone (26, rue Treilhard, 75008 Paris, France) from January 1995 to December 1997; V.P. Finance and Customer Relations for Great Brands of Europe, Inc. since January 1998. Marc R. Charpentier....................... Vice-President General Manager Industrial Operations for Dannon Great Brands of Europe, Inc. Natural Spring Water; Purchasing Director for the Beverage Division 208 Harbor Drive of Danone Group from September 1997 to May 1998; General Manager and Stamford, CT 06902 Chief Executive Officer of Sources du Mont Dore from January 1995 Citizen of France until August 1997; Industrial Operation Manager for Evian Company from February 1991 until December 1994.
I-13 SCHEDULE II SECTIONS 1930(A) AND 1571-80 (SUBCHAPTER D OF CHAPTER 15) OF THE PENNSYLVANIA BUSINESS CORPORATION LAW SECTION 1930. DISSENTERS RIGHTS (a) GENERAL RULE.--If any shareholder of a domestic business corporation that is to be a party to a merger or consolidation pursuant to a plan of merger or consolidation objects to the plan of merger or consolidation and complies with the provisions of Subchapter D of Chapter 15 (relating to dissenters rights), the shareholder shall be entitled to the rights and remedies of dissenting shareholders therein provided, if any. See also section 1906(c) (relating to dissenters rights upon special treatment). CHAPTER 15 SUBCHAPTER D.--DISSENTERS RIGHTS SECTION 1571. APPLICATION AND EFFECT OF SUBCHAPTER (a) GENERAL RULE.--Except as otherwise provided in subsection (b), any shareholder of a business corporation shall have the right to dissent from, and to obtain payment of the fair value of his shares in the event of, any corporate action, or to otherwise obtain fair value for his shares, where this part expressly provides that a shareholder shall have the rights and remedies provided in this subchapter. See: Section 1906(c) (relating to dissenters rights upon special treatment). Section 1930 (relating to dissenters rights). Section 1931(d) (relating to dissenters rights in share exchanges). Section 1932(c) (relating to dissenters rights in asset transfers). Section 1952(d) (relating to dissenters rights in division). Section 1962(c) (relating to dissenters rights in conversion). Section 2104(b) (relating to procedure). Section 2324 (relating to corporation option where a restriction on transfer of a security is held invalid). Section 2325(b) (relating to minimum vote requirement). Section 2704(c) (relating to dissenters rights upon election). Section 2705(d) (relating to dissenters rights upon renewal of election). Section 2907(a) (relating to proceedings to terminate breach of qualifying conditions). Section 7104(b)(3) (relating to procedure). (b) EXCEPTIONS.-- (1) Except as otherwise provided in paragraph (2), the holders of the shares of any class or series of shares that, at the record date fixed to determine the shareholders entitled to notice of and to vote at the meeting at which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to be voted on, are either: (i) listed on a national securities exchange; or II-1 (ii) held of record by more than 2,000 shareholders; shall not have the right to obtain payment of the fair value of any such shares under this subchapter. (2) Paragraph (1) shall not apply to and dissenters rights shall be available without regard to the exception provided in that paragraph in the case of: (i) Shares converted by a plan if the shares are not converted solely into shares of the acquiring, surviving, new or other corporation or solely into such shares and money in lieu of fractional shares. (ii) Shares of any preferred or special class unless the articles, the plan or the terms of the transaction entitle all shareholders of the class to vote thereon and require for the adoption of the plan or the effectuation of the transaction the affirmative vote of a majority of the votes cast by all shareholders of the class. (iii) Shares entitled to dissenters rights under section 1906(c) (relating to dissenters rights upon special treatment). (3) The shareholders of a corporation that acquires by purchase, lease, exchange or other disposition all or substantially all of the shares, property or assets of another corporation by the issuance of shares, obligations or otherwise, with or without assuming the liabilities of the other corporation and with or without the intervention of another corporation or other person, shall not be entitled to the rights and remedies of dissenting shareholders provided in this subchapter regardless of the fact, if it be the case, that the acquisition was accomplished by the issuance of voting shares of the corporation to be outstanding immediately after the acquisition sufficient to elect a majority or more of the directors of the corporation. (c) GRANT OF OPTIONAL DISSENTERS RIGHTS.--The bylaws or a resolution of the board of directors may direct that all or a part of the shareholders shall have dissenters rights in connection with any corporate action or other transaction that would otherwise not entitle such shareholders to dissenters rights. (d) NOTICE OF DISSENTERS RIGHTS.--Unless otherwise provided by statute, if a proposed corporate action that would give rise to dissenters rights under this subpart is submitted to a vote at a meeting of shareholders, there shall be included in or enclosed with the notice of meeting: (1) a statement of the proposed action and a statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the terms of this subchapter; and (2) a copy of this subchapter. (e) OTHER STATUTES.--The procedures of this subchapter shall also be applicable to any transaction described in any statute other than this part that makes reference to this subchapter for the purpose of granting dissenters rights. (f) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE.--This subchapter may not be relaxed by any provision of the articles. (g) CROSS REFERENCES.--See sections 1105 (relating to restriction on equitable relief), 1904 (relating to a de facto transaction doctrine abolished) and 2512 (relating to dissenters rights procedure). SECTION 1572. DEFINITIONS The following words and phrases when used in this subchapter shall have the meanings given to them in this section unless the context clearly indicates otherwise: "CORPORATION." The issuer of the shares held or owned by the dissenter before the corporate action or the successor by merger, consolidation, division, conversion or otherwise of that issuer. A plan of II-2 division may designate which of the resulting corporations is the successor corporation for the purposes of this subchapter. The successor corporation in a division shall have sole responsibility for payments to dissenters and other liabilities under this subchapter except as otherwise provided in the plan of division. "FAIR VALUE." The fair value of shares immediately before the effectuation of the corporate action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action. "INTEREST." Interest from the effective date of the corporate action until the date of payment at such rate as is fair and equitable under all the circumstances, taking into account all relevant factors, including the average rate currently paid by the corporation on its principal bank loans. SECTION 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS (a) RECORD HOLDERS OF SHARES.--A record holder of shares of a business corporation may assert dissenters rights as to fewer than all of the shares registered in his name only if he dissents with respect to all the shares of the same class or series beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf he dissents. In that event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different shareholders. (b) BENEFICIAL OWNERS OF SHARES.--A beneficial owner of shares of a business corporation who is not the record holder may assert dissenters rights with respect to shares held on his behalf and shall be treated as a dissenting shareholder under the terms of this subchapter if he submits to the corporation not later than the time of the assertion of dissenters rights a written consent of the record holder. A beneficial owner may not dissent with respect to some but less than all shares of the same class or series owned by the owner, whether or not the shares so owned by him are registered in his name. SECTION 1574. NOTICE OF INTENTION TO DISSENT If the proposed corporate action is submitted to a vote at a meeting of shareholders of a business corporation, any person who wishes to dissent and obtain payment of the fair value of his shares must file with the corporation, prior to the vote, a written notice of intention to demand that he be paid the fair value for his shares if the proposed action is effectuated, must effect no change in the beneficial ownership of his shares from the date of such filing continuously through the effective date of the proposed action and must refrain from voting his shares in approval of such action. A dissenter who fails in any respect shall not acquire any right to payment of the fair value of his shares under this subchapter. Neither a proxy nor a vote against the proposed corporate action shall constitute the written notice required by this section. SECTION 1575. NOTICE TO DEMAND PAYMENT (a) GENERAL RULE.--If the proposed corporate action is approved by the required vote at a meeting of shareholders of a business corporation, the corporation shall mail a further notice to all dissenters who gave due notice of intention to demand payment of the fair value of their shares and who refrained from voting in favor of the proposed action. If the proposed corporate action is to be taken without a vote of shareholders, the corporation shall send to all shareholders who are entitled to dissent and demand payment of the fair value of their shares a notice of the adoption of the plan or other corporate action. In either case, the notice shall: (1) State where and when a demand for payment must be sent and certificates for certificated shares must be deposited in order to obtain payment. (2) Inform holders of uncertificated shares to what extent transfer of shares will be restricted from the time that demand for payment is received. II-3 (3) Supply a form for demanding payment that includes a request for certification of the date on which the shareholder, or the person on whose behalf the shareholder dissents, acquired beneficial ownership of the shares. (4) Be accompanied by a copy of this subchapter. (b) TIME FOR RECEIPT OF DEMAND FOR PAYMENT.--The time set for receipt of the demand and deposit of certificated shares shall be not less than 30 days from the mailing of the notice. SECTION 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC. (a) EFFECT OF FAILURE OF SHAREHOLDER TO ACT.--A shareholder who fails to timely demand payment, or fails (in the case of certificated shares) to timely deposit certificates, as required by a notice pursuant to section 1575 (relating to notice to demand payment) shall not have any right under this subchapter to receive payment of the fair value of his shares. (b) RESTRICTION ON UNCERTIFICATED SHARES.--If the shares are not represented by certificates, the business corporation may restrict their transfer from the time of receipt of demand for payment until effectuation of the proposed corporate action or the release of restrictions under the terms of section 1577(a) (relating to failure to effectuate corporate action). (c) RIGHTS RETAINED BY SHAREHOLDER.--The dissenter shall retain all other rights of a shareholder until those rights are modified by effectuation of the proposed corporate action. SECTION 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES (a) FAILURE TO EFFECTUATE CORPORATE ACTION.--Within 60 days after the date set for demanding payment and depositing certificates, if the business corporation has not effectuated the proposed corporate action, it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. (b) RENEWAL OF NOTICE TO DEMAND PAYMENT.--When the uncertificated shares have been released from transfer restrictions and deposited certificates have been returned, the corporation may at any later time send a new notice conforming to the requirements of section 1575 (relating to notice to demand payment), with like effect. (c) PAYMENT OF FAIR VALUE OF SHARES.--Promptly after effectuation of the proposed corporate action, or upon timely receipt of demand for payment if the corporate action has already been effectuated, the corporation shall either remit to dissenters who have made demand and (if their shares are certificated) have deposited their certificates the amount that the corporation estimates to be the fair value of the shares, or give written notice that no remittance under this section will be made. The remittance or notice shall be accompanied by: (1) The closing balance sheet and statement of income of the issuer of the shares held or owned by the dissenter for a fiscal year ending not more than 16 months before the date of remittance or notice together with the latest available interim financial statements. (2) A statement of the corporation's estimate of the fair value of the shares. (3) A notice of the right of the dissenter to demand payment or supplemental payment, as the case may be, accompanied by a copy of this subchapter. (d) FAILURE TO MAKE PAYMENT.--If the corporation does not remit the amount of its estimate of the fair value of the shares as provided by subsection (c), it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. The corporation may make a notation on any such certificate or on the records of the II-4 corporation relating to any such uncertificated shares that such demand has been made. If shares with respect to which notation has been so made shall be transferred, each new certificate issued therefor or the records relating to any transferred uncertificated shares shall bear a similar notation, together with the name of the original dissenting holder or owner of such shares. A transferee of such shares shall not acquire by such transfer any rights in the corporation other than those that the original dissenter had after making demand for payment of their fair value. SECTION 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES (a) GENERAL RULE.--If the business corporation gives notice of its estimate of the fair value of the shares, without remitting such amount, or remits payment of its estimate of the fair value of a dissenter's shares as permitted by section 1577(c) (relating to payment of fair value of shares) and the dissenter believes that the amount stated or remitted is less than the fair value of his shares, he may send to the corporation his own estimate of the fair value of the shares, which shall be deemed a demand for payment of the amount or the deficiency. (b) EFFECT OF FAILURE TO FILE ESTIMATE.--Where the dissenter does not file his own estimate under subsection (a) within 30 days after the mailing by the corporation of its remittance or notice, the dissenter shall be entitled to no more than the amount stated in the notice or remitted to him by the corporation. SECTION 1579. VALUATION PROCEEDINGS GENERALLY (a) GENERAL RULE.--Within 60 days after the latest of: (1) Effectuation of the proposed corporate action; (2) Timely receipt of any demands for payment under section 1575 (relating to notice to demand payment); or (3) Timely receipt of any estimates pursuant to section 1578 (relating to estimate by dissenter of fair value of shares); if any demands for payment remain unsettled, the business corporation may file in court an application for relief requesting that the fair value of the shares be determined by the court. (b) MANDATORY JOINDER OF DISSENTERS.--All dissenters, wherever residing, whose demands have not been settled shall be made parties to the proceeding as in an action against their shares. A copy of the application shall be served on each such dissenter. If a dissenter is a nonresident, the copy may be served on him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and international procedure). (c) JURISDICTION OF THE COURT.--The jurisdiction of the court shall be plenary and exclusive. The court may appoint an appraiser to receive evidence and recommend a decision on the issue of fair value. The appraiser shall have such power and authority as may be specified in the order of appointment or in any amendment thereof. (d) MEASURE OF RECOVERY.--Each dissenter who is made a party shall be entitled to recover the amount by which the fair value of his shares is found to exceed the amount, if any, previously remitted, plus interest. (e) EFFECT OF CORPORATION'S FAILURE TO FILE APPLICATION.--If the corporation fails to file an application as provided in subsection (a), any dissenter who made a demand and who has not already settled his claim against the corporation may do so in the name of the corporation at any time within 30 days after the expiration of the 60-day period. If a dissenter does not file an application within the 30-day period, each II-5 dissenter entitled to file an application shall be paid the corporation's estimate of the fair value of the shares and no more, and may bring an action to recover any amount not previously remitted. SECTION 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS (a) GENERAL RULE.--The costs and expenses of any proceeding under section 1579 (relating to valuation proceedings generally), including the reasonable compensation and expenses of the appraiser appointed by the court, shall be determined by the court and assessed against the business corporation except that any part of the costs and expenses may be apportioned and assessed as the court deems appropriate against all or some of the dissenters who are parties and whose action in demanding supplemental payment under section 1578 (relating to estimate by dissenter of fair value of shares) the court finds to be dilatory, obdurate, vexatious or in bad faith. (b) ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH APPEARS.--Fees and expenses of counsel and of experts for the respective parties may be assessed as the court deems appropriate against the corporation and in favor of any or all dissenters if the corporation failed to comply substantially with the requirements of this subchapter and may be assessed against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights provided by this subchapter. (c) AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS.--If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated and should not be assessed against the corporation, it may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefitted. II-6 Facsimiles of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates evidencing Shares and any other required documents should be sent or delivered by each shareholder or his or her broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. THE DEPOSITARY FOR THE OFFER IS: HARRIS TRUST COMPANY OF NEW YORK BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND: Wall Street Station (201) 222-4720 Receive Window P.O. Box 1023 or Wall Street Plaza New York, New York (201) 222-4721 88 Pine Street, 19th Floor 10268-1023 New York, New York 10005 CONFIRM BY TELEPHONE: (201) 222-4707
Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: abcdef 156 Fifth Avenue New York, New York 10010 Tel.: (212) 929-5916 Fax: (212) 675-0918 THE DEALER MANAGER FOR THE OFFER IS: J.P. MORGAN & CO. 60 Wall Street New York, New York 10260 Tel.: (800) 576-8401 EX-99.(A)(2) 3 EXHIBIT 99(A)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF AQUAPENN SPRING WATER COMPANY, INC. PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 6, 1998 OF ZONEO ACQUISITION CORP. AN INDIRECT SUBSIDIARY OF GROUPE DANONE ----------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD (IF APPLICABLE) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 7, 1998, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE DEPOSITARY FOR THE OFFER IS: HARRIS TRUST COMPANY OF NEW YORK BY MAIL: BY HAND/OVERNIGHT DELIVERY: Wall Street Station Receive Window P.O. Box 1023 Wall Street Plaza New York, New York 10268-1023 88 Pine Street, 19(th) Floor New York, New York 10005
BY FACSIMILE: (212) 701-7636 CONFIRM BY TELEPHONE: (212) 701-7624 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by shareholders either if certificates evidencing Shares (as defined below) are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the book-entry transfer procedure described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. A shareholder who desires to tender Shares and whose certificates evidencing such Shares ("Share Certificates") are not immediately available, or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in "Section 1. Terms of the Offer; Proration; Expiration Date" of the Offer to Purchase) or who cannot comply with the procedure for delivery by book-entry transfer on a timely basis, may tender such Shares by following the procedure for guaranteed delivery set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. See Instruction 2. / / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution __________________________________________________ Account Number _________________________________________________________________ Transaction Code Number ________________________________________________________ / / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ________________________________________________ Window Ticket No. (if any) _____________________________________________________ Date of Execution of Notice of Guaranteed Delivery _____________________________ Name of Institution that Guaranteed Delivery ___________________________________ If delivery is by book-entry transfer, give the following: DTC Account Number _____________________________________________________________ Transaction Code Number ________________________________________________________
- ---------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ---------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL LIST, IF NECESSARY) APPEAR(S) ON SHARE CERTIFICATE(S)) - ----------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES EVIDENCED SHARE BY NUMBER OF CERTIFICATE SHARE SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** - ----------------------------------------------------------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- TOTAL SHARES - ----------------------------------------------------------------------------------------------------- * Need not be completed by shareholders delivering Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. - ----------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME the ("Parent"), the above-described shares of Common Stock, no par value, of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company") (all shares of such Common Stock from time to time outstanding being, collectively, the "Shares"), pursuant to the Purchaser's offer to purchase all Shares, at $13.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 6, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith, in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby and all dividends, distributions (including, without limitation, distributions of additional Shares) and rights declared, paid or distributed in respect of such Shares on or after November 2, 1998 (collectively, "Distributions") and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates evidencing such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by the Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints Mark Rodriguez and Emmanuel Faber and each of them, as the attorneys and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, deem proper and otherwise act (by written consent or otherwise) with respect to all the Shares tendered hereby which have been accepted for payment by the Purchaser prior to the time of such vote or other action and all Shares and other securities issued in Distributions in respect of such Shares, which the undersigned is entitled to vote at any meeting of shareholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by the Purchaser in accordance with other terms of the Offer. Such acceptance for payment shall revoke all other proxies and powers of attorney granted by the undersigned at any time with respect to such Shares (and all Shares and other securities issued in Distributions in respect of such Shares), and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the undersigned with respect thereto. The undersigned understands that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance of such Shares for payment, the Purchaser must be able to exercise full voting and other rights with respect to such Shares, including, without limitation, voting at any meeting of the Company's shareholders then scheduled. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, that when such Shares are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restriction, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of the Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and pending such remittance and transfer or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby, or deduct from such purchase price, the amount or value of such Distribution as determined by the Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. The Purchaser's acceptance of such Shares for payment will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned further understands that any Shares held prior to January 28, 1998 are subject to the 0.6008-for-one reverse stock split that was effective on January 28, 1998. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please issue the check for the purchase price of all Shares purchased, and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail the check for the purchase price of all Shares purchased and all Share Certificates evidencing Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of, and mail such check and Share Certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please credit any Shares tendered hereby and delivered by book-entry transfer, but which are not purchased by crediting the account at DTC. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not purchase any of the Shares tendered hereby. - ------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned, or if Shares tendered hereby and delivered by book-entry transfer which are not purchased are to be returned by credit to an account at the Book-Entry Transfer Facility other than that designated above. Issue / / Check / / Share Certificate(s) to: Name: ______________________________________________________________________ (PLEASE PRINT) Address: ___________________________________________________________________ ____________________________________________________________________________ (ZIP CODE) __________________________________________________________________________ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) / / Credit Shares delivered by book-entry transfer and not purchased to the account set forth below: DTC Account Number: ________________________________________________________ ---------------------------------------------------- ---------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or Share Certificates evidencing Shares not tendered or not purchased are to be mailed to someone other than the undersigned, or the undersigned at an address other than that shown under "Description of Shares Tendered." Issue / / Check / / Share Certificate(s) to: Name: ______________________________________________________________________ (PLEASE PRINT) Address: ___________________________________________________________________ ____________________________________________________________________________ (ZIP CODE) __________________________________________________________________________ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) - ------------------------------------------------------------ - -------------------------------------------------------------------------------- IMPORTANT SHAREHOLDERS: SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) ____________________________________________________________________________ ____________________________________________________________________________ SIGNATURE(S) OF HOLDER(S) Dated: ______________,199_ (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5). Name(s): ___________________________________________________________________ ____________________________________________________________________________ PLEASE PRINT Capacity (full title): _____________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ INCLUDE ZIP CODE Area Code and Telephone No.: ( )__________________________________________ Taxpayer Identification or Social Security No.: ____________________________ (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTION ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW. ---------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal must be guaranteed by a firm which is a member in good standing of the Security Transfer Agent Medallion Signature Guarantee Program, or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered hereby and such holder(s) has (have) completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all physically tendered Shares, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the reverse hereof prior to the Expiration Date (as defined in "Section 1. Terms of the Offer; Proration; Expiration Date" of the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares pursuant to the guaranteed delivery procedure described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates evidencing all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered by book-entry transfer, in each case together with a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase)), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery, all as described in "Section 3. Procedure for Accepting the Offer and Tendering Shares" of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a facsimile hereof), all tendering shareholders waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule and attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such cases, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Shares without alteration, enlargement or any other change whatsoever. If any Share tendered hereby is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, the Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to the Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates evidencing the Shares tendered hereby. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse of this Letter of Transmittal must be completed. Shareholders delivering Shares tendered hereby by book-entry transfer may request that Shares not purchased be credited to such account maintained at DTC as such shareholder may designate in the box entitled "Special Payment Instructions" on the reverse hereof. If no such instructions are given, all such Shares not purchased will be returned by crediting the account at DTC designated on the reverse hereof as the account from which such Shares were delivered. 8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at its addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or the Dealer Manager. 9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify, under penalty of perjury, that such number is correct and that such shareholder is not subject to backup withholding of federal income tax. If a tendering shareholder has been notified by the Internal Revenue Service that such shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such shareholder has since been notified by the Internal Revenue Service that such shareholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to 31% federal income tax withholding on the payment of the purchase price of all Shares purchased from such shareholder. If the tendering shareholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES (OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE) AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under the federal income tax law, a shareholder whose tendered Shares are accepted for payment is required by law to provide the Depositary (as payer) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's social security number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. In addition, if a shareholder makes a false statement that results in no imposition of backup withholding, and there was no reasonable basis for making such statement, a $500 penalty may also be imposed by the Internal Revenue Service. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit a statement (Internal Revenue Service Form W-8), signed under penalties of perjury, attesting to such individual's exempt status. Forms of such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. A shareholder should consult his or her tax advisor as to such shareholder's qualification for exemption from backup withholding and the procedure for obtaining such exemption. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN), and that (i) such shareholder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such shareholder that such shareholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK - --------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1--Taxpayer Identification ---------------- FORM W-9 Number--For all accounts, enter Social Security Number Payer's Request for Taxpayer your taxpayer identification OR ---------------- Identification Number (TIN) number in the box at right. Employer Identification Number (For most individuals, this is (If awaiting TIN write your social security number. If "Applied For") you do not have a number, see Obtaining a Number in the enclosed Guidelines.) Certify by signing and dating below. Note: If the account is in more than one name, see the chart in the enclosed Guidelines to determine which number to give the payer. - --------------------------------------------------------------------------------------------------- PART II--For Payees Exempt from Backup Withholding, see the enclosed Guidelines and complete as instructed therein. ----------------------------------------------------------------- CERTIFICATION--Under penalty of perjury, I certify that: (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed GUIDELINES.) - --------------------------------------------------------------------------------------------------- SIGNATURE -------------------------------------------------------- DATE-------------------- ,199 - ---------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 1 THE DEPOSITARY FOR THE OFFER IS: HARRIS TRUST COMPANY OF NEW YORK BY MAIL: BY HAND/OVERNIGHT DELIVERY: Wall Street Station Receive Window P.O. Box 1023 Wall Street Plaza New York, New York 10268-1023 88 Pine Street, 19(th) Floor New York, New York 10005
BY FACSIMILE: (212) 701-7636 CONFIRM BY TELEPHONE: (212) 701-7624 Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or Dealer Manager. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] 156 Fifth Avenue New York, NY 10010 (212) 929-5500 or Call Toll Free: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: J.P. MORGAN & CO. 60 Wall Street New York, NY 10260 (212) 648-7957 or Call Toll Free: (800) 576-8401 EX-99.(A)(3) 4 EXHIBIT 99(A)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF AQUAPENN SPRING WATER COMPANY, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) (i) if certificates ("Share Certificates") evidencing shares of Common Stock, no par value (the "Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company"), are not immediately available, (ii) if Share Certificates and all other required documents cannot be delivered to the Harris Trust Company of New York, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in "Section 1. Terms of the Offer; Proration; Expiration Date" of the Offer to Purchase) or (iii) if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram, telex or facsimile transmission to the Depositary. See "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: HARRIS TRUST COMPANY OF NEW YORK BY MAIL: BY HAND/OVERNIGHT DELIVERY: Wall Street Station Receive Window P.O. Box 1023 Wall Street Plaza New York, New York 10268-1023 88 Pine Street, 19(th) Floor New York, New York 10005
BY FACSIMILE: (212) 701-7636 CONFIRM BY TELEPHONE: (212) 701-7624 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Zoneo Acquisition Corp., a Pennsylvania corporation and an indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 6, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendment or supplements thereto, collectively constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described in "Section 3. Procedures for Accepting the Offering and Tendering Shares" of the Offer to Purchase. Number of Shares: __________________________________________________________ Certificate Nos. (If Available): ____________________________________________________________________________ Check box if Shares will be delivered by book-entry transfer: / / The Depositary Trust Company Account No. ________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ SIGNATURE(S) OF HOLDER(S) Dated: ___________, 199_ Name(s) of Holders: ____________________________________________________________________________ ____________________________________________________________________________ PLEASE TYPE OR PRINT __________________________________________________________________________ ADDRESS __________________________________________________________________________ ZIP CODE __________________________________________________________________________ AREA CODE AND TELEPHONE NO. 2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member in good standing of the Medallion Signature Guarantee Program or is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees to delivery to the Depositary at one of its addresses set forth above, either Share Certificates evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, and any other required documents, all within three New York Stock Exchange trading days of the date hereof. - -------------------------------------------- ------------------------------------------------------- NAME OF FIRM TITLE - ------------------------------------------------------- ------------------------------------------------------- AUTHORIZED SIGNATURE ADDRESS ZIP CODE NAME: PLEASE TYPE OR PRINT AREA CODE AND TELEPHONE NO.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. Dated: ___________, 199_. 3 EX-99.(A)(4) 5 EXHIBIT 99(A)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF AQUAPENN SPRING WATER COMPANY, INC. AT $13.00 NET PER SHARE BY ZONEO ACQUISITION CORP. AN INDIRECT SUBSIDIARY OF GROUPE DANONE THE OFFER, PRORATION PERIOD (IF APPLICABLE) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, DECEMBER 7, 1998, UNLESS THE OFFER IS EXTENDED November 6, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME (the "Parent"), to act as Dealer Manager in connection with the Purchaser's offer to purchase all the issued and outstanding shares of common stock, no par value (the "Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company"), at a price of $13.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase, dated November 6, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 80% OF THE ISSUED AND OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) THE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO THE OFFER SHALL HAVE EXPIRED OR BEEN TERMINATED. IN THE EVENT ALL THE CONDITIONS TO THE OFFER HAVE BEEN SATISFIED OR WAIVED OTHER THAN THE MINIMUM CONDITION, THE PURCHASER MAY, AT ITS OPTION, PURCHASE ANY NUMBER OF TENDERED SHARES UP TO 19.9% OF THE THEN OUTSTANDING SHARES ON A PRO RATA BASIS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. Enclosed for your information and use are copies of the following documents: 1. Offer to Purchase, dated November 6, 1998; 2. Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents are not immediately available or cannot be delivered to the Harris Trust Company of New York (the "Depositary") by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. A letter to shareholders of the Company from Mr. Edward J. Lauth, III, Chairman of the Board, Chief Executive Officer, and President of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD (IF APPLICABLE) AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 7, 1998, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account the Book-Entry Transfer Facility (as defined in the Offer to Purchase), (ii) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees (or in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase)) and (iii) any other required documents. A shareholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedure for guaranteed delivery set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. The Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. However, the Purchaser will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to J.P. Morgan Securities Inc., the Dealer Manager, or MacKenzie Partners, Inc., the Information Agent, at the addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent at the address and telephone number set forth on the back cover page of the Offer to Purchase. Very truly yours, J.P. Morgan & Co. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PARENT, THE PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.(A)(5) 6 EXHIBIT 99(A)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF AQUAPENN SPRING WATER COMPANY, INC. AT $13.00 NET PER SHARE BY ZONEO ACQUISITION CORP. AN INDIRECT SUBSIDIARY OF GROUPE DANONE To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated November 6, 1998 (the "Offer to Purchase"), and a related Letter of Transmittal in connection with the offer by Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME (the "Parent"), to purchase all the issued and outstanding shares of common stock, no par value (the "Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company"), at a price of $13.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). We are (or our nominee is) the holder of record of Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $13.00 per Share, net to the seller in cash. 2. The Offer is being made for all issued and outstanding Shares. 3. The Board of Directors of the Company has unanimously determined that each of the Offer and the Merger (as defined in the Offer to Purchase) is fair to, and in the best interests of, the Company and the shareholders of the Company, and recommends that shareholders accept the Offer and tender their Shares pursuant to the Offer. 4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on December 7, 1998, unless the Offer is extended. 5. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer at least 80% of the issued and outstanding Shares on a fully diluted basis (the "Minimum Condition") and (ii) the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the purchase of the Shares pursuant to the Offer having expired or been terminated. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. In the event all the conditions to the Offer have been satisfied or waived other than the Minimum Condition, the Purchaser may, at its option, purchase any number of tendered Shares up to 19.9% of the then outstanding Shares on a pro rata basis. 6. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the sale and transfer of any Shares by the Purchaser pursuant to the Offer. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facility (as defined in the Offer to Purchase), (ii) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees (or in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase)) and (iii) any other required documents. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal, and is being made to all holders of Shares. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by J.P. Morgan Securities Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF AQUAPENN SPRING WATER COMPANY, INC. BY ZONEO ACQUISITION CORP. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated November 6, 1998 (the "Offer to Purchase"), and a related Letter of Transmittal (which together constitute the "Offer") in connection with the offer by Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME (the "Parent"), to purchase all the issued and outstanding shares of common stock, no par value (the " Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company"), at a price of $13.00 per Share. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. NUMBER OF SHARES TO BE TENDERED: __________________ SHARES* DATED: ___________ , 199__ SIGN HERE - ---------------------------------------- - ---------------------------------------- SIGNATURE(S) - ---------------------------------------- - ---------------------------------------- PLEASE TYPE OR PRINT NAME(S) - ---------------------------------------- - ---------------------------------------- PLEASE TYPE OR PRINT ADDRESS - ---------------------------------------- AREA CODE AND TELEPHONE NUMBER - ---------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER - ------------------------ * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.(A)(6) 7 EXHIBIT 99(A)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
- --------------------------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF- - --------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint The actual owner of the account) account or, if joint funds, either person(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account that is not a The actual owner(1) legal or valid trust under state law 6. Sole proprietorship The owner(4) account - --------------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF- - --------------------------------------------------------------- 7. A valid trust, estate or The legal entity (Do not pension trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 8. Corporate account The corporation 9. Religious, charitable or The organization educational organization account 10. Partnership account held The partnership in the name of the business 11. Association, club or The organization other tax-exempt organization 12. A broker or registered The broker or nominee nominee 13. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district or prison) that receives agricultural program payments
- --------------------------------------------- - --------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show the name of the owner. (4) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEE EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - - A corporation. - - A financial institution. - - An organization exempt from tax under Section 501(a) or an individual retirement plan. - - The United States or any agency or instrumentality thereof. - - A state, the District of Columbia, a possession of the United States or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government or any agency or instrumentality thereof. - - An international organization or any agency or instrumentality thereof. - - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under Section 584(a). - - An exempt charitable remainder trust or a nonexempt trust described in Section 4947(a)(1). - - An entity registered at all times under the Investment Company Act of 1940. - - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt interest dividends under section 852). - - Payments described in section 6049(b)(5) to non-resident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041(a), 6045 and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(7) 8 EXHIBIT 99(A)(7) Exhibit 99(a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell the Shares (as defined below). The Offer(as defined below) is made solely by the Offer to Purchase, dated November 6, 1998, and the related Letter of Transmittal, and is being made to all holders of Shares. The Purchaser (as defined below) is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by J.P. Morgan Securities Inc., the Dealer Manager for the Offer, or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of AquaPenn Spring Water Company, Inc. at $13.00 Net Per Share by Zoneo Acquisition Corp. an Indirect Wholly Owned Subsidiary of Groupe Danone Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an indirect wholly owned subsidiary of Groupe Danone, a French societe anonyme (the "Parent"), is offering to purchase all outstanding shares of common stock, no par value (the "Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "Company"), at a price of $13.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 6, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). Following the Offer, the Purchaser intends to effect the Merger (as defined below). - -------------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD (IF APPLICABLE) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, DECEMBER 7, 1998, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least 80% of the issued and outstanding Shares of the Company, on a fully diluted basis (the "Minimum Condition"). In the event all the conditions to the Offer have been satisfied or waived other than the Minimum Condition, the Purchaser may, at its option, purchase any number of tendered Shares up to 19.9% of the then outstanding Shares on a pro rata basis. The Offer is being made pursuant to the Agreement and Plan of Merger, dated November 2, 1998, among the Parent, the Purchaser and the Company (the "Merger Agreement"), which provides, among other things, that, subject to the satisfaction of the conditions of the Merger Agreement and in accordance with the relevant provisions of the Pennsylvania Business Corporation Law of 1988, as amended ("Pennsylvania Law"), the Purchaser will be merged with and into the Company (the "Merger"). The Merger will take place as soon as practicable after either (i) the purchase of Shares pursuant to the Offer, so long as, among other conditions, the Minimum Condition is satisfied, or (ii) among other conditions, the Merger Agreement is adopted by the affirmative vote of a majority of the votes cast by all holders of Shares entitled to vote thereon. Following consummation of the Merger, the Company will continue as the surviving corporation and will become an indirect wholly owned subsidiary of the Parent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares held in the treasury of the Company, owned by the Purchaser, the Parent or any direct or indirect wholly owned subsidiary of the Parent or the Company and other than Shares, if any, held by shareholders who shall have dissented and demanded the right to receive the fair value of their Shares in accordance with Sections 1930 and 1571 through 1580 of the Pennsylvania Law) will be canceled and automatically converted into the right to receive $13.00, or any greater amount per Share that may be paid pursuant to the Offer, in cash, without interest. The purpose of the Merger is to facilitate the acquisition of all the remaining Shares for cash and thereby enable the Parent to acquire 100% of the Shares. In connection with the Merger Agreement, the Parent and the Purchaser have entered into shareholder agreements with each of Edward J. Lauth, III, Geoffrey F. Feidelberg and Matthew Suhey (the "Principal Shareholders"), pursuant to which, among other things, the Principal Shareholders have granted to the Purchaser the option to acquire their shares at $13.00 per share (so long as such purchase does not cause the aggregate number of Shares acquired by the Purchaser pursuant to the Offer (assuming that the Minimum Condition is not satisfied) and the shareholder agreements to exceed 19.9% of the then issued and outstanding Shares), have agreed to tender and sell (and not withdraw prior to the termination or expiration of the Offer or the termination of the Merger Agreement) their Shares pursuant to the Offer and have granted to the Purchaser an irrevocable proxy to vote their Shares, among other things, in favor of the Merger, if necessary, in each case upon the terms and subject to the conditions thereof. The Principal Shareholders beneficially own an aggregate of 1,851,313 Shares (or approximately 20.8% of the Shares on a fully diluted basis). The Board of Directors of the Company has unanimously determined that each of the Offer and the Merger is fair to, and in the best interests of, the shareholders of the Company, and recommends that the shareholders accept the Offer and tender their Shares pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn if, as and when the Purchaser gives oral or written notice to the Harris Trust Company of New York (the "Depositary") of the Purchaser"s acceptance of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from the Purchaser and transmitting such payments to tendering shareholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price of Shares be paid by the Purchaser, regardless of any extension of the Offer or any delay in payment. In all cases, payment for Shares tendered and accepted for purchase pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares as defined in Section 2 of the Offer to Purchase (or a timely confirmation of a book-entry transfer of such Shares into the Depositary"s account at the Depository Trust Company (the "Book-Entry Transfer Facility")), pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a manually signed facsimile thereof) properly completed and duly executed with any required signature guarantees or, in the case of a book-entry transfer, an Agent"s Message (as defined in Section 2 of the Offer to Purchase) and (iii) any other document required by the Letter of Transmittal. The Purchaser expressly reserves the right, subject to the terms and conditions of the Merger Agreement, at any time and from time to time, to extend, for any reason, the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. Any such extension will be followed as promptly as practicable by public announcement thereof, such announcement to be made no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date (as defined in Section 1 of the Offer to Purchase). During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder"s Shares. Tenders of Shares made pursuant to the Offer are irrevocable, except that such Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment pursuant to the Offer, may also be withdrawn at any time after January 5, 1999. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of a withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares tendered and the number to be withdrawn and the name of the registered holder of such shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in Section 3 of the Offer to Purchase), unless such Shares are tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures or book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Purchaser with the Company"s shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares whose names appear on the Company"s shareholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies, and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency"s security position listing. The Offer to Purchase and related Letter of Transmittal contain important information which should be read carefully before any decision is made with respect to the Offer. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager as set forth below. Requests for copies of the Offer to Purchase and the related Letter of Transmittal and all other Offer materials may be directed to the Information Agent or the Dealer Manager, and copies will be furnished promptly at the Purchaser"s expense. No fees will be paid to brokers, dealers or other person (other than the Information Agent and Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: [MacKenzie Logo] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll-Free (800) 322-2885 The Dealer Manager for the Offer is: J.P. Morgan & Co. 60 Wall Street Mail Stop 2860 New York, New York 10260 (212) 648-7957 (Call Collect) or Call Toll-Free (800) 576-8401 November 6, 1998 EX-99.(A)(8) 9 EXHIBIT 99(A)(8) Exhibit 99(A)(8) Danone Group continues expansion in the US bottled water market Danone Group has entered into a definitive agreement with Aquapenn to acquire Aquapenn, a company based in Pennsylvania, through a friendly offer to be launched in the next few days at a price of US$ 13 a share payable in cash. The offer has been unanimously approved by Aquapenn's Board of Directors and principal shareholders. The price values the company at US$ 112 million. Danone Group and Aquapenn have also agreed to immediately implement an agreement for the production of convenience still natural spring water under the Dannon Water brand. * * * Aquapenn was founded in 1986 and has been listed on the New York Stock Exchange since January 30, 1998. It produces, bottles and markets spring water sold either under its own brands - Aquapenn, Great American, Pure American and Castle Rock - or under private labels for major retailers and other large customers. Aquapenn currently operates three springs and three plants, one in Pennsylvania, one in Florida and one in California. In 1997, it reported a strong rise in sales to approximately US$ 45.8 million. The upward trend has continued this year. Danone Group expects that Aquapenn's rapidly growing business will continue to prosper under Danone Group's ownership. * * * Danone Group launched a convenience still natural spring water in the US under the "Dannon" brand in 1996. Dannon Water is now the leading national brand for convenience still bottled water sales through supermarkets, accounting for 14% of the total. Dannon Water operates two springs, the larger being in Canada. * * * The acquisition will increase Danone Group's North American portfolio of high quality springs and production capacities and should create significant logistic synergies. Danone Group should thus be able to accelerate expansion in the US convenience still bottled water market, which is growing at a rate of more than 20% a year. Paris, November 2, 1998 The statements in this press release that are not historical facts or information may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause the outcome to be materially different. EX-99.(C)(1) 10 EXHIBIT 99(C)(1) EXECUTION COPY ================================================================================ AGREEMENT AND PLAN OF MERGER Among GROUPE DANONE, ZONEO ACQUISITION CORP. and AQUAPENN SPRING WATER COMPANY, INC. Dated November 2, 1998 ================================================================================ TABLE OF CONTENTS ARTICLE I THE OFFER SECTION 1.01. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . .2 SECTION 1.02. Company Actions . . . . . . . . . . . . . . . . . . . . . . . .3 ARTICLE II THE MERGER SECTION 2.01. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .5 SECTION 2.02. Effective Time; Closing . . . . . . . . . . . . . . . . . . . .5 SECTION 2.03. Effect of the Merger. . . . . . . . . . . . . . . . . . . . . .5 SECTION 2.04. Articles of Incorporation; Bylaws . . . . . . . . . . . . . . .5 SECTION 2.05. Directors and Officers. . . . . . . . . . . . . . . . . . . . .6 SECTION 2.06. Conversion of Securities. . . . . . . . . . . . . . . . . . . .6 SECTION 2.07. Stock Options; Warrants. . . . . . . . . . . . . . . . . . . . .6 SECTION 2.08. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . .7 SECTION 2.09. Surrender of Shares; Stock Transfer Books . . . . . . . . . . .8 SECTION 2.10. Merger Without Approval of Company Shareholders. . . . . . . . .9 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.01. Organization and Qualification; Subsidiaries. . . . . . . . . 10 SECTION 3.02. Articles of Incorporation and Bylaws. . . . . . . . . . . . . 10 SECTION 3.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 3.04. Authority Relative to this Agreement; Vote Required . . . . . 11 SECTION 3.05. No Conflict; Required Filings and Consents. . . . . . . . . . 12 SECTION 3.06. Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.07. SEC Filings; Financial Statements . . . . . . . . . . . . . . 13 SECTION 3.08. Absence of Certain Changes or Events. . . . . . . . . . . . . 14 SECTION 3.09. Absence of Litigation . . . . . . . . . . . . . . . . . . . . 15 SECTION 3.10. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 15 SECTION 3.11. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement. . . . . . . 18 SECTION 3.13. Tangible Property; Real Property and Leases . . . . . . . . . 18 SECTION 3.14. Trademarks, Patents and Copyrights. . . . . . . . . . . . . . 19 SECTION 3.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 3.16. Environmental Matters . . . . . . . . . . . . . . . . . . . . 21 SECTION 3.17. Material Contracts. . . . . . . . . . . . . . . . . . . . . . 22 SECTION 3.18. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 3.19. Opinion of Financial Advisors . . . . . . . . . . . . . . . . 22 SECTION 3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 3.21. Pennsylvania Law. . . . . . . . . . . . . . . . . . . . . . . 23 i ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER SECTION 4.01. Corporate Organization. . . . . . . . . . . . . . . . . . . . 23 SECTION 4.02. Authority Relative to This Agreement. . . . . . . . . . . . . 23 SECTION 4.03. No Conflict; Required Filings and Consents. . . . . . . . . . 24 SECTION 4.04. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 4.05. Offer Documents; Proxy Statement. . . . . . . . . . . . . . . 25 SECTION 4.06. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 4.07. Ownership of Purchaser; No Prior Activities . . . . . . . . . 25 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. Conduct of Business by the Company Pending the Merger . . . . 26 SECTION 5.02. Consultation and Cooperation. . . . . . . . . . . . . . . . . 28 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Special Shareholders' Meeting . . . . . . . . . . . . . . . . 29 SECTION 6.02. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 6.03. Access to Information; Confidentiality. . . . . . . . . . . . 30 SECTION 6.04. No Solicitation of Transactions . . . . . . . . . . . . . . . 30 SECTION 6.05. Employee Benefits Matters . . . . . . . . . . . . . . . . . . 31 SECTION 6.06. Directors' and Officers' Indemnification and Insurance. . . . 32 SECTION 6.07. Notification of Certain Matters . . . . . . . . . . . . . . . 33 SECTION 6.08. Further Action; Reasonable Best Efforts . . . . . . . . . . . 33 SECTION 6.09. Public Announcements. . . . . . . . . . . . . . . . . . . . . 34 SECTION 6.10. Confidentiality Agreement . . . . . . . . . . . . . . . . . . 34 SECTION 6.11. Facility Investment Agreement . . . . . . . . . . . . . . . . 34 SECTION 6.12. 1998 Financial Statements . . . . . . . . . . . . . . . . . . 34 ARTICLE VII CONDITIONS TO THE MERGER SECTION 7.01. Conditions to the Merger. . . . . . . . . . . . . . . . . . . 34 SECTION 7.02. Conditions to the Long-Form Merger. . . . . . . . . . . . . . 35 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . 39 SECTION 8.03. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 8.04. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 8.05. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Non-Survival of Representations, Warranties and Agreements. . 41 SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ii SECTION 9.03. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 42 SECTION 9.04. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 9.05. Entire Agreement; Assignment. . . . . . . . . . . . . . . . . 43 SECTION 9.06. Parties in Interest . . . . . . . . . . . . . . . . . . . . . 43 SECTION 9.07. Specific Performance. . . . . . . . . . . . . . . . . . . . . 44 SECTION 9.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 9.09. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 9.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 45 iii ANNEX A Conditions to the Offer ANNEX B Facility Investment Agreement Terms ANNEX C Form of Short-Form Plan of Merger Disclosure Schedule Schedule 3.07(b) iv Glossary of Defined Terms Location of Defined Term Definition ------------ ----------- affiliate . . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(a) Agreement . . . . . . . . . . . . . . . . . . . . . . . . Preamble Articles of Merger. . . . . . . . . . . . . . . . . . . . Section 2.02 Assignee. . . . . . . . . . . . . . . . . . . . . . . . . Section 9.05 beneficial owner. . . . . . . . . . . . . . . . . . . . . Section 9.03(b) Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . Section 3.05(b) Board . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals business day. . . . . . . . . . . . . . . . . . . . . . . Section 9.03(c) Certificates. . . . . . . . . . . . . . . . . . . . . . . Section 2.09(b) Code . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a) Company . . . . . . . . . . . . . . . . . . . . . . . . . Preamble Confidentiality Agreement . . . . . . . . . . . . . . . . Section 6.03(b) Consents. . . . . . . . . . . . . . . . . . . . . . . . . Section 2.07 control . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(d) controlled by . . . . . . . . . . . . . . . . . . . . . . Section 9.03(d) Disclosure Schedule . . . . . . . . . . . . . . . . . . . Section 3.01 Dissenting Shares . . . . . . . . . . . . . . . . . . . . Section 2.08(a) Effective Time. . . . . . . . . . . . . . . . . . . . . . Section 2.02 Environmental Claims. . . . . . . . . . . . . . . . . . . Section 3.16(a) Environmental Law . . . . . . . . . . . . . . . . . . . . Section 3.16(a) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a) Exchange Act. . . . . . . . . . . . . . . . . . . . . . . Section 1.02(b) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . Section 8.03(a) Expiration Date . . . . . . . . . . . . . . . . . . . . . Section 6.01 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.03(a)(iii) GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.07(b) Governmental Entity . . . . . . . . . . . . . . . . . . . Section 3.09 Hazardous Materials . . . . . . . . . . . . . . . . . . . Section 3.16(a) HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.05(b) Indemnified Parties . . . . . . . . . . . . . . . . . . . Section 6.06(b) IRS . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a) Lazard. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.13(b) Long-Form Merger. . . . . . . . . . . . . . . . . . . . . Section 6.01 Material Adverse Effect . . . . . . . . . . . . . . . . . Section 3.01(a) Material Contracts. . . . . . . . . . . . . . . . . . . . Section 3.17 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . Recitals Merger Consideration. . . . . . . . . . . . . . . . . . . Section 2.06(a) Minimum Condition . . . . . . . . . . . . . . . . . . . . Section 1.01(a) 1998 Financial Statements . . . . . . . . . . . . . . . . Section 6.12 Offer . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals Offer Documents . . . . . . . . . . . . . . . . . . . . . Section 1.01(b) Offer to Purchase . . . . . . . . . . . . . . . . . . . . Section 1.01(b) Option Consents . . . . . . . . . . . . . . . . . . . . . Section 2.07(b) Option Holders. . . . . . . . . . . . . . . . . . . . . . Section 2.07(b) Parent. . . . . . . . . . . . . . . . . . . . . . . . . . Preamble Paying Agent. . . . . . . . . . . . . . . . . . . . . . . Section 2.09(a) Pennsylvania Law. . . . . . . . . . . . . . . . . . . . . Recitals Per Share Amount. . . . . . . . . . . . . . . . . . . . . Recitals Permitted Liens . . . . . . . . . . . . . . . . . . . . . Section 3.13(b) person . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(e) Plans . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a) Proxy Statement . . . . . . . . . . . . . . . . . . . . . Section 3.12 Purchaser . . . . . . . . . . . . . . . . . . . . . . . . Preamble Schedule 14D-1. . . . . . . . . . . . . . . . . . . . . . Section 1.01(b) Schedule 14D-9. . . . . . . . . . . . . . . . . . . . . . Section 1.02(b) SEC . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.01(b) SEC Reports . . . . . . . . . . . . . . . . . . . . . . . Section 3.07(a) Securities Act. . . . . . . . . . . . . . . . . . . . . . Section 3.07(a) Shares. . . . . . . . . . . . . . . . . . . . . . . . . . Recitals Shareholders. . . . . . . . . . . . . . . . . . . . . . . Recitals Shareholder Agreements. . . . . . . . . . . . . . . . . . Recitals Short-Form Plan of Merger . . . . . . . . . . . . . . . . Section 4.02 Special Shareholders' Meeting . . . . . . . . . . . . . . Section 6.01 Stock Option Plans. . . . . . . . . . . . . . . . . . . . Section 2.07 Stock Purchase Plan . . . . . . . . . . . . . . . . . . . Section 6.05 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . Section 3.01 subsidiary. . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(f) Superior Proposal . . . . . . . . . . . . . . . . . . . . Section 6.04(a) Surviving Corporation . . . . . . . . . . . . . . . . . . Section 2.01 Takeover Proposal . . . . . . . . . . . . . . . . . . . . Section 6.04(a) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.15 Transactions. . . . . . . . . . . . . . . . . . . . . . . Section 1.02 under common control with . . . . . . . . . . . . . . . . Section 9.03(d) WARN . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(f) Warrant Consents. . . . . . . . . . . . . . . . . . . . . Section 2.07(c) AGREEMENT AND PLAN OF MERGER, dated November 2, 1998 (this "AGREEMENT"), among GROUPE DANONE, a French SOCIETE ANONYME (the "PARENT"), ZONEO ACQUISITION CORP., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent (the "PURCHASER"), and AQUAPENN SPRING WATER COMPANY, INC., a Pennsylvania corporation (the "COMPANY"). WHEREAS, the Boards of Directors of the Parent, the Purchaser and the Company have each determined that it is in the best interests of their respective corporations and shareholders for the Parent to acquire the Company upon the terms and subject to the conditions set forth herein; WHEREAS, in furtherance of such acquisition, it is proposed that the Purchaser shall make a cash tender offer (the "OFFER") to acquire all the issued and outstanding shares of common stock, no par value, of the Company (the "SHARES") for U.S. $13.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "PER SHARE AMOUNT") net to the seller in cash, upon the terms and subject to the conditions of this Agreement and the Offer; WHEREAS, the Board of Directors of the Company (the "BOARD"), including all the disinterested directors on the Board, has unanimously approved the making of the Offer and resolved and agreed to recommend that holders of Shares tender their Shares pursuant to the Offer; WHEREAS, also in furtherance of such acquisition, the Boards of Directors of the Parent, the Purchaser and the Company have each approved the merger (the "MERGER") of the Purchaser with and into the Company in accordance with the Pennsylvania Business Corporation Law of 1988, as amended ("PENNSYLVANIA LAW"), following either the consummation of the Offer or approval of the holders of Shares and upon the terms and subject to the conditions set forth herein, whereby each Share, except Shares held by each person who objects to the Merger and complies with all the provisions of Pennsylvania Law concerning the right of holders of Shares to dissent from the Merger and demand the right to receive the fair value of their Shares, will be converted into the right to receive the Per Share Amount in cash; 2 WHEREAS, the Parent, the Purchaser and certain shareholders of the Company (the "SHAREHOLDERS"), concurrently with the execution and delivery hereof, have entered into Shareholder Agreements (the "SHAREHOLDER AGREEMENTS"), providing that, among other things, the Shareholders will (i) tender their Shares into the Offer, (ii) vote their Shares in favor of the Merger, if applicable, and (iii) grant an option to the Purchaser to purchase their Shares at the Per Share Amount, in each case subject to the conditions set forth therein; WHEREAS, the Parent, the Purchaser and the Company, concurrently with the execution and delivery hereof, have entered into a Registration Rights Agreement, pursuant to which the Company has granted to the Purchaser or its assignees certain registration rights with respect to Shares acquired pursuant to the third sentence of Section 1.01 of this Agreement or any Shareholder Agreement; and WHEREAS, concurrently with the execution and delivery hereof, Great Brands of Europe, Inc., an indirect wholly owned subsidiary of the Parent, and each of Edward J. Lauth and Geoffrey F. Feidelberg have entered into employment agreements, and Great Brands of Europe, Inc., and Matthew Suhey have entered into a consulting agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parent, the Purchaser and the Company hereby agree as follows: ARTICLE I THE OFFER SECTION 1.01. THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.01 and none of the events set forth in Annex A hereto shall have occurred or be existing, the Purchaser shall commence the Offer as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the initial public announcement of the Purchaser's intention to commence the Offer, which announcement shall occur on the date hereof or on the following day. The obligation of the Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject to the condition (the "MINIMUM CONDITION") that Shares constituting at least 80% of the then outstanding Shares on a fully diluted basis (including, without limitation, all Shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights) shall have been validly tendered and not withdrawn prior to the expiration of the Offer and also shall be subject to the satisfaction of the other conditions set forth in Annex A hereto. In the event that Shares constituting at least 19.9% of the then outstanding Shares shall have been validly tendered and not withdrawn prior to the expiration of the Offer, and all the conditions set forth in Annex A thereto shall have been satisfied other than the Minimum Condition, the Purchaser may, at its option, purchase for the Per Share Amount any number of such Shares constituting in the aggregate no more than 19.9% of the then outstanding Shares, on a pro rata basis if a greater number of Shares shall have been tendered into the Offer by the holders thereof. The Purchaser expressly reserves the right to waive any such condition, to increase the price per Share payable in the Offer, and to make any other 3 changes in the terms and conditions of the Offer; PROVIDED, HOWEVER, that no change may be made without the prior written consent of the Company that decreases the Minimum Condition, that decreases the price per Share payable in the Offer below the Per Share Amount, that changes the form of consideration to be paid in the Offer, that reduces the maximum number of Shares to be purchased in the Offer or that imposes conditions to the Offer in addition to those set forth in Annex A hereto. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition), the Purchaser shall pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn; PROVIDED that if on the initial scheduled expiration date (which will be twenty business days after the date of the commencement of the Offer) of the Offer, all the conditions to the Offer have not been satisfied or waived, the Offer may be extended from time to time until January 4, 1999, without the consent of the Company. Notwithstanding the foregoing, the Purchaser may not, without the prior written consent of the Company, extend the Offer pursuant to the foregoing sentence if the failure to satisfy any of the conditions to the Offer was caused by or resulted from the failure of the Parent or the Purchaser to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by the Parent or the Purchaser of any material representation or warranty of either of them contained in this Agreement. (b) As soon as reasonably practicable on the date of commencement of the Offer, the Purchaser shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "SCHEDULE 14D-1") with respect to the Offer and the other Transactions (as hereinafter defined). The Schedule 14D-1 shall contain or shall incorporate by reference an offer to purchase (the "OFFER TO PURCHASE") and forms of the related letter of transmittal and any related summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "OFFER DOCUMENTS"). The Parent, the Purchaser and the Company agree to correct promptly any information provided by any of them for use in the Offer Documents that shall have become false or misleading, and the Parent and the Purchaser further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. SECTION 1.02. COMPANY ACTIONS. (a) The Company hereby approves of and consents to the Offer and represents that (i) the Board, at a meeting duly called and held on November 1, 1998, has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger (collectively, the "TRANSACTIONS"), are fair to and in the best interests of the Company and the shareholders of 4 the Company, (B) approved this Agreement and the Transactions, (C) taken all action required to (1) render inapplicable to the Transactions the provisions of Section 2538 of Pennsylvania Law and (2) approve the Transactions pursuant to the provisions of Subchapter F of Chapter 25 and Section 2539 of Pennsylvania Law and (D) recommended that the shareholders of the Company accept the Offer and, in the event of a shareholder vote, approve and adopt this Agreement and the Transactions and (ii) Lazard Freres & Co. LLC ("LAZARD") and Parker/Hunter Incorporated ("PARKER") have each delivered to the Board a written opinion to the effect that the consideration to be received by the holders of Shares pursuant to each of the Offer and the Merger is fair to the holders of Shares from a financial point of view. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence, and, except as set forth in Section 6.04(c), agrees not to withdraw or modify or propose to withdraw or modify such recommendation in a manner adverse to the Parent or the Purchaser. The Company has been advised by each of its directors and executive officers that they intend to tender or cause to be tendered all Shares beneficially owned by them to the Purchaser pursuant to the Offer, to sell such Shares to the Purchaser pursuant to the respective Shareholder Agreement, if applicable, and to vote such Shares in favor of the approval and adoption of this Agreement and the Transactions. (b) As soon as reasonably practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "SCHEDULE 14D-9") containing the recommendation of the Board described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and any other applicable federal securities laws. The Company, the Parent and the Purchaser agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (c) The Company shall promptly furnish the Purchaser with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of Shares. The Company shall furnish the Purchaser with such additional information, including, without limitation, updated listings and computer files of shareholders, mailing labels and security position listings, and such other assistance as the Parent, the Purchaser or their agents may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer 5 Documents and any other documents necessary to consummate the Offer or the Merger, the Parent and the Purchaser shall hold in confidence until the Effective Time the information contained in such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated in accordance with Section 8.01, shall deliver to the Company all copies of such information then in their possession. ARTICLE II THE MERGER SECTION 2.01. THE MERGER. Upon the terms and subject to the conditions set forth in Article VII, and in accordance with Pennsylvania Law (including, without limitation, Section 1906 thereof), at the Effective Time, the Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the "SURVIVING CORPORATION"), and shall continue to be governed by the laws of the Commonwealth of Pennsylvania. SECTION 2.02. EFFECTIVE TIME; CLOSING. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VII, the parties hereto shall cause the Merger to be consummated by filing articles of merger (the "ARTICLES OF MERGER"), together with any required tax certificates or statements, with the Department of State of the Commonwealth of Pennsylvania, in such form as is required by, and executed in accordance with, the relevant provisions of Pennsylvania Law (the date and time of such filing being the "EFFECTIVE TIME"). Prior to such filings, a closing shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VII. SECTION 2.03. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Pennsylvania Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and the Purchaser shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. 6 SECTION 2.04. ARTICLES OF INCORPORATION; BYLAWS. (a) The Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by applicable law and such Articles of Incorporation. (b) The Bylaws of the Company, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such Bylaws. SECTION 2.05. DIRECTORS AND OFFICERS. The directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. SECTION 2.06. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of the Purchaser, the Company or the holders of any of the Shares: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 2.06(b) and any Dissenting Shares) shall be canceled and shall be converted automatically into the right to receive an amount equal to the Per Share Amount in cash (the "MERGER CONSIDERATION"), payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.09, of the certificate that formerly evidenced such Share; (b) Each Share owned by the Purchaser, the Parent or any direct or indirect wholly owned subsidiary of the Parent or of the Company immediately prior to the Effective Time shall be canceled and retired without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) Each share of Common Stock, par value U.S. $0.01 per share, of the Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock, par value U.S. $0.01 per share, of the Surviving Corporation. SECTION 2.07. STOCK OPTIONS; WARRANTS. (a) In accordance with the terms of the Company's 1989 Stock Option Plan and 1992 Stock Option Plan (the "STOCK OPTION PLANS"), the Company shall cause each outstanding option to purchase Shares granted under 7 the Stock Option Plans to, immediately prior to the Effective Time, become exercisable regardless of the installment provisions contained in the Stock Option Plans and to be terminated at the Effective Time. Section 2.07(a) of the Disclosure Schedule lists all options outstanding under the Stock Option Plans. (b) The Company shall use its reasonable best efforts to obtain the consent (the "OPTION CONSENTS") of the persons listed on Section 2.07(b) of the Disclosure Schedule (the "OPTION HOLDERS"), to the termination, immediately prior to the Effective Time, of the stock options held by each Option Holder pursuant to the respective option agreements listed on Section 2.07(b) of the Disclosure Schedule. Each such Option Holder shall be paid by the Company, at or immediately prior to the Effective Time with respect to each stock option, in consideration of such termination, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Amount over the applicable exercise price under such option by (ii) the number of Shares such Option Holder could have purchased had such holder exercised such options in full immediately prior to the Effective Time. (c) The Company shall use its reasonable best efforts to obtain the consent of Edward J. Lauth, James D. Hammond and Marion I. Hammond and Nancy J. Davis to the termination, immediately prior to the Effective Time, of the warrants held by each of them pursuant to the Warrants dated as of April 6, 1995, the Warrant dated as of November 21, 1995, and the Warrant dated as of August 28, 1996, respectively (the "WARRANT CONSENTS"). Each such holder of warrants shall be paid by the Company, at or immediately prior to the Effective Time with respect to each such warrant, in consideration of such termination, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Amount over the applicable exercise price under such warrant by (ii) the number of Shares such holder could have purchased had such holder exercised such warrant in full immediately prior to the Effective Time. SECTION 2.08. DISSENTING SHARES. (a) Notwithstanding any provision of this Agreement to the contrary, in the event that this Agreement is submitted to a vote at the Special Shareholders' Meeting, Shares that are outstanding immediately prior to the Effective Time and that are held by shareholders who shall have dissented and demanded the right to receive the fair value of their Shares in accordance with, and otherwise complied in all respects with, Sections 1930 and 1571 through 1580 of Pennsylvania Law (collectively, the "DISSENTING SHARES") shall be canceled but not be converted into or represent the right to receive the Merger Consideration. Such shareholders shall be entitled instead to receive payment of the fair value of such Shares (which may be more than, equal to, or less than the Merger Consideration) in accordance with the provisions of such Sections 1930 and 1571 through 1580, except that all Dissenting Shares held by shareholders who shall fail to perfect or who effectively shall withdraw or lose their rights to be paid the fair value for such Shares under such Sections 1930 and 1571 through 1580 shall thereupon be deemed to have been 8 converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.09, of the certificate or certificates that formerly evidenced such Shares. (b) Notwithstanding any provision of this Agreement to the contrary, in the event that the Merger is effected as provided in Section 2.10 without a shareholders' meeting, Shares that are outstanding immediately prior to the Effective Time shall be canceled and the holders thereof shall be entitled to a notice to demand payment in accordance with the provisions of Sections 1930 and 1575 of Pennsylvania Law, and those shareholders who make a timely demand for payment in accordance with, and otherwise comply in all respects with, Sections 1575 through 1580 of Pennsylvania Law shall be entitled to receive, instead of the Merger Consideration, payment of the fair value of such Shares (which may be more than, equal to, or less than the Merger Consideration) in accordance with the provisions of such Sections 1930 and 1575 through 1580, except that all Dissenting Shares held by shareholders who shall fail to perfect or who effectively shall withdraw or lose their rights to be paid the fair value for such Shares under such Sections 1930 and 1575 through 1580 shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.09, of the certificate or certificates that formerly evidenced such Shares. SECTION 2.09. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior to the Effective Time, the Purchaser shall designate a bank or trust company to act as agent (the "PAYING AGENT") for the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.06(a). Such funds shall be invested by the Paying Agent as directed by the Surviving Corporation, provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of U.S. $500 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). (b) Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 2.06(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the "CERTIFICATES") shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the 9 Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly evidenced by such Certificate, and such Certificate shall then be canceled. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. (c) At any time following the sixth month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it) and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law. (d) At the Effective Time, the stock transfer books of the Company shall be closed and, thereafter, there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law. SECTION 2.10. MERGER WITHOUT APPROVAL OF COMPANY SHAREHOLDERS. Notwithstanding any other provision of this Agreement, in the event that the Parent, the Purchaser or any of their Assignees acquire Shares pursuant to the Offer constituting at least 80% of the then outstanding Shares, the parties hereby agree, subject to Article VII hereof, to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without approval of the Company's shareholders, in accordance with Section 1924(b)(1)(ii) of Pennsylvania Law, including, without limitation, 10 adoption by the Board of Directors of the Purchaser or the Assignee acquiring the Shares pursuant to the Offer of the Short-Form Plan of Merger. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Parent and the Purchaser that: SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the Company and each subsidiary of the Company (a "SUBSIDIARY") is a corporation duly organized, validly existing and in good standing or validly subsisting (with respect to jurisdictions which recognize such concept) under the laws of the jurisdiction of its incorporation and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect (as defined below). The Company and each Subsidiary is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Material Adverse Effect. When used in connection with the Company or any Subsidiary, the term "MATERIAL ADVERSE EFFECT" means any change or effect that is or would be materially adverse to the business, operations, properties, condition, assets or liabilities (including, without limitation, contingent liabilities) of the Company and the Subsidiaries taken as a whole. A true and complete list of all the Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary and the percentage of the outstanding capital stock of each Subsidiary owned by the Company and each other Subsidiary, is set forth in Section 3.01 of the Disclosure Schedule, which has been delivered prior to the date of this Agreement by the Company to the Parent (the "DISCLOSURE SCHEDULE"). Except as disclosed in such Section 3.01, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. SECTION 3.02. ARTICLES OF INCORPORATION AND BYLAWS. The Company has heretofore furnished to the Parent a complete and correct copy of the Articles of Incorporation and the Bylaws or equivalent organizational documents, each as amended to date, of the 11 Company and each Subsidiary. Such Articles of Incorporation, Bylaws and equivalent organizational documents are in full force and effect. Neither the Company nor any Subsidiary is in violation of any provision of its Articles of Incorporation, Bylaws or equivalent organizational documents. SECTION 3.03. CAPITALIZATION. The authorized capital stock of the Company consists of 100,000,000 Shares and 2,000,000 shares of preferred stock, par value $1.00 per share. As of the date hereof, (i) 8,448,913 Shares are issued and outstanding, all of which are validly issued, fully paid and nonassessable, and no shares of preferred stock are issued and outstanding, (ii) 35,095 Shares are held in the treasury of the Company, (iii) no Shares are held by the Subsidiaries, (iv) 352,808 Shares are reserved for issuance pursuant to stock options granted pursuant to the Company's Stock Option Plans or otherwise, (v) warrants for 75,100 Shares are issued and outstanding and (vi) 37,681 Shares have been subscribed for but not yet purchased pursuant to the Stock Purchase Plan. Except as set forth in this Section 3.03, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital stock of any Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary or any other person. Each outstanding share of capital stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable and each such share owned by the Company or another Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or such Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT; VOTE REQUIRED. The Company has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Long-Form Merger, the approval and adoption of this Agreement by the affirmative vote of the shareholders of the Company in accordance with Pennsylvania Law and the Company's Articles of Incorporation), and no further corporate proceedings are necessary to (i) render inapplicable to the Transactions the provisions of Section 2538 of Pennsylvania Law regarding 12 approval of transactions with interested shareholders and (2) approve the Transactions pursuant to the provisions of Subchapter F of Chapter 25 and Section 2539 of Pennsylvania Law regarding business combinations. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the Parent and the Purchaser, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. If the Parent, the Purchaser or any of their Assignees acquires Shares pursuant to the Offer constituting at least 80% of the then outstanding Shares, no vote of the holders of Shares shall be required to effect the Merger in accordance with Sections 1924(b)(1)(ii) and 2539 of Pennsylvania Law; PROVIDED that the corporation merging with and into the Company owns, directly or indirectly, at least 80% of the then outstanding Shares. Otherwise, the Long-Form Merger must be approved by the affirmative vote of holders of a majority of the Shares voted on a proposal to approve the Long-Form Merger at a duly convened annual or special meeting of the shareholders of Company. SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Articles of Incorporation or Bylaws or equivalent organizational documents of the Company or any Subsidiary, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or subject or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance of any nature on any property or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the Company or any Subsidiary is bound or subject, except, in the case of (ii) or (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with, or notification to, any governmental, administrative or regulatory authority or agency, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act, state securities or "blue sky" laws ("BLUE SKY LAWS") and state takeover laws, the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR ACT"), the rules of the New York Stock Exchange and filing and recordation of appropriate merger documents as required by 13 Pennsylvania Law, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Offer or the Merger, or otherwise prevent the Company from performing its obligations under this Agreement, and would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.06. COMPLIANCE. Neither the Company nor any Subsidiary is in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or subject or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the Company or any Subsidiary is bound or subject, except for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed all forms, reports and documents required to be filed by it with the SEC since January 29, 1998, and has heretofore made available to the Parent, in the form filed with the SEC, (i) its Quarterly Reports on Form 10-Q for the periods ended December 31, 1997, March 31, 1998 and June 30, 1998, (ii) all proxy statements relating to the Company's meetings of shareholders (whether annual or special) held since January 29, 1998, if any, and (iii) all other forms, reports and other registration statements filed by the Company with the SEC since January 29, 1998 (the forms, reports and other documents referred to in clauses (i), (ii) and (iii) above being referred to herein, collectively, as the "SEC REPORTS"). The SEC Reports (i) were prepared in accordance with the requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and the Exchange Act, as the case may be, and the rules and regulations promulgated thereunder and (ii) did not, at the time they were filed, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. No Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the SEC Reports, the audited consolidated balance sheets of the Company dated September 30, 1997, and September 30, 1996, and the audited statements of operations, shareholders' equity and cash flows for the years ending September 30, 1995, 1996 and 1997, the unaudited consolidated balance sheet dated September 30, 1998, and the unaudited statement of income for the year ended September 30, 1998, copies of which are attached hereto as Schedule 3.07(b), was, and the 1998 Financial Statements, to be delivered 14 by the Company to the Parent pursuant to Section 6.12 hereof will be, prepared in accordance with United States generally accepted accounting principles applied on a consistent basis ("GAAP") throughout the periods indicated (except as may be indicated in the notes thereto and except for (i) interim periods after September 30, 1997, which did not include any year-end adjustments and (ii) the unaudited consolidated balance sheet dated September 30, 1998, and the unaudited statement of income for the year ended September 30, 1998, which did not include notes thereto as required by GAAP and are subject to adjustment based on year-end inventory count) and each fairly presents, or will present, as the case may be, the consolidated financial position, results of operations and changes in shareholders' equity and cash flows of the Company and the consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein except as otherwise noted therein. (c) The 1998 Financial Statements will not be materially less favorable than the financial statements attached hereto as Schedule 3.07(b). For purposes of this subsection (c) "materially less favorable" means that the earnings per share, on a fully diluted basis, reflected in the 1998 Financial Statements is less than $0.27, the operating income reflected in the 1998 Financial Statements is less than $3,800,000 and net debt reflected in the 1998 Financial Statements is more than $3,000,000. (d) Except as and to the extent specifically disclosed in any SEC Report filed prior to the date of this Agreement, neither the Company nor any Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities and obligations incurred in the ordinary course of business consistent with past practice since June 30, 1998, that would not, individually or in the aggregate, have a Material Adverse Effect. (e) The Company has heretofore furnished to the Parent complete and correct copies of all amendments and modifications that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect. SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1997, except as expressly contemplated by this Agreement or specifically disclosed in any SEC Report filed prior to the date of this Agreement, the Company and the Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since September 30, 1997, except as specifically disclosed in any SEC Report filed prior to the date of this Agreement, or in the Company's Registration Statement on Form S-1 dated January 29, 1998, there has not been (i) any change in the business, operations, properties, condition, assets or liabilities (including, without limitation, contingent liabilities) of the Company or any Subsidiary having, individually or in the aggregate, a Material Adverse Effect, (ii) any damage, destruction or loss (whether or not covered by insurance) with respect 15 to any property or asset of the Company or any Subsidiary having, individually or in the aggregate, a Material Adverse Effect, (iii) any change by the Company in its accounting methods, principles or practices, (iv) any revaluation by the Company of any asset (including, without limitation, any writing down of the value of inventory or writing off of notes or accounts receivable), other than in the ordinary course of business consistent with past practice, (v) any failure by the Company to revalue any asset in accordance with GAAP consistent with past practice, (vi) any entry by the Company or any Subsidiary into any commitment or transaction material to the Company and the Subsidiaries taken as a whole, (vii) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Company or any redemption, purchase or other acquisition of any of its securities, (viii) other than pursuant to the contracts referred to in Section 3.10 and the increase in compensation for the directors approved by the Board on May 12, 1998, any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any officers or key employees of the Company or any Subsidiary, except in the ordinary course of business consistent with past practice, (ix) any entering into, renewal, modification or extension of, any contract, arrangement or agreement with any other party except for contracts, arrangements or agreements in the ordinary course of business consistent with past practice or (x) any other change, condition, event or development that has had or is reasonably likely to have a Material Adverse Effect. SECTION 3.09. ABSENCE OF LITIGATION. Except as specifically disclosed in any SEC Report filed prior to the date of this Agreement, there is no claim, action, proceeding or investigation pending or, to the best knowledge of the Company, threatened against the Company or any Subsidiary, or any property or asset of the Company or any Subsidiary, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign (each a "GOVERNMENTAL ENTITY"), which (i) alleges damages of $250,000 or more or (ii) seeks to, or is reasonably likely to, delay or prevent the consummation of any Transaction. Neither the Company nor any Subsidiary nor any property or asset of the Company or any Subsidiary is subject to any order, writ, judgment, injunction, decree, determination or award enjoining or requiring the Company or any Subsidiary to take any action with respect to its business, assets or properties. SECTION 3.10. EMPLOYEE BENEFIT PLANS. (a) Section 3.10 of the Disclosure Schedule contains a true and complete list of all employee benefit plans (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance, change 16 in control, stock option or other contracts, arrangements or agreements to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary (collectively, the "PLANS"). No Plan is a "defined benefit plan" within the meaning of Section 3(35) of ERISA and no Plan is subject to Title IV of ERISA and neither the Company nor any Subsidiary has ever maintained or contributed to an employee benefit plan subject to Title IV of ERISA. Each Plan is in writing and the Company has previously furnished the Parent with a true and complete copy of: (i) each material document setting forth the terms of such Plan, (ii) each trust or other funding arrangement, (iii) each summary plan description and summary of material modifications, (iv) the most recently filed Internal Revenue Service ("IRS") Form 5500, (v) the most recently received IRS determination letter for each such Plan, and (vi) the most recently prepared actuarial report and financial statement in connection with each such Plan. Neither the Company nor any Subsidiary has any express or implied commitment (i) to create or incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any other contract or agreement to provide compensation or benefits to any individual or (iii) to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA or the Internal Revenue Code of 1986, as amended (the "CODE"). (b) Except as set forth in Section 3.10 of the Disclosure Schedule, none of the Plans (i) provides for the payment of separation, severance, termination or similar-type benefits to any person, (ii) obligates the Company or any Subsidiary to pay separation, severance, termination or other benefits as a result of any Transaction or (iii) obligates the Company or any Subsidiary to make any payment or provide any benefit that could be subject to a tax under Section 4999 of the Code. Except as set forth in Section 3.10 of the Disclosure Schedule, none of the Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Subsidiary, other than as required by Section 601 et seq. of ERISA (COBRA). (c) Except as set forth in Section 3.10 of the Disclosure Schedule, each Plan that is intended to be qualified under Section 401(a) or 401(k) of the Code has received a favorable determination letter from the IRS that such Plan is so qualified, and each trust established in connection with any Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that such trust is so exempt. To the best of the Company's knowledge, no fact or event has occurred since the date of any such determination letter from the IRS that could adversely affect the qualified status of any such Plan or the exempt status of any such trust. Each trust maintained or contributed to by the Company or any Subsidiary that is intended to be qualified as a voluntary employees' beneficiary association exempt from federal income taxation under 17 Sections 501(a) and 501(c)(9) of the Code has received a favorable determination letter from the IRS that it is so qualified and so exempt, and no fact or event has occurred since the date of such determination by the IRS that could adversely affect such qualified or exempt status. (d) There has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. Neither the Company nor any Subsidiary is currently liable or has previously incurred any liability for any tax or penalty arising under Section 4971, 4972, 4979, 4980 or, to the best of the Company's knowledge, 4980B of the Code or Section 502(c) of ERISA, and, to the Company's knowledge, no fact or event exists that could give rise to any such liability. Neither the Company nor any Subsidiary has incurred any liability under, arising out of or by operation of Title IV of ERISA, and no fact or event exists which could give rise to any such liability. No complete or partial termination has occurred within the five years preceding the date hereof with respect to any Plan. (e) Each Plan is now and has been operated in all respects in accordance with the requirements of all applicable laws, including, without limitation, ERISA and the Code, and the Company and each Subsidiary have performed all obligations required to be performed by them under, are not in any respect in default under or in violation of, and have no knowledge of any default or violation by any party to, any Plan. All contributions, premiums or payments required to be made with respect to any Plan are fully deductible for income tax purposes and no such deduction previously claimed has been challenged by any government entity. The Company's balance sheet dated September 30, 1998, provided to the Parent prior to the date of this Agreement reflects an accrual of all amounts of employer contributions and premiums accrued but unpaid with respect to the Plans. (f) The Company and the Subsidiaries have not incurred any liability under, and have complied in all respects with, the Worker Adjustment Retraining Notification Act and the regulations promulgated thereunder ("WARN") and do not reasonably expect to incur any such liability as a result of actions taken or not taken prior to the Effective Time. Section 3.10(f) of the Disclosure Schedule lists (i) all the employees terminated or laid off by the Company or any Subsidiary during the 90 days prior to the date hereof and (ii) all the employees of the Company or any Subsidiary who have experienced a reduction in hours of work of more than 50% during any month during the 90 days prior to the date hereof and describes all notices given by the Company and the Subsidiaries in connection with WARN. The Company will, by written notice to the Parent and the Purchaser, update Section 3.10(f) of the Disclosure Schedule to include any such terminations, layoffs and reductions in hours from the date hereof through the Effective Time and will provide the Parent and the Purchaser with any related information which they may reasonably request. 18 SECTION 3.11. LABOR MATTERS. (i) There are no controversies pending or, to the best knowledge of the Company, threatened between the Company or any Subsidiary and any of their respective employees, which controversies have or could have a Material Adverse Effect; (ii) neither the Company nor any Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any Subsidiary, nor, to the best knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees; (iii) neither the Company nor any Subsidiary has breached or otherwise failed to comply with any provision of any such agreement or contract and there are no grievances outstanding against the Company or any Subsidiary under any such agreement or contract; (iv) there are no unfair labor practice complaints pending against the Company or any Subsidiary before the National Labor Relations Board or any current union representation questions involving employees of the Company or any Subsidiary; and (v) there is no strike, slowdown, work stoppage or lockout, or, to the best knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any Subsidiary. SECTION 3.12. OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT. Neither the Schedule 14D-9 nor any information supplied by the Company for inclusion in the Offer Documents shall, at the respective times the Schedule 14D-9, the Offer Documents, or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to shareholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading. The proxy statement to be sent to the shareholders of the Company in connection with the Special Shareholders' Meeting (such proxy statement, as amended or supplemented, being referred to herein as the "PROXY STATEMENT") shall not, at the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to shareholders of the Company, at the time of the Special Shareholders' Meeting, if any, and at the Effective Time, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Shareholders' Meeting, if any, which shall have become false or misleading. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by the Parent, the Purchaser or any of the Parent's or the Purchaser's representatives for inclusion in the foregoing documents. The Schedule 14D-9 and the Proxy Statement shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. 19 SECTION 3.13. TANGIBLE PROPERTY; REAL PROPERTY AND LEASES. (a) The Company and the Subsidiaries have sufficient title to all their tangible properties and assets to conduct their respective businesses as currently conducted or as contemplated to be conducted. (b) Each parcel of real property owned or leased by the Company or any Subsidiary (i) is owned or leased free and clear of all mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges or other claims of third parties of any kind (collectively, "LIENS"), other than (A) Liens for current taxes and assessments not yet past due, (B) inchoate mechanics' and materialmen's Liens for construction in progress, (C) workmen's, repairmen's, warehousemen's and carriers' Liens arising in the ordinary course of business of the Company or such Subsidiary consistent with past practice, (D) any matter disclosed on Section 3.13(b) to the Disclosure Schedule and (E) all matters of record, Liens and other imperfections of title and encumbrances that, individually or in the aggregate, would not affect the Company's water sources or its use thereof or materially affect the use of any other property subject to the foregoing (collectively, "PERMITTED LIENS"), and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the best knowledge of the Company, has any such condemnation, expropriation or taking been proposed. (c) All leases of real property leased for the use or benefit of the Company or any Subsidiary to which the Company or any Subsidiary is a party requiring rental payments in excess of U.S. $25,000 during the period of the lease and all amendments and modifications thereto are in full force and effect and have not been modified or amended, and there exists no default under any such lease by the Company or any Subsidiary, nor any event which with notice or lapse of time or both would constitute a default thereunder by the Company or any Subsidiary, except as, individually or in the aggregate, would not materially affect the use of such real property the subject of such lease. SECTION 3.14. TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set forth in Section 3.14 of the Disclosure Schedule, the Company and the Subsidiaries own or possess adequate licenses or other valid rights to use all patents, patent rights, trademarks, trademark rights, trade names, trade dress, trade name rights, copyrights, servicemarks, trade secrets, applications for trademarks and for servicemarks, mask works, know-how and other proprietary rights and information used or held for use in connection with the business of the Company and the Subsidiaries, as currently conducted or as contemplated to be conducted, and the Company is unaware of any assertion or claim challenging the validity of any of the foregoing. The conduct of the business of the Company and the Subsidiaries as currently conducted and as contemplated to be conducted does not and will not conflict in any way with any patent, patent right, license, trademark, trademark right, trade dress, trade name, trade name right, service mark, mask work or copyright of any third party that, individually or in 20 the aggregate, could have a Material Adverse Effect. To the knowledge of the Company, there are no infringements by any third party of any proprietary rights owned by or licensed by or to the Company or any Subsidiary. Except as set forth in Section 3.14 of the Disclosure Schedule, neither the Company nor any Subsidiary has licensed or otherwise permitted the use by any third party of any proprietary information. SECTION 3.15. TAXES. (a) Except for such matters as would not have a Material Adverse Effect, (i) the Company and its Subsidiaries have timely filed or will timely file all returns and reports required to be filed by them with any taxing authority with respect to Taxes for any period ending on or before the earlier of the Effective Time or the date on which the terms and conditions of the Offer (including, without limitation, the Minimum Condition) have been satisfied, taking into account any extension of time to file granted to or obtained on behalf of the Company and its Subsidiaries, (ii) all Taxes that are due for any period ending on or before the earlier of the Effective Time or the date on which the terms and conditions of the Offer (including, without limitation, the Minimum Condition) have been satisfied have been paid or will be paid (other than Taxes which (1) are not yet delinquent or (2) are being contested in good faith and have not been finally determined), (iii) as of the date hereof, no deficiency for any Tax has been asserted or assessed by a taxing authority against the Company or any of its Subsidiaries which deficiency has not been paid other than any deficiency being contested in good faith, (iv) the Company and its Subsidiaries have provided adequate reserves (in accordance with GAAP) in their financial statements for any Taxes that have not been paid, whether or not shown as being due on any returns. As used in the Agreement, "TAXES" shall mean any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity or taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers' duties, tariffs and similar charges. (b) To the best of the Company's knowledge, there are no material disputes pending or claims asserted in writing for Taxes or assessments upon the Company or any of its Subsidiaries, nor has the Company or any of its Subsidiaries been requested in writing to give any currently effective waivers extending the statutory period of limitation applicable to any federal or state income tax return for any period which disputes, claims, assessments or waivers are reasonably likely to have a Material Adverse Effect. 21 (c) There are no Tax liens upon any property or assets of the Company or any of its Subsidiaries except liens for current Taxes not yet due and except for liens which have not had and are not reasonably likely to have a Material Adverse Effect. (d) Neither the Company nor any of its Subsidiaries has been required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by the Company or any of its Subsidiaries, and the IRS has not initiated or proposed any such adjustment or change in accounting method, in either case which adjustment or change has had or is reasonably likely to have a Material Adverse Effect. (e) Except as set forth in the financial statements describe in Section 3.07, neither Company nor any of its Subsidiaries has entered into a transaction which is being accounted for under the installment method of Section 453 of the Code, which would be reasonably likely to have a Material Adverse Effect. (f) Neither the Company nor any of its Subsidiaries has made an election under Section 341(f) of the Code. SECTION 3.16. ENVIRONMENTAL MATTERS. (a) For purposes of this Agreement, the following terms shall have the following meanings: (i) "HAZARDOUS MATERIALS" means (a) petroleum and petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials and polychlorinated biphenyls and (b) any other chemicals, materials or substances defined or regulated as toxic or hazardous or as a pollutant, contaminant or waste under any applicable Environmental Law; (ii) "ENVIRONMENTAL LAW" means any Law, now or hereafter in effect and as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to pollution or protection of the environment, public or employee safety and health or natural resources, including without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials; (iii) "ENVIRONMENTAL CLAIMS" means any and all actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, notices of liability or potential liability, investigations, proceedings, consent orders or consent agreements relating in any way to any Environmental Law, any environmental or water permit or any Hazardous Materials. (b) (i) The Company has not violated and is not in violation of any Environmental Law; (ii) the Company has all permits, licenses and other authorizations required under any Environmental Law and the Company has always been and is in compliance with their requirements; (iii) none of the properties owned or leased by the Company (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Materials or have been used for the treatment, storage or disposal of any 22 Hazardous Materials; (iv) there are no Environmental Claims pending or, to the knowledge of the Company, threatened against the Company or any of its properties, and there are no circumstances that can reasonably be expected to form the basis of any such Environmental Claim, including without limitation with respect to any off-site disposal location presently or formerly used by the Company or any of its predecessors or with respect to any previously owned or operated facilities; and (v) the Company has not received any written notice of violation with or liability under any Environmental Law and the Company is not aware of any circumstances that could reasonably be expected to give rise to such notice. (c) The quality of the spring water from each water source used by the Company meets all applicable state and federal standards and guidelines for "spring water". SECTION 3.17. MATERIAL CONTRACTS. Section 3.17 of the Disclosure Schedule lists each contract or agreement to which the Company or any of the Subsidiaries is a party that is material to the Company or any Subsidiary, including, but not limited to, any material contracts or agreements (i) pursuant to which the Company or any Subsidiary leases or otherwise procures or obtains rights to water sources, (ii) pursuant to which the Company or any Subsidiary sells, brokers or distributes bottled water having an annual aggregate value for each such contract or agreement in excess of $100,000, (iii) pursuant to which any third party supplies raw materials, supplies or other goods or merchandise to the Company having an annual aggregate value for each such contract or arrangement in excess of $100,000 or (iv) containing a provision purporting to limit the ability of the Company to compete in any line of business, with any person, in any geographic area or during any time, excluding all such contracts that the Company may in its discretion terminate within forty-five days without penalty thereunder (each, a "MATERIAL CONTRACT"). Each Material Contract is in full force and effect and is enforceable against the parties thereto (other than the Company and the Subsidiaries) in accordance with its terms and no condition or state of facts exists that, with notice or the passage of time, or both, would constitute a material default by the Company or any Subsidiary or, to the best knowledge of the Company, any third party under such Material Contracts. The Company or the applicable Subsidiary has duly complied in all material respects with the provision of each Material Contract to which it is a party. SECTION 3.18. BROKERS. No broker, finder or investment banker (other than Lazard and Parker) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to the Parent a complete and correct copy of all agreements between the Company and each of Lazard and Parker pursuant to which each such firm would be entitled to any payment relating to the Transactions. SECTION 3.19. OPINION OF FINANCIAL ADVISORS. The Board has received the written opinion of each of Lazard and Parker to the effect that the consideration to be received 23 by the shareholders of the Company pursuant to the Offer and the Merger is fair to such shareholders from a financial point of view, copies of which have been provided to the Parent. SECTION 3.20. INSURANCE. Section 3.20(a) of the Disclosure Schedule lists each of the insurance policies relating to the Company or any of its Subsidiaries which are currently in effect. The Company has provided to the Parent and the Purchaser a true, complete and correct copy of each such policy or the binder therefor. With respect to each such insurance policy or binder none of the Company, any of its Subsidiaries or any other party to the policy is in breach of or in default thereunder (including with respect to the payment of premiums or the giving of notices), and the Company does not know of any occurrence or event which (with notice or the lapse of time or both) would constitute such a breach or default or permit termination, modification or acceleration under the policy, except for such breaches or defaults which, individually or in the aggregate, would not result in a Material Adverse Effect. Section 3.20(b) of the Disclosure Schedule describes any self-insurance arrangements affecting the Company or any of its Subsidiaries. SECTION 3.21. PENNSYLVANIA LAW. Assuming that no "control-share approval," as such term is defined in Subchapter I of Chapter 25 of Pennsylvania Law, occurs in connection with the Transactions the provisions of Subchapters I and J of Chapter 25 of Pennsylvania Law will not apply to the Transactions. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER The Parent and the Purchaser hereby, jointly and severally, represent and warrant to the Company that: SECTION 4.01. CORPORATE ORGANIZATION. Each of the Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, prevent or materially delay the performance by the Parent or the Purchaser of any of their obligations under this Agreement or the consummation of the Transactions. 24 SECTION 4.02. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of the Parent and the Purchaser has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Parent and the Purchaser and the consummation by the Parent and the Purchaser of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Parent or the Purchaser are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by Pennsylvania Law and, if the Merger is effected as provided in Section 2.10, the adoption by the Purchaser's Board of Directors, or by the Board of Directors of the Assignee that acquires the Shares pursuant to the Offer, of the plan of merger attached hereto as Annex D (the "SHORT-FORM PLAN OF MERGER")). This Agreement has been duly and validly executed and delivered by the Parent and the Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of the Parent and the Purchaser enforceable against each of the Parent and the Purchaser in accordance with its terms. SECTION 4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Parent and the Purchaser do not, and the performance of this Agreement by the Parent and the Purchaser will not, (i) conflict with or violate the Articles of Incorporation or Bylaws (or equivalent organizational documents) of either the Parent or the Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Parent or the Purchaser or by which any property or asset of either of them is bound or subject, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance of any nature on any property or asset of the Parent or the Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Parent or the Purchaser is a party or by which the Parent or the Purchaser or any property or asset of either of them is bound or subject, except, in the case of (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, prevent or materially delay the performance by the Parent or the Purchaser of any of their obligations under this Agreement or the consummation of the Transactions. (b) The execution and delivery of this Agreement by the Parent and the Purchaser do not, and the performance of this Agreement by the Parent and the Purchaser will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover laws, the HSR Act, and filing and recordation of appropriate merger documents as required by Pennsylvania Law and (ii) where failure to obtain such 25 consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or materially delay the performance by the Parent or the Purchaser of any of their obligations under this Agreement or the consummation of the Transactions. SECTION 4.04. FINANCING. The Parent has or will have, prior to the expiration of the Offer or the Effective Time, sufficient funds to permit the Purchaser to acquire all the outstanding Shares in the Offer and the Merger and to pay all related fees and expenses, and Parent will cause such funds to be contributed to the Purchaser or any Assignee thereof participating in the Offer and the Merger. SECTION 4.05. OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents, and the information supplied by the Parent or the Purchaser for inclusion in the Schedule 14D-9, will not, at the time such documents are filed with the SEC or are first published, sent or given to shareholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The information supplied by the Parent for inclusion in the Proxy Statement, if any, will not, on the date such Proxy Statement (or any amendment or supplement thereto) is first mailed to shareholders of the Company, at the time of the Special Shareholders' Meeting, if any, and at the Effective Time, contain any untrue statement of a material fact which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Shareholders' Meeting, if any, which shall have become false or misleading. Notwithstanding the foregoing, the Parent and the Purchaser make no representation or warranty with respect to any information supplied by the Company or any of its representatives which is contained in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. SECTION 4.06. BROKERS. No broker, finder or investment banker (other than J.P. Morgan Securities Inc.) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Parent or the Purchaser. SECTION 4.07. OWNERSHIP OF PURCHASER; NO PRIOR ACTIVITIES. (a) Purchaser was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. 26 (b) As of the Effective Time, all of the outstanding capital stock of the Purchaser will be owned directly by the Parent. As of the Effective Time, there will be no options, warrants or other rights (including registration rights), agreements, arrangements or commitments to which the Purchaser is a party of any character relating to the issued or unissued capital stock of, or other equity interests in, the Purchaser or obligating the Purchaser to grant, issue or sell any shares of the capital stock of or equity interests in the Purchaser, by sale, lease, license or otherwise. There are no obligations, contingent or otherwise, of the Purchaser to repurchase, redeem or otherwise acquire any shares of the capital stock of the Purchaser. (c) As of the date hereof and the Effective Time, except for obligations or liabilities incurred in connection with its incorporation or organization and the Transactions the Purchaser has not and will not have incurred, directly or indirectly, through any subsidiary or affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person. ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company covenants and agrees that, between the date of this Agreement and the Effective Time, unless the Parent shall otherwise agree in writing, the businesses of the Company and the Subsidiaries shall be conducted only in, and the Company and the Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company shall use its reasonable best efforts to preserve substantially intact the business organization of the Company and the Subsidiaries, to maintain adequate insurance coverage, to keep available the services of the current officers, employees and consultants of the Company and the Subsidiaries and to preserve the current relationships of the Company and the Subsidiaries with customers, suppliers and other persons with which the Company or any Subsidiary has significant business relations. By way of amplification and not limitation of the foregoing, except as expressly contemplated by this Agreement, neither the Company nor any Subsidiary shall, between the date of this Agreement and the Effective Time, directly or indirectly do, or propose to do, any of the following without the prior written consent of the Parent: (a) amend or otherwise change its Articles of Incorporation or Bylaws or equivalent organizational documents; 27 (b) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares of capital stock of any class of the Company or any Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any Subsidiary or (ii) any assets of the Company or any Subsidiary, except for sales in the ordinary course of business and in a manner consistent with past practice; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof or any assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, pledge in respect of or otherwise as an accommodation become responsible for the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past practice; (iii) enter into any contract or agreement with any direct competitor of the Parent or any affiliate thereof, or any other contract or agreement, except contracts or agreements entered into in the ordinary course of business, consistent with past practice and that require payments by or to the Company or the Subsidiaries (A) with respect to such contracts or agreements with a term of more than one year, in an aggregate amount of less than U.S. $100,000 and (B) with respect to such contracts or agreements with a term of one year or less, in an aggregate amount of less than U.S. $250,000; (iv) terminate, cancel or request any material change in, or agree to any material change in, any Material Contract set forth in Section 3.17 of the Disclosure Schedule; (v) authorize one or more capital expenditures that are, in the aggregate, in excess of U.S. $75,000 for the Company and the Subsidiaries taken as a whole, other than capital expenditures with respect to projects that have commenced prior to the date hereof, or with respect to which equipment has been ordered prior to the date hereof, so long as, with respect to such projects, the Parent shall have been informed in writing thereof prior to the date hereof and, with respect to such orders, the Company discusses with the Parent or its representatives, promptly after the date hereof, such orders and the intended uses of the equipment the subject thereof, PROVIDED that the Company shall report on the progress of any such project in accordance with Section 5.02 hereof; or (vi) enter into or amend 28 any contract, agreement, commitment or arrangement with respect to any matter set forth in this Section 5.01(e); (f) increase the compensation payable or to become payable to its officers, employees or consultants, except for increases in accordance with past practices in salaries or wages of employees of the Company or any Subsidiary who are not officers of the Company, or grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of the Company or any Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (g) take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivable); (h) make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (i) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the Company's balance sheet dated June 30, 1998, or subsequently incurred in the ordinary course of business and consistent with past practice; (j) make any material alterations or modifications to any of the water sources used by the Company, including, without limitation, any new boreholes or any new wells; or (k) announce an intention, enter into any formal or informal agreement, or otherwise make a commitment, to do any of the foregoing. SECTION 5.02. CONSULTATION AND COOPERATION. The Company and each of its Subsidiaries shall (a) report on a regular basis, at reasonable times, to the Parent's representatives regarding material operational matters and financial matters (including providing monthly unaudited financial information); (b) promptly and regularly notify the Parent of any change in the normal course or operation of its business or its properties or of 29 any material development in the business or operations of the Company or the Subsidiaries; and (iii) cooperate with the Parent and its affiliates and representatives in arranging for an orderly transition in connection with the transfer of control of the Company, including, without limitation, arranging for meetings among the Company, its vendors, suppliers and customers and representatives of the Parent and its affiliates. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. SPECIAL SHAREHOLDERS' MEETING. In the event that at the initial scheduled expiration date of the Offer, the Minimum Condition shall not have been satisfied (the date of such expiration without satisfaction of such condition being the "EXPIRATION DATE") at the request of the Parent, the Company, acting through the Board, shall, in accordance with applicable law and the Company's Articles of Incorporation and Bylaws, (i) duly call, give notice of, convene and hold a special meeting of its shareholders (the "SPECIAL SHAREHOLDERS' MEETING") as soon as practicable following such request for the purpose of considering and taking action on this Agreement and the transactions contemplated hereby, other than the Offer (such transactions, including without limitation the Merger, but excluding the Offer, being the "LONG-FORM MERGER") and (ii) (A) include in the Proxy Statement the unanimous recommendation of the Board that the shareholders of the Company adopt this Agreement and the Long-Form Merger and (B) use its best efforts to obtain such adoption. At the Special Shareholders' Meeting, the Parent and the Purchaser shall cause all Shares then owned by them and their subsidiaries to be voted in favor of the adoption of this Agreement and the Long-Form Merger. SECTION 6.02. PROXY STATEMENT. As soon as practicable following the commencement of the Offer, the Company shall file the Proxy Statement with the SEC under the Exchange Act, and shall use its best efforts to have the Proxy Statement cleared by the SEC as promptly as practicable following such filing. The Parent, the Purchaser and the Company shall cooperate with each other in the preparation of the Proxy Statement, and the Company shall notify the Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to the Parent promptly copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give the Parent and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give the Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being 30 filed with, or sent to, the SEC. Each of the Company, the Parent and the Purchaser agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto, subject to the occurrence of the Expiration Date, to be mailed to the holders of Shares entitled to vote at the Special Shareholders' Meeting at the earliest practicable time. SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the date hereof to the Effective Time, the Company shall, and shall cause the Subsidiaries and the officers, directors, employees, auditors and agents of the Company and the Subsidiaries to, afford the officers, employees and agents of the Parent and the Purchaser complete access at all reasonable times to the officers, employees, agents, properties, offices, plants and other facilities, books and records of the Company and each Subsidiary, and shall furnish the Parent and the Purchaser with all financial, operating and other data and information as the Parent or the Purchaser, through its officers, employees or agents, may reasonably request. (b) All information obtained by the Parent or the Purchaser pursuant to this Section 6.03 shall be kept confidential in accordance with the confidentiality agreement, dated September 11, 1998 (the "CONFIDENTIALITY AGREEMENT"), between the Parent and the Company. (c) No investigation pursuant to this Section 6.03 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. SECTION 6.04. NO SOLICITATION OF TRANSACTIONS. (a) Neither the Company nor any Subsidiary shall, directly or indirectly, through any officer, director, agent or otherwise, solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or any material portion of the assets of, or any equity interest in, the Company or any Subsidiary or any business combination with the Company or any Subsidiary (a "TAKEOVER PROPOSAL") or participate in any negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing. Notwithstanding the foregoing, if the Board determines in good faith, after consultation with and based on the written advice of independent legal counsel, that it is necessary to do so in order to comply with its fiduciary duties under Pennsylvania law, the Company may, in response to a Superior Proposal that was not solicited by it or that did not otherwise result from a breach of this Section 6.04, and subject to providing prior written notice of its decision to take such action to the Parent and compliance with subsection (b) of this Section 6.04, (i) furnish information with respect to the Company and its subsidiaries to any person making a Superior Proposal pursuant to a confidentiality agreement no less favorable to the Company than the Confidentiality Agreement, and (ii) participate in discussions or negotiations regarding such Superior 31 Proposal. For purposes of this Agreement, "SUPERIOR PROPOSAL" means any proposal made by a third party (A) to acquire, directly or indirectly, more than 50% of the combined voting power of the Shares then outstanding or all or substantially all the assets of the Company and its subsidiaries, (B) that is otherwise on terms that the Board determines in its good faith judgment (after consultation with, and based upon the written advice of, a financial advisor of nationally recognized reputation and independent legal counsel) to be more favorable to the Company and its shareholders than the Transactions, (C) for which financing, to the extent required, is then committed, and (D) for which, in the good faith judgment of the Board, no regulatory approvals, including antitrust approvals, are required that could not reasonably be expected to be obtained. (b) In addition to the obligations set forth in subsections (a) and (c) of this Section 6.04, the Company shall notify the Parent promptly if any Takeover Proposal, or any inquiry or contact with any person with respect thereto, is made and shall, in any such notice to the Parent, indicate the identity of the person making such Takeover Proposal, offer, inquiry or contact and the terms and conditions of such Takeover Proposal, inquiry or contact. The Company will keep Parent reasonably informed of the status and details, including amendments or proposed amendments of any such request or Takeover Proposal. The Company agrees not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Company is a party. (c) Except as set forth in this subsection (c), the Board shall not (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to the Parent or the Purchaser its approval and recommendation of this Agreement and the Transactions, (ii) approve or recommend or propose to approve or recommend any Takeover Proposal that is not a Superior Proposal approved or recommended in accordance with the provisions of this Section 6.04, or (iii) enter into any agreement with respect to any Takeover Proposal. Notwithstanding the foregoing, if the Board determines in good faith, after consultation with and based on the written advice of independent legal counsel, that it is necessary to do so in order to comply with its fiduciary duties under Pennsylvania law, the Board may withdraw or modify its approval and recommendation of this Agreement and the Transactions, approve or recommend a Superior Proposal or enter into an agreement with respect to a Superior Proposal, in each case at any time after midnight on the fifth business day following the Parent's receipt of written notice that the Board has received a Superior Proposal, specifying the terms and conditions of such Superior Proposal and the identity of the person making such Superior Proposal. (d) Nothing contained in this Section 6.04 shall prohibit the Company from taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act, or from making a disclosure to the Company's shareholders if, in the good faith judgment of the Board, after consultation with and based on the written advice of, 32 independent legal counsel, failure to so disclose would be inconsistent with its obligations under applicable law. SECTION 6.05. EMPLOYEE BENEFITS MATTERS. From and after the Effective Time the Company's 1996 Employee Stock Purchase Plan (the "STOCK PURCHASE PLAN") shall terminate. Between the date of this Agreement and the Effective Time, the Company agrees that the Board of Directors shall not fix an offering date pursuant to Section 4 of the Stock Purchase Plan. Any amounts remaining on an individual's account at the Effective Time pursuant to the Stock Purchase Plan shall be returned to such individual together with interest thereon at a rate equal to the rate announced publicly by Citibank, N.A. in New York, New York, as its base rate. SECTION 6.06. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a) The Articles of Incorporation and Bylaws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are set forth in Article VII of the Bylaws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at the Effective Time were directors, officers, employees, fiduciaries or agents of the Company, unless such modification shall be required by law. (b) The Company shall, to the fullest extent permitted by law, indemnify and hold harmless, and, after the Effective Time, the Surviving Corporation shall indemnify and hold harmless, each current and former director, officer, employee, fiduciary and agent of the Company and each Subsidiary (collectively, the "INDEMNIFIED PARTIES") against all costs and expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as an officer, director, employee, fiduciary or agent, whether occurring before or after the Effective Time, for a period of six years after the date hereof. In the event of any such claim, action, suit, proceeding or investigation, (i) the Company or the Surviving Corporation, as the case may be, shall pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to the Company or the Surviving Corporation, promptly after statements therefor are received and (ii) the Company and the Surviving Corporation shall cooperate in the defense of any such matter; PROVIDED, HOWEVER, that neither the Company nor the Surviving Corporation shall be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld); PROVIDED FURTHER that neither the Company nor the Surviving Corporation shall be obligated pursuant to this Section 6.06(b) to pay the fees and expenses of more than one counsel for all Indemnified Parties in any single action except to the extent that 33 two or more of such Indemnified Parties shall have conflicting interests in the outcome of such action; and PROVIDED FURTHER that, in the event that any claim for indemnification is asserted or made within such six-year period, all rights to indemnification in respect of such claim shall continue until the disposition of such claim. (c) The Surviving Corporation shall use its reasonable best efforts to maintain in effect for three years from the Effective Time, if available, the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions that are not materially less favorable) with respect to matters occurring prior to the Effective Time; PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be required to expend pursuant to this Section 6.06(c) more than an amount per year equal to 150% of current annual premiums paid by the Company for such insurance (which premiums the Company represents and warrants to be approximately U.S. $72,500 in the aggregate). (d) In the event the Company or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Company or the Surviving Corporation, as the case may be, or, at the Parent's option, the Parent, shall assume the obligations set forth in this Section 6.06. SECTION 6.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to the Parent, and the Parent shall give prompt notice to the Company, of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any failure of the Company, the Parent or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 6.07 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 6.08. FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the terms and subject to the conditions hereof, each of the parties hereto shall (i) make promptly its respective filings, and thereafter make any other required submissions, under the HSR Act with respect to the Transactions and (ii) use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Transactions, including, without limitation, using its reasonable best efforts to obtain all 34 licenses, permits (including, without limitation, environmental permits), consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and the Subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Offer and the Merger. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to take all such action. SECTION 6.09. PUBLIC ANNOUNCEMENTS. The Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or any Transaction and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national securities exchange or the New York Stock Exchange to which the Parent or the Company is a party. SECTION 6.10. CONFIDENTIALITY AGREEMENT. The Company hereby waives the provisions of the Confidentiality Agreement as and to the extent necessary to permit the consummation of each Transaction. Upon the consummation of the Merger, the Confidentiality Agreement shall be deemed to have terminated without further action by the parties thereto. SECTION 6.11. FACILITY INVESTMENT AGREEMENT. As promptly as practicable, but in no event more than twenty business days from the date hereof, at the Parent's request, the Company shall enter into a Facility Investment Agreement with the Parent, having substantially the terms and conditions set forth on Annex C hereto. SECTION 6.12. 1998 FINANCIAL STATEMENTS. As promptly as practicable, but in no event more than twenty-two business days from the date hereof, the Company shall deliver to the Parent an audited consolidated balance sheet for the Company dated September 30, 1998, and audited statements of operations, stockholders' equity and cash flows for the year ended September 30, 1998 (the "1998 FINANCIAL STATEMENTS"). 35 ARTICLE VII CONDITIONS TO THE MERGER SECTION 7.01. CONDITIONS TO THE MERGER. If the Offer is consummated and all terms and conditions thereof (including, without limitation, the Minimum Condition) are satisfied, the respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) NO ORDER. No Governmental Entity or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the acquisition of Shares by the Parent or the Purchaser or any affiliate of either of them or the consummation of the Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Transactions; and (b) OFFER. The Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED, HOWEVER, that this condition shall not be applicable to the obligations of the Parent or the Purchaser if, in breach of this Agreement or the terms of the Offer, the Purchaser or such assignee fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. SECTION 7.02. CONDITIONS TO THE LONG-FORM MERGER. In all cases other than those in which Section 7.01 is applicable, (a) the respective obligations of each party to effect the Long-Form Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (i) SHAREHOLDER APPROVAL. This Agreement and the Long-Form Merger shall have been adopted by the affirmative vote of a majority of the votes cast by all holders of Shares entitled to vote thereon; (ii) HSR ACT. Any waiting period (and any extension thereof) applicable to the consummation of the Long-Form Merger under the HSR Act shall have expired or been terminated; and 36 (iii) NO ORDER. No Governmental Entity or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the consummation of the Long-Form Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Long-Form Merger. (b) The obligations of the Parent and the Purchaser to effect the Long-Form Merger are also subject to the following conditions at or as of the Effective Time: (i) the representations and warranties of the Company in this Agreement and of each Shareholder in the respective Shareholder Agreement that are qualified as to materiality shall be true and correct and all such representations and warranties that are not so qualified shall be true and correct in all material respects, in each case on or as of the Effective Time (other than representations and warranties that address matters only as of a certain date which shall be true and correct in the same manner as of such certain date), and the Parent and the Purchaser shall have received a certificate from a duly authorized officer of the Company and each Shareholder, as applicable, to such effect; (ii) the Company shall have performed in all material respects all obligations and complied in all material respects with each agreement and covenant of the Company to be performed or complied with by it under this Agreement and each Shareholder shall have performed in all material respects all obligations and complied in all material respects with each agreement and covenant of such Shareholder to be performed or complied with by such Shareholder under the applicable Shareholder Agreement, and the Parent and the Purchaser shall have received a certificate from a duly authorized officer of the Company and each Shareholder, as applicable, to such effect; (iii) all consents, approvals and authorizations required to be obtained to consummate the Long-Form Merger shall have been obtained from all Governmental Entities, except for such consents, approvals and authorizations the failure of which to obtain would not have a material adverse effect on the Parent or the Purchaser (assuming for purposes of this paragraph (iii) that the Long-Form Merger shall have been effected); (iv) there shall not have occurred any of the events set forth in paragraphs (a) (as adapted to apply MUTATIS MUTANDIS to the Long-Form Merger 37 rather than the purchase of Shares pursuant to the Offer), (b), (j) or (k) of Annex A hereto; and (v) there shall not have occurred, since June 30, 1998, any change, condition, event or development that has a Material Adverse Effect with respect to the Company. (c) The obligation of the Company to effect the Long-Form Merger is also subject to the following conditions at or as of the Effective Time: (i) the representations and warranties of the Parent and the Purchaser in this Agreement that are qualified as to materiality shall be true and correct and all such representations and warranties that are not so qualified shall be true and correct in all material respects, in each case on or as of the Effective Time (other than representations and warranties which address matters only as of a certain date which shall be true and correct in the same manner as of such certain date), and the Company shall have received a certificate from a duly authorized officer of the Parent to such effect; and (ii) the Parent and the Purchaser shall have performed in all material respects all obligations and complied in all material respects with each agreement and covenant of the Parent and the Purchaser, respectively, to be performed or complied with by it under this Agreement, and the Company shall have received a certificate from a duly authorized officer of the Parent to such effect. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. TERMINATION. (a) This Agreement may be terminated and the Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite adoption of this Agreement and the transactions contemplated hereby by the shareholders of the Company: (i) By mutual written consent duly authorized by the Boards of Directors of the Parent, the Purchaser and the Company; or 38 (ii) By the Parent, the Purchaser or the Company if (x) the Effective Time shall not have occurred on or before March 31, 1999; PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section 8.01(a)(ii) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (y) a Governmental Entity or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the consummation of the Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Merger. (b) This Agreement may be terminated, and the Merger and the other Transactions may be abandoned at any time prior to the earlier of the expiration or termination of the Offer without the Minimum Condition having been satisfied and the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby by the shareholders of the Company: (i) By the Parent, upon approval of its Board of Directors, if due to a failure to satisfy any condition set forth in (i)-(iii) of the preamble of Annex A hereto or the existence of any condition set forth in paragraphs (a) - (k) of Annex A hereto, the Purchaser shall have (1) failed to commence the Offer within five business days following the date of this Agreement, (2) terminated the Offer without having accepted any Shares for payment thereunder or (3) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer; unless such action or inaction under (1), (2) or (3) shall have been caused by or resulted from the failure of the Parent or the Purchaser to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by the Parent or the Purchaser of any material representation or warranty of either of them contained in this Agreement; (ii) By the Company, upon approval of the Board, if due to a failure to satisfy any of the conditions set forth in (i)-(iii) of the preamble of Annex A hereto or the existence of any condition set forth in paragraphs (a) - (k) of Annex A hereto, the Purchaser shall have (1) failed to commence the Offer within five business days following the date of this Agreement, (2) terminated the Offer without having accepted any Shares for payment thereunder or (3) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such action or inaction under (1), (2), and (3) shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of 39 it contained in this Agreement or the material breach by the Company of any material representation or warranty of it contained in this Agreement; (iii) By the Company, in connection with entering into a definitive agreement with respect to a Superior Proposal in accordance with Section 6.04; PROVIDED that the Company has complied with its obligations under Section 6.04, and that it makes simultaneous payment of the Fee and Expenses pursuant to Section 8.03; or (iv) By the Parent, if the Board shall have modified or withdrawn in a manner adverse to the Parent and the Purchaser its approval and recommendation of this Agreement and the Transactions or shall have approved or recommended to the Company's shareholders a Superior Proposal. (c) This Agreement may be terminated and the Long-Form Merger may be abandoned at any time prior to the Effective Time but after the expiration or termination of the Offer without the Minimum Condition having been satisfied, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby by the shareholders of the Company: (i) by the Parent in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in this Agreement that (A) would give rise to the failure of a condition set forth in Section 7.02(b)(i) or (ii) and (B) cannot be or has not been cured within 20 days after the giving by the Parent of written notice to the Company or upon the occurrence of any of the events set forth in paragraphs (a) (as adapted to apply MUTATIS MUTANDIS to the Long-Form Merger rather than the purchase of Shares pursuant to the Offer), (b), or (c) of Annex A hereto; (ii) by the Company in the event of a breach by the Parent or the Purchaser of any of their respective representations, warranties, covenants or other agreements contained in this Agreement that (A) would give rise to the failure of a condition set forth in Section 7.02(c)(i) or (ii) and (B) cannot be or has not been cured within 20 days after the giving by the Company of written notice to the Parent and the Purchaser; or (iii) by the Parent or the Company if the shareholders of the Company do not approve this Agreement at the Special Shareholders' Meeting or any adjournment or postponement thereof. SECTION 8.02. EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void, and there 40 shall be no liability on the part of any party hereto, except as set forth in Sections 8.03 and 9.01, and nothing herein shall relieve any party from liability for any breach hereof. SECTION 8.03. FEES AND EXPENSES. (a) In the event that (i) this Agreement is terminated pursuant to Section 8.01(b)(iii) or 8.01(b)(iv) or (ii) any person shall have commenced, or publicly announced and not withdrawn its intention to commence, a tender or exchange offer for 20% or more (or which, assuming the maximum amount of securities that could be purchased, would result in any person beneficially owning 20% or more) of the then outstanding Shares or otherwise for the direct or indirect acquisition of the Company or all or a substantial portion of its assets and (A) the Offer shall have remained open for at least 20 business days, (B) the Minimum Condition shall not have been satisfied, (C) this Agreement shall have been terminated pursuant to Section 8.01(c)(iii) and (D) within six months following the date of the termination of this Agreement, a Takeover Proposal between the Company and such other person shall have been consummated, then, in any such event, the Company shall pay the Parent promptly (but in no event later than one business day after the first of such events shall have occurred) a fee of U.S.$3,400,000 (the "FEE"), which amount shall be payable in immediately available funds, plus all Expenses up to U.S.$750,000 in the aggregate. For purposes of this Section 8.03, the term "EXPENSES" shall mean all out-of-pocket expenses and fees of each of the Parent, the Purchaser and their respective shareholders and affiliates (including, without limitation, fees and expenses payable to all banks, investment banking firms, other financial institutions and other persons and their respective agents and counsel for arranging, committing to provide or providing any financing for the Transactions or structuring the Transactions and all fees of counsel, accountants, experts and consultants to the Parent and the Purchaser, and all printing and advertising expenses and all costs and expenses incurred by or on behalf of the Parent and the Purchaser in connection with the collection under and enforcement of this Section 8.03) actually incurred or accrued by any of them or on their behalf in connection with the Transactions, including, without limitation, the financing thereof, and actually incurred or accrued by banks, investment banking firms, other financial institutions and other persons and assumed by the Parent and the Purchaser in connection with the negotiation, preparation, execution and performance of this Agreement, the structuring and financing of the Transactions and any financing commitments or agreements relating thereto. (b) Except as set forth in this Section 8.03, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any Transaction is consummated. SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after the adoption of this Agreement and the transactions contemplated hereby by the shareholders of the Company, no amendment may be 41 made that would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any obligation or other act of any other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 8.01, as the case may be, except that the agreements set forth in Article II and this Article IX and Section 6.06 shall survive the Effective Time indefinitely and those set forth in Sections 6.03(b), 6.11 and 8.03 and Article IX shall survive termination indefinitely. SECTION 9.02. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02): if to the Parent or the Purchaser: Groupe Danone 7, rue de Teheran 75008 Paris France Fax: 011-33-1-44-35-20-97 Attention: M. Emmanuel Faber 42 with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Fax: 212-848-7179 Attention: Clare O'Brien, Esq. if to the Company: AquaPenn Spring Water Company, Inc. One AquaPenn Drive P.O. Box 938 Milesburg, Pennsylvania 16853 Fax: 814-353-9108 Attention: Mr. Geoffrey F. Feidelberg with a copy to: Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street 51st Floor Philadelphia, PA 19103-7599 Fax: 215-864-8999 Attention: Brian D. Doerner, Esq. SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the term: (a) "AFFILIATE" of a specified person means a person who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified person; (b) "BENEFICIAL OWNER" with respect to any Shares means a person who shall be deemed to be the beneficial owner of such Shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares; (c) "BUSINESS DAY" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in the City of New York; (d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (e) "PERSON" means an individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and (f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving Corporation, the Parent or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries. SECTION 9.04. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 9.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes, except as set forth in Sections 6.03(b) and 6.10, all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, 44 except that the Parent and the Purchaser may assign all or any of their rights and obligations hereunder to any affiliate of the Parent provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations (any such assignee of the Purchaser being an "ASSIGNEE"). SECTION 9.06. PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Section 6.06 (which is intended to be for the benefit of the persons covered thereby and may be enforced by such persons). SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 9.08. GOVERNING LAW. Except to the extent that Pennsylvania Law is mandatorily applicable to the Transactions and the rights of the shareholders of the Company, this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any New York state or federal court sitting in the City of New York. SECTION 9.09. HEADINGS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 45 SECTION 9.10. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. GROUPE DANONE By /s/ Emmanuel Faber -------------------------------- Name: Emmanuel Faber Title: Director of Corporate Development ZONEO ACQUISITION CORP. By /s/ Mark S. Rodriguez -------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer AQUAPENN SPRING WATER COMPANY, INC. By /s/ Edward J. Lauth, III -------------------------------- Name: Edward J. Lauth, III Title: Chairman, President and Chief Executive Officer ANNEX A CONDITIONS TO THE OFFER Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer or (iii) at any time on or after the date of this Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been instituted or be pending any action or proceeding (other than actions or proceedings which, in the good faith reasonable judgment of the Parent, after consultation with independent legal counsel, do not have any basis in fact or a reasonable likelihood of success on the merits) before any court or Governmental Entity, (i) challenging or seeking to make illegal, materially delay or otherwise directly or indirectly restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by the Parent, the Purchaser or any other affiliate of the Parent, the purchase of Shares pursuant to any Shareholder Agreement, or the consummation of any other Transaction, or seeking to obtain material damages in connection with any Transaction; (ii) seeking to prohibit or limit materially the ownership or operation by the Company, the Parent or any of their subsidiaries of all or any material portion of the business or assets of the Company, the Parent or any of their subsidiaries, or to compel the Company, the Parent or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company, the Parent or any of their subsidiaries, as a result of the Transactions; (iii) seeking to impose or confirm limitations on the ability of the Parent, the Purchaser or any other affiliate of the Parent to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares, except as specifically provided in Pennsylvania Law, acquired by the Purchaser pursuant to the Offer, any Shareholder Agreement or otherwise on all matters properly presented to the Company's shareholders, including, without limitation, the approval and adoption of this Agreement and the transactions contemplated hereby; (iv) seeking to require divestiture by the Parent, the Purchaser or any other affiliate of the Parent of any Shares; or (v) which otherwise has a Material Adverse Effect or which would materially adversely affect the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) or prospects of the Parent; (b) there shall have been any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, entered, enforced, promulgated, amended, issued or deemed applicable to (i) the Parent, the Company or any subsidiary or affiliate of the Parent or the Company or (ii) any Transaction, by any legislative body, court, Governmental Entity, other than the routine application of the waiting period provisions of the HSR Act to the Offer, any Shareholder Agreement or the Merger, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; PROVIDED, HOWEVER, that the Parent shall have used reasonable efforts to cause any such judgment, order or injunction to be vacated or lifted; (c) there shall have occurred, since June 30, 1998, any change, condition, event or development that has a Material Adverse Effect with respect to the Company; (d) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities of the Company on the New York Stock Exchange for a period in excess of 2 hours (excluding emergencies or limitations resulting solely from physical damage, interference with such exchange not related to market conditions, or any trading halt triggered solely as a result of a specified decrease in a market index) (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or France, (iii) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, on, or other event that, in the reasonable judgment of the Purchaser, affects, the extension of credit by banks or other lending institutions, (iv) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or (v) in the case of any of the foregoing existing on the date hereof, a material acceleration or worsening thereof; (e) it shall have been publicly disclosed or the Parent or the Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the then outstanding Shares has been acquired by any person, other than the Parent or any of its affiliates; (f) any representation or warranty of the Company in the Agreement or of any Shareholder in the respective Shareholder Agreement that is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case when made on or immediately following the expiration of the Offer as though made on or as of such date, except those representations and warranties that address matters only as of a certain date which shall not be true and correct as of such certain date; (g) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Agreement or the Shareholders shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of any Shareholder to be performed or complied with by such Shareholder under the respective Shareholder Agreement; (h) the Agreement shall have been terminated in accordance with its terms; (i) the Purchaser and the Company shall have agreed that the Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; (j) any Option Consent or Warrant Consent shall not have been obtained immediately prior to the expiration of the Offer; or (k) the Parent and the Purchaser shall not have received immediately prior to the expiration of the Offer the opinions of Ballard Spahr Andrews & Ingersoll, LLP, as to the matters set forth in Sections 3.04 and 3.21 of the Agreement, and of McQuaide Blasko, as to the matters set forth in Section 3.01 of the Agreement, in each case in form and substance satisfactory to the Parent and the Purchaser; which, in the sole judgment of the Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by the Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with the Offer and with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and the Parent and may be asserted by the Purchaser or the Parent regardless of the circumstances giving rise to any such condition or may be waived by the Purchaser or the Parent in whole or in part at any time and from time to time in their sole discretion. The failure by the Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. ANNEX B Facility Investment Agreement (the "Agreement") Summary of Key Terms Parties: AquaPenn Spring Water Company, Inc. (the "Company") and Parent (the "Parent"). Effective Date: No later than 20 business days from the date of execution of the Agreement and Plan of Merger ("Merger Agreement"). Purpose: Parent will finance and develop an extension of the Company's existing production facility in south-east Florida (the "Facility") to house a new PET bottle production line, which will begin operating no later than September 15, 1999. Project Manager: Parent will act as Project Manager and have final decision making authority over all aspects of the Project. Project: Completion of a 16,500 sq ft extension of the Facility. Relocation of the Company's existing one-gallon blowing equipment to the building extension. Installation of a new PET bottle production line at the Facility. Termination of all production of 2.5 gallon bottles at the Facility and removal of the corresponding equipment. Equipment: Parent agrees to supply and install all equipment required with respect to the installation of a new PET bottle production line, including equipment used for water treatment. Responsibility for Costs of the Project: Parent agrees to finance the cost of installation of the PET bottle production line. In addition, Parent agrees to finance the cost of the Project (other than the cost of the installation of the PET bottle production line). 2 ANNEX B Timeline for the Project: The parties agree that they shall each use their reasonable best efforts to effect a target start-up date of September 15, 1999. In addition, the parties agree to target the following dates for completion of the items set out below: April 14, 1999 - finalization of the design for the Project; approval of necessary permits; retention of contractors and other professional services required to execute the Project; June 30, 1999 - completion of the construction of the extension of the Facility and other modifications to the Facility; July 15, 1999 - relocation of the one-gallon blowing equipment; August 30, 1999 - installation of the new PET bottling line equipment; September 15, 1999 - completion of final testing of newly installed equipment and start-up date. Product: All bottles produced by the new PET bottle production line will be purchased by the Parent for a price to be determined. Additional Terms: The Agreement shall also provide for the parties' respective rights and obligations regarding quality control procedures, the provision of packaging orders and supplies, inventory reports, inspection rights, orders and shipments, confidentiality, use of trademarks, indemnification and insurance, as well as other terms and conditions existing for similar agreements. Termination: Parent, at its option, may terminate the Agreement in the event that the Merger Agreement is terminated. ANNEX C FORM OF SHORT-FORM PLAN OF MERGER - -------------------------------------------------------------------------------- PLAN OF MERGER merging ZONEO ACQUISITION CORP. with and into AQUAPENN SPRING WATER COMPANY, INC. Dated as of [____________], 199[_] - -------------------------------------------------------------------------------- PLAN OF MERGER, dated [____________], 199[_] (this "Plan of Merger"), merging ZONEO ACQUISITION CORP., a Pennsylvania corporation (the "Purchaser") and an indirect wholly-owned subsidiary of GROUPE DANONE, a French societe anonyme (the "Parent"), with and into AQUAPENN SPRING WATER COMPANY, INC., a Pennsylvania corporation (the "Company"). WHEREAS, the Parent, the Purchaser and the Company are parties to an Agreement and Plan of Merger, dated as of November 2, 1998 (the "Merger Agreement"), which provides for the adoption of this Plan of Merger; WHEREAS, Purchaser owns [_______] shares of common stock, no par value, of the Company (the "Shares"), representing more than 80% of the outstanding Shares; WHEREAS, at all times following the date hereof and prior to the Effective Time (as defined below), Purchaser will own more than 80% of the outstanding Shares; WHEREAS, the Board of Directors of the Purchaser has (a) determined that it is in the best interests of the Purchaser to merge the Purchaser with and into the Company (the "Merger"), with the Company being the surviving corporation, in accordance with the Pennsylvania Business Corporation Law of 1988, as amended ("Pennsylvania Law"), and (b) voted to adopt this Plan of Merger; NOW, THEREFORE, the Board of Directors of the Purchaser hereby adopts the following Plan of Merger: ARTICLE I THE MERGER SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Plan of Merger, and in accordance with Pennsylvania Law (including, without limitation, Section 1906 thereof), at the Effective Time, the Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"), and shall continue to be governed by the laws of the Commonwealth of Pennsylvania. SECTION 1.02. Effective Time; Closing. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article II, the parties hereto shall cause the Merger to be consummated by filing articles of merger (the "Articles of Merger"), together with any required tax certificates or statements, with the Department of State of the C-1 Commonwealth of Pennsylvania, in such form as is required by, and executed in accordance with, the relevant provisions of Pennsylvania Law (the date and time of such filing being the "Effective Time"). Prior to such filings, a closing shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article II. SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Pennsylvania Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and the Purchaser shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 1.04. Articles of Incorporation; Bylaws. (a) The Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by applicable law and such Articles of Incorporation. (b) The Bylaws of the Company, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such Bylaws. SECTION 1.05. Directors and Officers. The directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. SECTION 1.06. Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Purchaser, the Company or the holders of any of the Shares: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 1.06(b) and any Dissenting Shares) shall be canceled and shall be converted automatically into the right to receive an amount equal to $13.00 (the "Per Share Amount") in cash (the "Merger Consideration"), payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 1.09, of the certificate that formerly evidenced such Share; C-2 (b) Each Share owned by the Purchaser, the Parent or any direct or indirect wholly owned subsidiary of the Parent or of the Company immediately prior to the Effective Time shall be canceled and retired without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) Each share of Common Stock, par value U.S. $0.01 per share, of the Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock, par value U.S. $0.01 per share, of the Surviving Corporation. SECTION 1.07. Stock Options; Warrants. (a) In accordance with the terms of the Company's 1989 Stock Option Plan and 1992 Stock Option Plan (the "Stock Option Plans"), the Company shall cause each outstanding option to purchase Shares granted under the Stock Option Plans to, immediately prior to the Effective Time, become exercisable regardless of the installment provisions contained in the Stock Option Plans and to be terminated at the Effective Time. Section 2.07(a) of the Disclosure Schedule to the Merger Agreement (the "Disclosure Schedule") lists all options outstanding under the Stock Option Plans. (b) The Company shall use its reasonable best efforts to obtain the consent (the "Option Consents") of the persons listed on Section 2.07(b) of the Disclosure Schedule (the "Option Holders"), to the termination, immediately prior to the Effective Time, of the stock options held by each Option Holder pursuant to the respective option agreements listed on Section 2.07(b) of the Disclosure Schedule. Each such Option Holder shall be paid by the Company, at or immediately prior to the Effective Time with respect to each stock option, in consideration of such termination, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Amount over the applicable exercise price under such option by (ii) the number of Shares such Option Holder could have purchased had such holder exercised such options in full immediately prior to the Effective Time. (c) The Company shall use its reasonable best efforts to obtain the consent of Edward J. Lauth, James D. Hammond and Marion I. Hammond and Nancy J. Davis to the termination, immediately prior to the Effective Time, of the warrants held by each of them pursuant to the Warrants dated as of April 6, 1995, the Warrant dated as of November 21, 1995, and the Warrant dated as of August 28, 1996, respectively (the "Warrant Consents"). Each such holder of warrants shall be paid by the Company, at or immediately prior to the Effective Time with respect to each such warrant, in consideration of such termination, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Amount over the applicable exercise price under such warrant by (ii) the number of Shares such holder could have purchased had such holder exercised such warrant in full immediately prior to the Effective Time. SECTION 1.08. Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time shall be canceled and the holders thereof shall be entitled to a notice to demand payment in C-3 accordance with the provisions of Sections 1930 and 1575 of Pennsylvania Law, and those shareholders who make a timely demand for payment in accordance with, and otherwise comply in all respects with, Sections 1575 through 1580 of Pennsylvania Law shall be entitled to receive, instead of the Merger Consideration, payment of the fair value of such Shares (the Dissenting Shares") (which may be more than, equal to, or less than the Merger Consideration) in accordance with the provisions of such Sections 1930 and 1575 through 1580, except that all the Shares held by shareholders who shall fail to perfect or who effectively shall withdraw or lose their rights to be paid the fair value for such Shares under such Sections 1930 and 1575 through 1580 shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 1.09, of the certificate or certificates that formerly evidenced such Shares. SECTION 1.09. Surrender of Shares; Stock Transfer Books. (a) Prior to the Effective Time, the Purchaser shall designate a bank or trust company to act as agent (the "Paying Agent") for the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 1.06(a). Such funds shall be invested by the Paying Agent as directed by the Surviving Corporation, provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of U.S. $500 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). (b) Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 1.06(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the "Certificates") shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly evidenced by such Certificate, and such Certificate shall then be canceled. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so C-4 surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. (c) At any time following the sixth month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it) and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law. (d) At the Effective Time, the stock transfer books of the Company shall be closed and, thereafter, there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law. ARTICLE II CONDITIONS TO THE MERGER SECTION 2.01. Conditions to the Merger. If the Offer is consummated and all terms and conditions thereof are satisfied, the respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) No Order. No Governmental Entity or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) that is then in effect and has the effect of making the acquisition of Shares by the Parent or the Purchaser or any affiliate of either of them or the consummation of the Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Transactions; and C-5 (b) Offer. The Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition shall not be applicable to the obligations of the Parent or the Purchaser if, in breach of this Agreement or the terms of the Offer, the Purchaser or such assignee fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. * * * * * IN WITNESS WHEREOF, the Purchaser has caused this Plan of Merger to be duly executed as of the date first written above. ZONEO ACQUISITION CORP. By -------------------------------- Name: Title: C-6 EX-99.(C)(2) 11 EXHIBIT 99(C)(2) REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT dated November 2, 1998 (this "AGREEMENT") among AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "COMPANY"), Groupe Danone, a French societe anonyme (the "PARENT"), and Zoneo Acquisition Corp., a Pennsylvania corporation and an indirect wholly owned subsidiary of the Parent (the "PURCHASER"). WHEREAS, the Purchaser, the Parent, and the Company have, on the date hereof, entered into an Agreement and Plan of Merger pursuant to which the Purchaser will acquire the Company on the terms and subject to the conditions set forth therein (the "MERGER AGREEMENT"); WHEREAS, in furtherance of such acquisition, the Purchaser will make a cash tender offer to acquire all the issued and outstanding shares of common stock, no par value, of the Company ("COMMON STOCK"), and, if all the conditions to such offer are not satisfied or waived, may, at its option and in accordance with Section 1.01 of the Merger Agreement, acquire shares of Common Stock constituting up to 19.9% of the issued and outstanding shares of Common Stock (the "OFFER SHARES"); WHEREAS, the Purchaser, the Parent and certain shareholders of the Company have on the date hereof entered into Shareholders' Agreements pursuant to which, under certain circumstances, among other things, such shareholders have granted to the Purchaser an option to acquire their shares of Common Stock constituting, together with any Offer Shares, not more than 19.9% of the issued and outstanding shares of Common Stock (the "OPTION SHARES", and, together with the Offer Shares, the "SHARES"); WHEREAS, as a condition to the willingness of the Parent and the Purchaser to enter into the Merger Agreement, the Parent and the Purchaser have requested that the Company agree, and, in order to induce the Parent and the Purchaser to enter into the Merger Agreement the Company has agreed, to grant the Purchaser the registration rights with respect to the Shares set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows: 1. CERTAIN DEFINITIONS. The following terms, as used herein, have the following meanings: "AFFILIATE" of a specified person means a person who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified person. 2 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, as the same shall be in effect at the time. "HOLDER" means the Purchaser or any assignee thereof to whom the rights under this Agreement are assigned in accordance with the provisions of Section 13. "PERSON" means an individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government. "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement or document. 3 "REGISTRABLE STOCK" means (a) the Shares, (b) any shares of Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, option or other convertible security which is issued) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the Shares, and (c) any shares of Common Stock issued by way of a stock split of the Common Stock referred to in clause (a) or (b) above. For purposes of this Agreement, any Registrable Stock shall cease to be Registrable Stock when (1) a registration statement covering such Registrable Stock has been declared effective and the earlier to occur of (x) such Registrable Stock having been disposed of pursuant to such effective registration statement, and (y) the date that is six months after such effective date; (2) such Registrable Stock is sold by a Person in a transaction in which the rights under the provisions of this Agreement are not assigned or (3) such Registrable Stock can be sold pursuant to Rule 144(k) (or any similar provision then in force under the Securities Act) without registration under the Securities Act. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar federal statute, as the same shall be in effect at the time. 2. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any Registrable Stock (other than under the circumstances described in Section 3 or 4), the Holder thereof shall have given written notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon the Holder of such stock shall be entitled to transfer such stock in accordance with the terms of its notice. Each certificate for Registrable Stock transferred as provided above shall bear the following legends: "THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICES OF THE CORPORATION." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE 4 EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS." Such certificate, however, shall not be required to bear the above legends if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an Affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. 3. DEMAND FOR REGISTRATION. (a) At any time after the Holders acquire the Shares, the Holders (the "INITIATING HOLDERS") of at least 20% of the Registrable Stock (the "MINIMUM DEMAND AMOUNT") may demand in a written notice (the "DEMAND NOTICE") that the Company file a registration statement under the Securities Act (or a similar document pursuant to any other statute then in effect corresponding to the Securities Act) covering the registration of any or all Registrable Stock held by such Initiating Holders in the manner specified in the Demand Notice, PROVIDED that the amount of Registrable Stock included in such registration shall be equal to at least the Minimum Demand Amount. Following receipt of a Demand Notice, the Company shall provide written notification of such Demand Notice to all other Holders within twenty (20) days of the receipt thereof. Thereafter, the Company shall use its reasonable best efforts to cause the prompt registration under the Securities Act of all Registrable Stock with respect to which registration has been demanded pursuant to the Demand Notice. The Company shall also use its reasonable best efforts to cause the prompt registration under the Securities Act of all Registrable Stock with respect to which all other Holders have made a demand for registration (such demand having been made no later than fifteen (15) days after the Company has given notice of its receipt of the Demand Notice from the Initiating Holders). (b) If the Initiating Holders intend to have the Registrable Stock distributed by means of an underwritten offering, the Company shall include such information in the written notice to all other Holders referred to in Section 3(a). In such event, the right of any Holder to include its Registrable Stock in such registration shall be conditioned upon such Holder's participation in such underwritten offering and the inclusion of such Holder's Registrable Stock in the underwritten offering (unless otherwise mutually agreed upon by a majority in interest of the Initiating Holders and such Holder) on the terms provided below. All Holders proposing to distribute Registrable Stock through such underwritten offering shall enter into an underwriting agreement in customary form with the underwriter or underwriters. Such underwriter or 5 underwriters shall be selected by a majority in interest of the Initiating Holders and shall be approved by the Company, which approval shall not be unreasonably withheld, PROVIDED that (i) all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holders of Registrable Stock, (ii) any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement shall be conditions precedent to the obligations of such Holders of Registrable Stock, and (iii) no Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, the Registrable Stock of such Holder and such Holder's intended method of distribution and any other representations required by law or reasonably required by the underwriter. If any Holder of Registrable Stock disapproves of the terms of the underwriting, such Holder may elect to withdraw all its Registrable Stock by written notice to the Company, the managing underwriter and the Initiating Holders. The Registrable Stock so withdrawn shall also be withdrawn from registration. If, as a result of such withdrawal, the amount of Registrable Stock to be included in the offering is less than the Minimum Demand Amount, the Company shall not be required to proceed with such offering. (c) Notwithstanding any provision of this Agreement to the contrary: (i) the Company shall not be required to effect a registration pursuant to this Section 3 during the period starting with the date of filing by the Company of, and ending on a date one hundred twenty (120) days following the effective date of, a registration statement pertaining to a public offering of securities for the account of the Company or on behalf of the Holders under any other registration rights agreement which the Holders have been entitled to join pursuant to Section 4; PROVIDED that the Company shall actively employ in good faith all reasonable efforts to cause such registration statement to become effective as soon as possible; and (ii) if the Company shall furnish to such Holders a certificate signed by the president of the Company stating that in the good faith opinion of the board of directors of the Company such registration would interfere with any material transaction then being pursued by the Company (a "DELAY NOTICE"), then the Company's obligation to use its reasonable best efforts to file such registration statement shall be deferred for a period not to exceed one hundred and twenty (120) days (the "DELAY PERIOD"); 6 PROVIDED that (i) any Delay Period shall earlier terminate upon public disclosure of any such material transaction and (ii) in no event may the Company furnish more than one Delay Notice to the Holders during any twelve (12) month period. (d) The Company shall not be obligated to effect and pay for more than two registrations pursuant to this Section 3; PROVIDED that a registration demanded pursuant to this Section 3 shall not be deemed to have been effected for purposes of this Section 3(d) unless (i) it has been declared effective by the SEC, (ii) it has remained effective for the period set forth in Section 6(a) and (iii) the offering of Registrable Stock pursuant to such registration is not subject to any stop order, injunction or other order or requirement of the SEC (other than any such stop order, injunction, or other requirement of the SEC prompted by any act or omission of Holders of Registrable Stock). 4. PIGGYBACK REGISTRATION. Subject to Section 9, if at any time the Company determines that it shall file a registration statement under the Securities Act (other than a registration statement on a Form S-4 or S-8 or filed in connection with an exchange offer or an offering of securities solely to the Company's existing shareholders) on any form that would also permit the registration of the Registrable Stock and such filing is to be on its behalf and/or on behalf of selling holders of its securities for the general registration of its Common Stock to be sold for cash, the Company shall each such time promptly give each Holder written notice of such determination setting forth the date on which the Company proposes to file such registration statement, which date shall be no earlier than fifteen (15) days from the date of such notice, and advising each Holder of its right to have Registrable Stock included in such registration. Upon the written request of any Holder received by the Company no later than ten (10) days after the date of receipt of the Company's notice, the Company shall use its reasonable efforts to cause to be registered under the Securities Act all of the Registrable Stock that each such Holder has so requested to be registered. If, in the opinion of the managing underwriter (or, in the case of a non-underwritten offering, in the opinion of the Company), the total amount of such securities to be so registered, including such Registrable Stock, will exceed the maximum amount of the Company's securities which can be marketed (a) at a price reasonably related to the then current market value of such securities, or (b) without otherwise materially and adversely affecting the entire offering, then the Company shall be entitled either (i) to reduce the number of shares of Registrable Stock to be registered or (ii) to elect not to register any shares of Registrable Stock in such offering. Any reduction made pursuant to the immediately preceding sentence shall be allocated among all such Holders in proportion (as nearly as practicable) to the amount of Registrable Stock owned by each Holder at the time of filing the registration statement. 7 5. REGISTRATION ON FORM S-3. If at any time (i) any Holder of Registrable Stock requests in writing that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or any portion of the Registrable Stock held by such requesting Holder, the reasonably anticipated aggregate price to the public of which would exceed $1,000,000, and (ii) the Company is a registrant entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its reasonable best efforts to register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such request, the number of shares of Registrable Stock specified in such request. Whenever the Company is required by this Section 5 to use its reasonable best efforts to effect the registration of Registrable Stock, each of the procedures and requirements of Section 3(b), (c) and (d) shall apply to such registration. 6. OBLIGATIONS OF THE COMPANY. Whenever required under Section 3 to use its reasonable efforts to effect the registration of any Registrable Stock, the Company shall, as expeditiously as is reasonably possible: (a) prepare and file with the SEC a registration statement signed, pursuant to Section 6(a) of the Securities Act, by the officers and directors of the Company with respect to such Registrable Stock and use its reasonable best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby, to be determined as hereinafter provided; (b) prepare and file with the SEC such amendments and supplements to such registration statement signed, pursuant to Section 6(a) of the Securities Act, by the officers and directors of the Company and the prospectus used in connection therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Stock covered by such registration statement; (c) furnish to the Holders such numbers of copies of the registration statement and the prospectus included therein (including each preliminary prospectus and any amendments or supplements thereto in conformity with the requirements of the Securities Act) and such other documents and information as they may reasonably request; (d) use its reasonable best efforts to register or qualify the Registrable Stock covered by such registration statement under such other securities or blue sky laws of such jurisdiction within the United States and Puerto Rico as shall be reasonably appropriate for the distribution of the Registrable Stock covered by the registration statement; PROVIDED, HOWEVER, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business in or to file a general consent to service of process in any jurisdiction wherein it would not but for the requirements of this paragraph (d) be obligated to do so; and PROVIDED, FURTHER, that the 8 Company shall not be required to qualify such Registrable Stock in any jurisdiction in which the securities regulatory authority requires that any Holder submit any shares of its Registrable Stock to the terms, provisions and restrictions of any escrow, lockup or similar agreement(s) for consent to sell Registrable Stock in such jurisdiction unless such Holder agrees to do so; (e) promptly notify each Holder for whom such Registrable Stock is covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and at the request of any such Holder promptly prepare and furnish, subject to Section 3(c), to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; (f) furnish, at the request of any Holder demanding registration of Registrable Stock pursuant to Section 3, if the method of distribution is by means of an underwriting, on the date that the shares of Registrable Stock are delivered to the underwriters for sale pursuant to such registration, or if such Registrable Stock is not being sold through underwriters, on the date that the registration statement with respect to such shares of Registrable Stock becomes effective, (i) a signed opinion, dated such date, of the independent legal counsel representing the Company for the purpose of such registration, addressed to the underwriters, if any, and if such Registrable Stock is not being sold through underwriters, then to the Holders making such request, as to such matters as such underwriters or the Holders holding a majority of the Registrable Stock included in such registration, as the case may be, may reasonably request and as would be customary in such a transaction; and (ii) letters dated such date and the date the offering is priced from the independent certified public accountants of the Company, addressed to the underwriters, if any, and if such Registrable Stock is not being sold through underwriters, then to the Holders making such request and, if such accountants refuse to deliver such letters to such Holders, then to the Company (A) stating that they are independent certified public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements and other financial data of the Company included in the registration statement or the prospectus, or any amendment or supplement thereto, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and 9 (B) covering such other financial matters (including information as to the period ending not more than five (5) business days prior to the date of such letters) with respect to the registration in respect of which such letter is being given as such underwriters or the Holders holding a majority of the Registrable Stock included in such registration, as the case may be, may reasonably request and as would be customary in such a transaction; (g) enter into customary agreements (including, if the method of distribution is by means of an underwriting, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Stock to be so included in the registration statement; (h) otherwise use its reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, but not later than eighteen (18) months after the effective date of the registration statement, an earnings statement which satisfies the provisions of Section 11(a) of the Securities Act; and (i) provide reasonable cooperation to the selling Holders of Registrable Stock and the managing or sole underwriter, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Stock to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Registrant; and enable such Registrable Stock to be in such denominations and registered in such names as the managing or sole underwriter, if any, or Holders may reasonably request in writing at least two business days prior to any sale of Registrable Stock in a firm commitment underwritten public offering, or at least ten business days prior to any other such sale. For purposes of Sections 6(a) and 6(b), the period of distribution of Registrable Stock in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Registrable Stock in any other registration shall be deemed to extend until the earlier of the sale of all Registrable Stock covered thereby and six (6) months after the effective date thereof. 7. FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement that the Holders shall furnish to the Company such information regarding themselves, the Registrable Stock held by them, and the intended method of disposition of such securities as the Company shall reasonably request and as shall be required in connection with the action to be taken by the Company. 10 8. EXPENSES OF REGISTRATION. All expenses incurred in connection with each registration pursuant to Section 3, Section 4 and Section 5 of this Agreement, excluding underwriters' discounts and commissions, but including without limitation all registration, filing and qualification fees, word processing, duplicating, printers' and accounting fees (including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance), fees of the New York Stock Exchange or listing fees, messenger and delivery expenses, all fees and expenses of complying with state securities or blue sky laws, fees and disbursements of counsel for the Company, and the fees and disbursements of one counsel for the selling Holders (which counsel shall be selected by the Holders holding a majority in interest of the Registrable Stock being registered), shall be shared equally by the Company, on the one hand, and the selling Holders, on the other hand; PROVIDED, HOWEVER, that if a registration request pursuant to Section 3 of this Agreement is subsequently withdrawn at the request of the Holders of a number of shares of Registrable Stock such that the remaining Holders requesting registration would not have been able to request registration under the provisions of Section 3 or Section 5 of this Agreement, such withdrawing Holders shall bear such expenses. The Holders shall bear and pay the underwriting commissions and discounts applicable to securities offered for their account in connection with any registrations, filings and qualifications made pursuant to this Agreement. 9. UNDERWRITING REQUIREMENTS. In connection with any underwritten offering, the Company shall not be required under Section 4 to include shares of Registrable Stock in such underwritten offering unless the Holders of such shares of Registrable Stock accept the terms of the underwriting of such offering that have been reasonably agreed upon between the Company and the underwriters selected by the Company; PROVIDED, HOWEVER, that in no event shall any Holder be required to make the representations and warranties to, or agreements with, the Company and its representatives other than as contemplated by Section 3(b)(iii). 10. RULE 144 INFORMATION. With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Registrable Stock to the public without registration, (a) at all times after ninety (90) days after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (ii) use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and 11 (iii) furnish to each Holder of Registrable Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing such Holder to sell any Registrable Stock without registration; and (b) at all times during which the Company is neither subject to the reporting requirements of Section 13 nor 15(d) of the Exchange Act, it will provide, upon the written request of any Holder of Registrable Stock in written form (as promptly as practicable and in any event within 15 business days), to any prospective buyer of such stock designated by such Holder, all information required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the SEC under the Securities Act. Upon written request of any Holder and if the Registrable Stock shall cease to be listed on the New York Stock Exchange, the Company will cooperate with and assist any Holder of Registrable Stock or any member of the National Association of Securities Dealers, Inc. system for Private Offerings Resales and Trading through Automated Linkage ("PORTAL") in applying to designate and thereafter maintain the eligibility of the Registrable Stock for trading through PORTAL. 11. INDEMNIFICATION. In the event any Registrable Stock is included in a registration statement under this Agreement: (a) The Company shall indemnify and hold harmless each Holder, such Holder's directors and officers, each Person who participates in the offering of such Registrable Stock, including underwriters (as defined in the Securities Act), and each Person, if any, who controls such Holder or participating Person within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or proceedings in respect thereof) arise out of or are based on any untrue or alleged untrue statement of any material fact contained in such registration statement on the effective date thereof (including any prospectus filed under Rule 424 under the Securities Act or any amendments or supplements thereto) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each such Holder, such Holder's directors and officers, such participating person or controlling person for any legal or other expenses reasonably incurred by them (but not in excess of expenses incurred in respect of one counsel for all of them unless, in the reasonable judgment of an indemnified party there is a conflict of interest with another indemnified party, in which case the indemnified parties may be represented by separate counsel) in connection with 12 investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 11(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld); PROVIDED FURTHER, that the Company shall not be liable to any Holder, such Holder's directors and officers, participating Person or controlling Person in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in connection with such registration statement, preliminary prospectus, final prospectus or amendments or supplements thereto, in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, such Holder's directors and officers, participating Person or controlling Person or in the event that such Holder shall have failed to deliver, or caused to be delivered, a final prospectus and any supplements thereto (provided that such Holder shall have been obligated or shall have assumed an obligation to so deliver, or caused to be delivered, such prospectus or supplement). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any such Holder, such Holder's directors and officers, participating Person or controlling Person, and shall survive the transfer of such securities by such Holder. (b) The Holders demanding or joining in a registration severally and not jointly shall indemnify and hold harmless the Company, each of its directors and officers, each Person, if any, who controls the Company within the meaning of the Securities Act, and each agent and any underwriter for the Company (within the meaning of the Securities Act) against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director, officer, controlling Person, agent or underwriter may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such registration statement on the effective date thereof (including any prospectus filed under Rule 424 under the Securities Act or any amendments or supplements thereto) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written information furnished by or on behalf of such Holder expressly for use in connection with such registration or due to Holder's failure to deliver a prospectus and any supplements thereto (provided that Holder shall have been obligated or assumed an 13 obligation to do so); and each such Holder shall reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling Person, agent or underwriter (but not in excess of expenses incurred in respect of one counsel for all of them unless, in the reasonable judgment of an indemnified party, there is a conflict of interest with another indemnified party, in which case the indemnified parties may be represented by separate counsel) in connection with investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 11(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld), and PROVIDED, FURTHER, that the liability of each Holder hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the net proceeds from the sale of the shares sold by such Holder under such registration statement bears to the total net proceeds from the sale of all securities sold thereunder, but not in any event to exceed the net proceeds received by such Holder from the sale of Registrable Stock covered by such registration statement. (c) Promptly after receipt by an indemnified party under this Section 11(c) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof and the indemnifying party shall have the right to participate in and assume the defense thereof with counsel selected by the indemnifying party and reasonably satisfactory to the indemnified party; PROVIDED, HOWEVER, that an indemnified party shall have the right to retain its own counsel, with all fees and expenses thereof to be paid by such indemnified party (except as provided in paragraph (a) and (b) above), and to be apprised of all progress in any proceeding the defense of which has been assumed by the indemnifying party. The failure to notify an indemnifying party promptly of the commencement of any such action shall only release the indemnifying party from any of its obligations under this Section 11 if, and only to the extent that, such indemnifying party is materially prejudiced by such failure, but the omission to so notify the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section. (d) To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions which resulted in such losses, claims, damages or 14 liabilities, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages or liabilities referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 11(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 12. LIMITATION ON REGISTRATION RIGHTS. Notwithstanding any other provisions of this Agreement to the contrary, the Company shall not be required to register any Registrable Stock under this Agreement with respect to any demand or demands made by any Holder after the fifth anniversary of the date of this Agreement. 13. ASSIGNMENT OF REGISTRATION RIGHTS. The registration rights of any Holder under this Agreement with respect to any Registrable Stock may be assigned to an Affiliate of such Holder; PROVIDED, HOWEVER, that (a) the assigning Holder shall give the Company written notice at or prior to the time of such assignment stating the name and address of the assignee and identifying the securities with respect to which the rights under this Agreement are being assigned; (b) such assignee shall agree in writing, in form and substance reasonably satisfactory to the Company, to be bound as a Holder by the provisions of this Agreement; and (c) immediately following such assignment the further disposition of such securities by such assignee is restricted under the Securities Act. No assignment of the registration rights of any Holder with respect to any Registrable Stock in accordance with this Section 13 shall cause such Registrable Stock to lose such status. 14. BINDING EFFECT; BENEFIT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 15 15. GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable conflicts of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in and New York state or federal court sitting in the City of New York. 16. COUNTERPARTS. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 17. HEADINGS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 18. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy upon written confirmation of receipt by the recipient, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) or overnight delivery to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 18): if to the Company: AquaPenn Spring Water Company, Inc. One AquaPenn Drive P.O. Box 938 Milesburg, PA 16853-0938 Telecopier: (814) 353-9108 Attention: Geoffrey F. Feidelberg 16 with a copy to: Ballard, Spahr Andrews & Ingersoll 1735 Market Street (51st Floor) Philadelphia, Pennsylvania 19103-7599 Telecopier: (215) 864-8999 Attention: Brian D. Doerner, Esq. if to the Parent or the Purchaser: Groupe Danone 7, rue de Teheran 75381 Paris Cedex 08 France Telecopier: 33 1 44 35 20 97 Attention: Emmanuel Faber with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Telecopier: (212) 848-7179 Attention: Clare O'Brien, Esq. 19. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be amended or waived if such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 20. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions set forth in this Agreement is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions set 17 forth in this Agreement be consummated as originally contemplated to the fullest extent possible. 20. ENTIRE AGREEMENT. This Agreement (including the schedule hereto) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings among the parties with respect thereto. IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. GROUPE DANONE By /s/ Emmanuel Faber -------------------------------- Name: Emmanuel Faber Title: Director of Corporate Development ZONEO ACQUISITION CORP. By /s/ Mark S. Rodriguez -------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer AQUAPENN SPRING WATER COMPANY, INC. By /s/ Edward J. Lauth, III -------------------------------- Name: Edward J. Lauth, III Title: Chairman, President and Chief Executive Officer EX-99.(C)(3)(A) 12 EXHIBIT 99(C)(3)(A) EXECUTION COPY SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated November 2, 1998, among GROUPE DANONE, a French SOCIETE ANONYME (the "PARENT"), ZONEO ACQUISITION CORP., a Pennsylvania corporation and an indirect wholly owned subsidiary of Parent (the "PURCHASER"), and Edward J. Lauth (the "SHAREHOLDER"). WHEREAS, as of the date of this Agreement, Shareholder owns (either beneficially or of record) the shares of common stock, no par value, of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "COMPANY") set forth on Exhibit A hereto (all such shares of the Company (the "SHARES") and any such Shares hereafter acquired by Shareholder prior to the termination of this Agreement being referred to herein as the "SHAREHOLDER'S SHARES"); WHEREAS, the Parent, the Purchaser and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date of this Agreement (as the same may be amended from time to time, the "MERGER AGREEMENT"), which provides, upon the terms and subject to the conditions thereof, for the acquisition by Purchaser of all the outstanding Shares through either (a) (i) a tender offer (the "OFFER") for any and all Shares for $13.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "PER SHARE AMOUNT") net to the sellers in cash and (ii) a second-step merger pursuant to which the Purchaser will merge with and into the Company (the "MERGER") and all outstanding Shares other than the Shares held by the Purchaser or the Parent (or any of their respective affiliates) will be converted into the right to receive the Per Share Amount in cash or (b) a merger pursuant to which, if approved by the holders of Shares in accordance with the Pennsylvania Business Corporation Law of 1988, as amended ("PENNSYLVANIA LAW"), and the Articles of Incorporation of the Company, the Purchaser will merge with and into the Company (the "LONG-FORM MERGER") and all outstanding Shares other than the Shares held by the Purchaser or the Parent (or any of their respective affiliates) will be converted into the right to receive the Per Share Amount in cash, except with respect to the holders of Shares who elect to exercise their dissenters' rights under Pennsylvania Law, who shall be entitled to demand the right to receive the fair value of such Shares; and WHEREAS, as a condition to the willingness of the Parent and the Purchaser to enter into the Merger Agreement, the Parent and the Purchaser have requested that the Shareholder agree, and, in order to induce the Parent and the Purchaser to enter into the Merger Agreement, the Shareholder has agreed, to (i) tender such Shareholder's Shares into the Offer, (ii) vote such Shareholder's Shares in favor of the Long-Form Merger, if 2 applicable, and (iii) grant the Purchaser an option to purchase such Shareholder's Shares at the Per Share Amount, in each case upon the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein and in the Merger Agreement, the parties hereto agree as follows: ARTICLE I THE OFFER SECTION 1.01. TENDER OF THE SHAREHOLDER'S SHARES PURSUANT TO THE OFFER. The Shareholder agrees to tender and sell (and not withdraw prior to termination or expiration of the Offer or the termination of the Merger Agreement), pursuant to and in accordance with the terms of the Offer, as it may be amended from time to time, all (but not less than all) the Shareholder's Shares (provided that the consideration offered in any such amendment is in cash and in an amount at least equal to the Per Share Amount). In the event the Offer is not consummated or if the Offer price is not in cash or is less than the Per Share Amount, the provisions of Article II shall apply. ARTICLE II THE OPTIONS SECTION 2.01. GRANT OF OPTIONS. Shareholder hereby grants to the Purchaser an irrevocable option ("OPTION") to purchase the Shareholder's Shares at a price per Share equal to the Per Share Amount. The Option shall expire if not exercised on the earlier of (i) the time the Merger or the Long-Form Merger becomes effective and (ii) the close of business on the 30th day following termination of the Merger Agreement. SECTION 2.02. EXERCISE OF OPTION. Provided that (a) to the extent necessary, any applicable waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR ACT") with respect to the exercise of the Option shall have expired or been terminated, (b) no preliminary or permanent injunction or other order, decree or ruling issued by any court or governmental or regulatory authority, domestic or foreign, of competent jurisdiction prohibiting the exercise of the Option or the delivery of Shares shall be in effect, and (c) the number of Shares to be purchased by the Purchaser pursuant to the exercise of the Option shall not cause the aggregate number of Shares, including, without 3 limitation, any Shares acquired by the Purchaser pursuant to (x) the third sentence of Section 1.01 of the Merger Agreement and (y) the other Shareholder Agreements (as defined in the Merger Agreement), to be held by the Purchaser immediately following such exercise to exceed 19.9% of the then issued and outstanding Shares, the Purchaser may exercise the Option at any time and from time to time, with respect to all or part of the Shareholder's Shares, following termination of the Merger Agreement until the expiration of such Option. In the event that the Purchaser wishes to exercise the Option, the Purchaser shall give written notice (the date of such notice being herein called the "NOTICE DATE"), to the Shareholder specifying a place and date (not later than ten Business Days (as defined below) and not earlier than two Business Days following the Notice Date) for closing such purchase (the "CLOSING"). For the purposes of this Agreement, the term "BUSINESS DAY" shall mean any day except (i) a Saturday, a Sunday or (ii) a day on which national banks are required or authorized by law or executive order to be closed in the City of New York. SECTION 2.03. VESTED OPTIONS; WARRANTS. The Shareholder agrees to exercise, upon written notice from the Purchaser, the Shareholder's vested options in respect of the number of Shares granted under the Company's 1989 Stock Option Plan, 1992 Stock Option Plan, 1994 Incentive Option Plan and stock option agreements with the Shareholder, each as amended (the "STOCK OPTION PLANS") as may be specified in the Purchaser's written notice. In addition, the Shareholder agrees to exercise, upon written notice from the Purchaser, the Shareholder's warrant issued pursuant to the Warrant dated as of November 21, 1995, for the number of Shares as may be specified in the Purchaser's written notice. All the Shareholder's Shares resulting from the exercise of such vested options and such warrant automatically shall become subject to the Option which may be exercised by the Purchaser pursuant to the terms of Section 2.02. Nothing herein shall preclude the Shareholder from exercising the Shareholder's vested options and warrant prior to receipt of notice from the Purchaser, and the Shareholder's Shares resulting from such independent exercise automatically shall become subject to the Option which may be exercised by Purchaser pursuant to the terms of Section 2.02. SECTION 2.04. PAYMENT FOR AND DELIVERY OF CERTIFICATES. At the Closing, (a) the Purchaser shall pay the aggregate purchase price for the Shareholder's Shares being purchased from the Shareholder by wire transfer in immediately available funds to an account designated by the Shareholder by written notice to Purchaser and (b) the Shareholder shall deliver to Purchaser a certificate or certificates evidencing the Shareholder's Shares, and the Shareholder agrees that such Shares shall be transferred free and clear of all Liens (as defined below). All such certificates shall be duly endorsed in blank, or with appropriate stock powers duly executed in blank attached thereto, in proper form for transfer, with the signature of the Shareholder thereon guaranteed, and with all applicable taxes paid or provided for. 4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER The Shareholder hereby represents and warrants to the Parent and the Purchaser as follows: SECTION 3.01. DUE EXECUTION AND DELIVERY; ENFORCEABILITY. This Agreement has been duly executed and delivered by the Shareholder and, assuming its due authorization, execution and delivery by the Purchaser and the Parent, constitutes a legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms. SECTION 3.02. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Shareholder do not, and the performance of this Agreement by the Shareholder will not, (i) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Shareholder or by which the Shareholder or any of the Shareholder's properties is bound or affected, or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Shareholder pursuant to, any note, mortgage, contract, agreement, lease, license, permit, or other instrument or obligation to which the Shareholder is a party or by which the Shareholder or any of the Shareholder's properties is bound or affected. (b) The execution and delivery of this Agreement by the Shareholder do not, and the performance of this Agreement by the Shareholder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE ACT"), and the HSR Act and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the Shareholder of such Shareholder's obligations under this Agreement. SECTION 3.03. TITLE TO SHARES. At the Closing, the Shareholder will deliver good and valid title to the Shareholder's Shares, free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal or other limitation on disposition or encumbrance of any kind ("LIENS"), other than pursuant to this Agreement. The Shareholder has full right, power and authority to sell, transfer and deliver 5 the Shareholder's Shares pursuant to this Agreement. Upon delivery of the Shareholder's Shares and payment of the Purchase Price therefor as contemplated herein, the Purchaser will receive good, valid, marketable and freely transferable title to the Shareholder's Shares, free and clear of all Liens. The Shareholder's Shares, including such Shareholder's options and warrants to purchase Shares, are set forth on Exhibit A hereto and are all the securities of the Company owned of record or beneficially by the Shareholder on the date of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT The Purchaser and the Parent hereby represent and warrant to the Shareholder as follows: SECTION 4.01. DUE ORGANIZATION, ETC. Each of the Purchaser and the Parent is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation. Each of the Purchaser and the Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Purchaser and the Parent have been duly authorized by all necessary corporate action on the part of the Purchaser and the Parent. This Agreement has been duly executed and delivered by the Purchaser and the Parent and, assuming its due authorization, execution and delivery by the Shareholder, constitutes a legal, valid and binding obligation of the Purchaser and the Parent, enforceable against the Purchaser and the Parent in accordance with its terms. SECTION 4.02. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Purchaser and the Parent do not, and the performance of this Agreement by the Purchaser and the Parent will not, (i) conflict with or violate the Articles of Incorporation or By-laws or equivalent organizational documents of the Purchaser or the Parent, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Purchaser or the Parent or by which the Purchaser or the Parent or any of their properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Purchaser or the Parent pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Purchaser or the Parent is a party or by which they or any of their properties is bound or affected. 6 (b) The execution and delivery of this Agreement by the Purchaser and the Parent do not, and the performance of this Agreement by the Purchaser and the Parent will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act and the HSR Act and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the Purchaser or the Parent of their obligations under this Agreement. SECTION 4.03. INVESTMENT INTENT. The purchase of Shares from the Shareholder pursuant to this Agreement is for the account of the Purchaser and not with a view to the public distribution or resale thereof in any manner which would be in violation of applicable United States securities laws. ARTICLE V TRANSFER AND VOTING OF SHARES SECTION 5.01. TRANSFER OF SHARES. During the term of the Option, and except as otherwise provided herein, the Shareholder shall not (a) sell, pledge, hypothecate or otherwise dispose of any of the Shareholder's Shares, or any options or warrants with respect thereto, (b) deposit the Shareholder's Shares, or any options or warrants with respect thereto, into a voting trust or enter into a voting agreement or arrangement with respect to the Shareholder's Shares or grant any proxy with respect thereto or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect acquisition or sale, assignment, transfer or other disposition of any Shareholder's Shares. SECTION 5.02. VOTING OF SHARES; FURTHER ASSURANCES. (a) The Shareholder, by this Agreement, does hereby constitute and appoint the Purchaser, or any nominee of the Purchaser, with full power of substitution, during and for the term of the Option, as such Shareholder's true and lawful attorney and proxy, for and in its name, place and stead, to vote each of the Shareholder's Shares as such Shareholder's proxy, at every annual, special or adjourned meeting of the shareholders of the Company (including the right to sign its name (as shareholder) to any consent, certificate or other document relating to the Company that Pennsylvania Law may permit or require) (i) in favor of the adoption of the Merger Agreement and the Long-Form Merger, if applicable, and the other transactions contemplated by the Merger Agreement, (ii) against any proposal for any recapitalization, merger, sale of assets or other business combination between the Company and any person or entity (other than the Merger or the Long-Form Merger) or any other action or agreement that would result 7 in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or that could result in any of the conditions to the Company's obligations under the Merger Agreement not being fulfilled, and (iii) in favor of any other matter relating to consummation of the transactions contemplated by the Merger Agreement. The Shareholder further agrees to cause the Shareholder's Shares to be voted in accordance with the foregoing. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The Shareholder acknowledges receipt and review of a copy of the Merger Agreement. (b) If the Purchaser shall exercise all or part of the Option in accordance with the terms of this Agreement, and without additional consideration, the Shareholder shall execute and deliver further transfers, assignments, endorsements, consents and other instruments as the Purchaser may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and the Merger Agreement, including the transfer of any and all of the Shareholder's Shares to the Purchaser and the release of any and all liens, claims and encumbrances covering the Shareholder's Shares. (c) The Shareholder shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in the Purchaser and the Parent the power to carry out the provisions of this Agreement, including, without limitation, causing all certificates representing the Shareholder's Shares to bear, until the expiration of the Option granted with respect to the Shareholder's Shares, in a conspicuous place the following legend: THE SHARES REPRESENTED BY THE WITHIN CERTIFICATE MAY NOT BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE SHAREHOLDER AGREEMENT, DATED NOVEMBER 2, 1998, AMONG GROUPE DANONE, ZONEO ACQUISITION CORP. AND THE REGISTERED HOLDER OF THE WITHIN CERTIFICATE. ARTICLE VI GENERAL PROVISIONS SECTION 6.01. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or 8 by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.01): (a) If to Parent or Purchaser: Groupe Danone 7, rue de Teheran 75008 Paris France Fax: 011-33-1-44-35-20-97 Attention: M. Emmanuel Faber with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Attention: Clare O'Brien, Esq. Fax: (212) 848-7179 (b) If to the Shareholder: c/o AquaPenn Spring Water Company, Inc. One AquaPenn Drive/P.O. Box 938 Milesburg, Pennsylvania 16853 Fax: 814-353-9108 Attention: Mr. Edward J. Lauth with a copy to: Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street 51st Floor Philadelphia, PA 19103-7599 Attention: Brian D. Doerner, Esq. Fax: 215-864-8999 SECTION 6.02. HEADINGS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 9 SECTION 6.03. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. SECTION 6.04. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. SECTION 6.05. ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise, except that the Parent and the Purchaser may assign any or all of their rights and obligations hereunder to any affiliate of the Parent. SECTION 6.06. PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. SECTION 6.07. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 6.08. AMENDMENTS. This Agreement may not be amended except by an instrument in writing signed by the Parent, the Purchaser and the Shareholder. SECTION 6.09. GOVERNING LAW; CONSENT TO JURISDICTION. Except to the extent that Pennsylvania Law is mandatorily applicable to the voting of the Shareholder's Shares and the related proxy, this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any New York State or federal court sitting in the City of New York. 10 SECTION 6.10. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties (with respect to the Parent and the Purchaser, by duly authorized officers thereof) have executed this Agreement as of the date first written above. GROUPE DANONE By /s/ Emmanuel Faber -------------------------------- Name: Emmanuel Faber Title: Director of Corporate Development ZONEO ACQUISITION CORP. By /s/ Mark S. Rodriguez -------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer /s/ Edward J. Lauth, III ------------------------------------- By Edward J. Lauth III, in his individual capacity EX-99.(C)(3)(B) 13 EXHIBIT (C)(3)(B) EXECUTION COPY SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated November 2, 1998, among GROUPE DANONE, a French SOCIETE ANONYME (the "PARENT"), ZONEO ACQUISITION CORP., a Pennsylvania corporation and an indirect wholly owned subsidiary of Parent (the "PURCHASER"), and Geoffrey F. Feidelberg (the "SHAREHOLDER"). WHEREAS, as of the date of this Agreement, Shareholder owns (either beneficially or of record) the shares of common stock, no par value, of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "COMPANY") set forth on Exhibit A hereto (all such shares of the Company (the "SHARES") and any such Shares hereafter acquired by Shareholder prior to the termination of this Agreement being referred to herein as the "SHAREHOLDER'S SHARES"); WHEREAS, the Parent, the Purchaser and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date of this Agreement (as the same may be amended from time to time, the "MERGER AGREEMENT"), which provides, upon the terms and subject to the conditions thereof, for the acquisition by Purchaser of all the outstanding Shares through either (a) (i) a tender offer (the "OFFER") for any and all Shares for $13.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "PER SHARE AMOUNT") net to the sellers in cash and (ii) a second-step merger pursuant to which the Purchaser will merge with and into the Company (the "MERGER") and all outstanding Shares other than the Shares held by the Purchaser or the Parent (or any of their respective affiliates) will be converted into the right to receive the Per Share Amount in cash or (b) a merger pursuant to which, if approved by the holders of Shares in accordance with the Pennsylvania Business Corporation Law of 1988, as amended ("PENNSYLVANIA LAW"), and the Articles of Incorporation of the Company, the Purchaser will merge with and into the Company (the "LONG-FORM MERGER") and all outstanding Shares other than the Shares held by the Purchaser or the Parent (or any of their respective affiliates) will be converted into the right to receive the Per Share Amount in cash, except with respect to the holders of Shares who elect to exercise their dissenters' rights under Pennsylvania Law, who shall be entitled to demand the right to receive the fair value of such Shares; and WHEREAS, as a condition to the willingness of the Parent and the Purchaser to enter into the Merger Agreement, the Parent and the Purchaser have requested that the Shareholder agree, and, in order to induce the Parent and the Purchaser to enter into the Merger Agreement, the Shareholder has agreed, to (i) tender such Shareholder's Shares into the Offer, (ii) vote such Shareholder's Shares in favor of the Long-Form Merger, if 2 applicable, and (iii) grant the Purchaser an option to purchase such Shareholder's Shares at the Per Share Amount, in each case upon the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein and in the Merger Agreement, the parties hereto agree as follows: ARTICLE I THE OFFER SECTION 1.01. TENDER OF THE SHAREHOLDER'S SHARES PURSUANT TO THE OFFER. The Shareholder agrees to tender and sell (and not withdraw prior to termination or expiration of the Offer or the termination of the Merger Agreement), pursuant to and in accordance with the terms of the Offer, as it may be amended from time to time, all (but not less than all) the Shareholder's Shares (provided that the consideration offered in any such amendment is in cash and in an amount at least equal to the Per Share Amount). In the event the Offer is not consummated or if the Offer price is not in cash or is less than the Per Share Amount, the provisions of Article II shall apply. ARTICLE II THE OPTIONS SECTION 2.01. GRANT OF OPTIONS. Shareholder hereby grants to the Purchaser an irrevocable option ("OPTION") to purchase the Shareholder's Shares at a price per Share equal to the Per Share Amount. The Option shall expire if not exercised on the earlier of (i) the time the Merger or the Long-Form Merger becomes effective and (ii) the close of business on the 30th day following termination of the Merger Agreement. SECTION 2.02. EXERCISE OF OPTION. Provided that (a) to the extent necessary, any applicable waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR ACT") with respect to the exercise of the Option shall have expired or been terminated, (b) no preliminary or permanent injunction or other order, decree or ruling issued by any court or governmental or regulatory authority, domestic or foreign, of competent jurisdiction prohibiting the exercise of the Option or the delivery of Shares shall be in effect, and (c) the number of Shares to be purchased by the Purchaser pursuant to the exercise of the Option shall not cause the aggregate number of Shares, including, without 3 limitation, any Shares acquired by the Purchaser pursuant to (x) the third sentence of Section 1.01 of the Merger Agreement and (y) the other Shareholder Agreements (as defined in the Merger Agreement), to be held by the Purchaser immediately following such exercise to exceed 19.9% of the then issued and outstanding Shares, the Purchaser may exercise the Option at any time and from time to time, with respect to all or part of the Shareholder's Shares, following termination of the Merger Agreement until the expiration of such Option. In the event that the Purchaser wishes to exercise the Option, the Purchaser shall give written notice (the date of such notice being herein called the "NOTICE DATE"), to the Shareholder specifying a place and date (not later than ten Business Days (as defined below) and not earlier than two Business Days following the Notice Date) for closing such purchase (the "CLOSING"). For the purposes of this Agreement, the term "BUSINESS DAY" shall mean any day except (i) a Saturday, a Sunday or (ii) a day on which national banks are required or authorized by law or executive order to be closed in the City of New York. SECTION 2.03. VESTED OPTIONS; WARRANTS. (a) The Shareholder agrees to exercise, upon written notice from the Purchaser, the Shareholder's vested options in respect of the number of Shares granted under the Company's 1989 Stock Option Plan, 1992 Stock Option Plan, 1994 Incentive Option Plan and stock option agreements with the Shareholder, each as amended (the "STOCK OPTION PLANS") as may be specified in the Purchaser's written notice. All the Shareholder's Shares resulting from the exercise of such vested options automatically shall become subject to the Option which may be exercised by the Purchaser pursuant to the terms of Section 2.02. Nothing herein shall preclude the Shareholder from exercising the Shareholder's vested options prior to receipt of notice from the Purchaser, and the Shareholder's Shares resulting from such independent exercise automatically shall become subject to the Option which may be exercised by Purchaser pursuant to the terms of Section 2.02. (b) The Purchaser agrees that it will give the Shareholder the notice referred to in Section 2.03(a) above only if the Purchaser agrees to promptly thereafter purchase the Shares that thereby become subject to the Option. SECTION 2.04. PAYMENT FOR AND DELIVERY OF CERTIFICATES. At the Closing, (a) the Purchaser shall pay the aggregate purchase price for the Shareholder's Shares being purchased from the Shareholder by wire transfer in immediately available funds to an account designated by the Shareholder by written notice to Purchaser and (b) the Shareholder shall deliver to Purchaser a certificate or certificates evidencing the Shareholder's Shares, and the Shareholder agrees that such Shares shall be transferred free and clear of all Liens (as defined below). All such certificates shall be duly endorsed in blank, or with appropriate stock powers duly executed in blank attached thereto, in proper form for transfer, with the signature of the Shareholder thereon guaranteed, and with all applicable taxes paid or provided for. 4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER The Shareholder hereby represents and warrants to the Parent and the Purchaser as follows: SECTION 3.01. DUE EXECUTION AND DELIVERY; ENFORCEABILITY. This Agreement has been duly executed and delivered by the Shareholder and, assuming its due authorization, execution and delivery by the Purchaser and the Parent, constitutes a legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms. SECTION 3.02. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Shareholder do not, and the performance of this Agreement by the Shareholder will not, (i) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Shareholder or by which the Shareholder or any of the Shareholder's properties is bound or affected, or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Shareholder pursuant to, any note, mortgage, contract, agreement, lease, license, permit, or other instrument or obligation to which the Shareholder is a party or by which the Shareholder or any of the Shareholder's properties is bound or affected. (b) The execution and delivery of this Agreement by the Shareholder do not, and the performance of this Agreement by the Shareholder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE ACT"), and the HSR Act and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the Shareholder of such Shareholder's obligations under this Agreement. SECTION 3.03. TITLE TO SHARES. At the Closing, the Shareholder will deliver good and valid title to the Shareholder's Shares, free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal or other limitation on disposition or encumbrance of any kind ("LIENS"), other than pursuant to this Agreement. The Shareholder has full right, power and authority to sell, transfer and deliver 5 the Shareholder's Shares pursuant to this Agreement. Upon delivery of the Shareholder's Shares and payment of the Purchase Price therefor as contemplated herein, the Purchaser will receive good, valid, marketable and freely transferable title to the Shareholder's Shares, free and clear of all Liens. The Shareholder's Shares, including such Shareholder's options and warrants to purchase Shares, are set forth on Exhibit A hereto and are all the securities of the Company owned of record or beneficially by the Shareholder on the date of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT The Purchaser and the Parent hereby represent and warrant to the Shareholder as follows: SECTION 4.01. DUE ORGANIZATION, ETC. Each of the Purchaser and the Parent is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation. Each of the Purchaser and the Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Purchaser and the Parent have been duly authorized by all necessary corporate action on the part of the Purchaser and the Parent. This Agreement has been duly executed and delivered by the Purchaser and the Parent and, assuming its due authorization, execution and delivery by the Shareholder, constitutes a legal, valid and binding obligation of the Purchaser and the Parent, enforceable against the Purchaser and the Parent in accordance with its terms. SECTION 4.02. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Purchaser and the Parent do not, and the performance of this Agreement by the Purchaser and the Parent will not, (i) conflict with or violate the Articles of Incorporation or By-laws or equivalent organizational documents of the Purchaser or the Parent, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Purchaser or the Parent or by which the Purchaser or the Parent or any of their properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Purchaser or the Parent pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Purchaser or the Parent is a party or by which they or any of their properties is bound or affected. 6 (b) The execution and delivery of this Agreement by the Purchaser and the Parent do not, and the performance of this Agreement by the Purchaser and the Parent will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act and the HSR Act and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the Purchaser or the Parent of their obligations under this Agreement. SECTION 4.03. INVESTMENT INTENT. The purchase of Shares from the Shareholder pursuant to this Agreement is for the account of the Purchaser and not with a view to the public distribution or resale thereof in any manner which would be in violation of applicable United States securities laws. ARTICLE V TRANSFER AND VOTING OF SHARES SECTION 5.01. TRANSFER OF SHARES. During the term of the Option, and except as otherwise provided herein, the Shareholder shall not (a) sell, pledge, hypothecate or otherwise dispose of any of the Shareholder's Shares, or any options or warrants with respect thereto, (b) deposit the Shareholder's Shares, or any options or warrants with respect thereto, into a voting trust or enter into a voting agreement or arrangement with respect to the Shareholder's Shares or grant any proxy with respect thereto or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect acquisition or sale, assignment, transfer or other disposition of any Shareholder's Shares. SECTION 5.02. VOTING OF SHARES; FURTHER ASSURANCES. (a) The Shareholder, by this Agreement, does hereby constitute and appoint the Purchaser, or any nominee of the Purchaser, with full power of substitution, during and for the term of the Option, as such Shareholder's true and lawful attorney and proxy, for and in its name, place and stead, to vote each of the Shareholder's Shares as such Shareholder's proxy, at every annual, special or adjourned meeting of the shareholders of the Company (including the right to sign its name (as shareholder) to any consent, certificate or other document relating to the Company that Pennsylvania Law may permit or require) (i) in favor of the adoption of the Merger Agreement and the Long-Form Merger, if applicable, and the other transactions contemplated by the Merger Agreement, (ii) against any proposal for any recapitalization, merger, sale of assets or other business combination between the Company and any person or entity (other than the Merger or the Long-Form Merger) or any other action or agreement that would result 7 in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or that could result in any of the conditions to the Company's obligations under the Merger Agreement not being fulfilled, and (iii) in favor of any other matter relating to consummation of the transactions contemplated by the Merger Agreement. The Shareholder further agrees to cause the Shareholder's Shares to be voted in accordance with the foregoing. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The Shareholder acknowledges receipt and review of a copy of the Merger Agreement. (b) If the Purchaser shall exercise all or part of the Option in accordance with the terms of this Agreement, and without additional consideration, the Shareholder shall execute and deliver further transfers, assignments, endorsements, consents and other instruments as the Purchaser may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and the Merger Agreement, including the transfer of any and all of the Shareholder's Shares to the Purchaser and the release of any and all liens, claims and encumbrances covering the Shareholder's Shares. (c) The Shareholder shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in the Purchaser and the Parent the power to carry out the provisions of this Agreement, including, without limitation, causing all certificates representing the Shareholder's Shares to bear, until the expiration of the Option granted with respect to the Shareholder's Shares, in a conspicuous place the following legend: THE SHARES REPRESENTED BY THE WITHIN CERTIFICATE MAY NOT BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE SHAREHOLDER AGREEMENT, DATED NOVEMBER 2, 1998, AMONG GROUPE DANONE, ZONEO ACQUISITION CORP. AND THE REGISTERED HOLDER OF THE WITHIN CERTIFICATE. ARTICLE VI GENERAL PROVISIONS SECTION 6.01. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or 8 by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.01): (a) If to Parent or Purchaser: Groupe Danone 7, rue de Teheran 75008 Paris France Fax: 011-33-1-44-35-20-97 Attention: M. Emmanuel Faber with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Attention: Clare O'Brien, Esq. Fax: (212) 848-7179 (b) If to the Shareholder: c/o AquaPenn Spring Water Company, Inc. One AquaPenn Drive P.O. Box 938 Milesburg, Pennsylvania 16853 Fax: 814-353-9108 Attention: Mr. Geoffrey F. Feidelberg with a copy to: Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street 51st Floor Philadelphia, PA 19103-7599 Attention: Brian D. Doerner, Esq. Fax: 215-864-8999 SECTION 6.02. HEADINGS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 6.03. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. SECTION 6.04. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. SECTION 6.05. ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise, except that the Parent and the Purchaser may assign any or all of their rights and obligations hereunder to any affiliate of the Parent. SECTION 6.06. PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. SECTION 6.07. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 6.08. AMENDMENTS. This Agreement may not be amended except by an instrument in writing signed by the Parent, the Purchaser and the Shareholder. SECTION 6.09. GOVERNING LAW; CONSENT TO JURISDICTION. Except to the extent that Pennsylvania Law is mandatorily applicable to the voting of the Shareholder's Shares and the related proxy, this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. All actions and proceedings arising out of or 10 relating to this Agreement shall be heard and determined in any New York State or federal court sitting in the City of New York. SECTION 6.10. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties (with respect to the Parent and the Purchaser, by duly authorized officers thereof) have executed this Agreement as of the date first written above. GROUPE DANONE By /s/ Emmanuel Faber -------------------------------- Name: Emmanuel Faber Title: Director of Corporate Development ZONEO ACQUISITION CORP. By /s/ Mark S. Rodriguez -------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer /s/ Geoffrey F. Feidelberg ------------------------------------- By Geoffrey F. Feidelberg, in his individual capacity EX-99.(C)(3)(C) 14 SHAREHOLDER AGREEMENT - MATTHEW J. SUHEY EXECUTION COPY SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT, dated November 2, 1998, among GROUPE DANONE, a French SOCIETE ANONYME (the "PARENT"), ZONEO ACQUISITION CORP., a Pennsylvania corporation and an indirect wholly owned subsidiary of Parent (the "PURCHASER"), and Matthew J. Suhey (the "SHAREHOLDER"). WHEREAS, as of the date of this Agreement, Shareholder owns (either beneficially or of record) the shares of common stock, no par value, of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation (the "COMPANY") set forth on Exhibit A hereto (all such shares of the Company (the "SHARES") and any such Shares hereafter acquired by Shareholder prior to the termination of this Agreement being referred to herein as the "SHAREHOLDER'S SHARES"); WHEREAS, the Parent, the Purchaser and the Company propose to enter into an Agreement and Plan of Merger, dated as of the date of this Agreement (as the same may be amended from time to time, the "MERGER AGREEMENT"), which provides, upon the terms and subject to the conditions thereof, for the acquisition by Purchaser of all the outstanding Shares through either (a) (i) a tender offer (the "OFFER") for any and all Shares for $13.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "PER SHARE AMOUNT") net to the sellers in cash and (ii) a second-step merger pursuant to which the Purchaser will merge with and into the Company (the "MERGER") and all outstanding Shares other than the Shares held by the Purchaser or the Parent (or any of their respective affiliates) will be converted into the right to receive the Per Share Amount in cash or (b) a merger pursuant to which, if approved by the holders of Shares in accordance with the Pennsylvania Business Corporation Law of 1988, as amended ("PENNSYLVANIA LAW"), and the Articles of Incorporation of the Company, the Purchaser will merge with and into the Company (the "LONG-FORM MERGER") and all outstanding Shares other than the Shares held by the Purchaser or the Parent (or any of their respective affiliates) will be converted into the right to receive the Per Share Amount in cash, except with respect to the holders of Shares who elect to exercise their dissenters' rights under Pennsylvania Law, who shall be entitled to demand the right to receive the fair value of such Shares; and WHEREAS, as a condition to the willingness of the Parent and the Purchaser to enter into the Merger Agreement, the Parent and the Purchaser have requested that the Shareholder agree, and, in order to induce the Parent and the Purchaser to enter into the Merger Agreement, the Shareholder has agreed, to (i) tender such Shareholder's Shares into the Offer, (ii) vote such Shareholder's Shares in favor of the Long-Form Merger, if applicable, and (iii) grant the Purchaser an option to purchase such Shareholder's Shares at the Per Share Amount, in each case upon the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein and in the Merger Agreement, the parties hereto agree as follows: 2 ARTICLE I THE OFFER SECTION 1.01. TENDER OF THE SHAREHOLDER'S SHARES PURSUANT TO THE OFFER. The Shareholder agrees to tender and sell (and not withdraw prior to termination or expiration of the Offer or the termination of the Merger Agreement), pursuant to and in accordance with the terms of the Offer, as it may be amended from time to time, all (but not less than all) the Shareholder's Shares (provided that the consideration offered in any such amendment is in cash and in an amount at least equal to the Per Share Amount). In the event the Offer is not consummated or if the Offer price is not in cash or is less than the Per Share Amount, the provisions of Article II shall apply. ARTICLE II THE OPTIONS SECTION 2.01. GRANT OF OPTIONS. Shareholder hereby grants to the Purchaser an irrevocable option ("OPTION") to purchase the Shareholder's Shares at a price per Share equal to the Per Share Amount. The Option shall expire if not exercised on the earlier of (i) the time the Merger or the Long-Form Merger becomes effective and (ii) the close of business on the 30th day following termination of the Merger Agreement. SECTION 2.02. EXERCISE OF OPTION. Provided that (a) to the extent necessary, any applicable waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR ACT") with respect to the exercise of the Option shall have expired or been terminated, (b) no preliminary or permanent injunction or other order, decree or ruling issued by any court or governmental or regulatory authority, domestic or foreign, of competent jurisdiction prohibiting the exercise of the Option or the delivery of Shares shall be in effect, and (c) the number of Shares to be purchased by the Purchaser pursuant to the exercise of the Option shall not cause the aggregate number of Shares, including, without limitation, any Shares acquired by the Purchaser pursuant to (x) the third sentence of Section 1.01 of the Merger Agreement and (y) the other Shareholder Agreements (as defined in the Merger Agreement), to be held by the Purchaser immediately following such exercise to 3 exceed 19.9% of the then issued and outstanding Shares, the Purchaser may exercise the Option at any time and from time to time, with respect to all or part of the Shareholder's Shares, following termination of the Merger Agreement until the expiration of such Option. In the event that the Purchaser wishes to exercise the Option, the Purchaser shall give written notice (the date of such notice being herein called the "NOTICE DATE"), to the Shareholder specifying a place and date (not later than ten Business Days (as defined below) and not earlier than two Business Days following the Notice Date) for closing such purchase (the "CLOSING"). For the purposes of this Agreement, the term "BUSINESS DAY" shall mean any day except (i) a Saturday, a Sunday or (ii) a day on which national banks are required or authorized by law or executive order to be closed in the City of New York. SECTION 2.03. VESTED OPTIONS. The Shareholder agrees to exercise, upon written notice from the Purchaser, the Shareholder's vested options in respect of the number of Shares granted under the Company's 1989 Stock Option Plan, 1992 Stock Option Plan, 1994 Incentive Option Plan and stock option agreements with the Shareholder, each as amended (the "STOCK OPTION PLANS") as may be specified in the Purchaser's written notice. All the Shareholder's Shares resulting from the exercise of such vested options automatically shall become subject to the Option which may be exercised by the Purchaser pursuant to the terms of Section 2.02. Nothing herein shall preclude the Shareholder from exercising the Shareholder's vested options prior to receipt of notice from the Purchaser, and the Shareholder's Shares resulting from such independent exercise automatically shall become subject to the Option which may be exercised by Purchaser pursuant to the terms of Section 2.02. SECTION 2.04. PAYMENT FOR AND DELIVERY OF CERTIFICATES. At the Closing, (a) the Purchaser shall pay the aggregate purchase price for the Shareholder's Shares being purchased from the Shareholder by wire transfer in immediately available funds to an account designated by the Shareholder by written notice to Purchaser and (b) the Shareholder shall deliver to Purchaser a certificate or certificates evidencing the Shareholder's Shares, and the Shareholder agrees that such Shares shall be transferred free and clear of all Liens (as defined below). All such certificates shall be duly endorsed in blank, or with appropriate stock powers duly executed in blank attached thereto, in proper form for transfer, with the signature of the Shareholder thereon guaranteed, and with all applicable taxes paid or provided for. 4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER The Shareholder hereby represents and warrants to the Parent and the Purchaser as follows: SECTION 3.01. DUE EXECUTION AND DELIVERY; ENFORCEABILITY. This Agreement has been duly executed and delivered by the Shareholder and, assuming its due authorization, execution and delivery by the Purchaser and the Parent, constitutes a legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms. SECTION 3.02. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Shareholder do not, and the performance of this Agreement by the Shareholder will not, (i) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Shareholder or by which the Shareholder or any of the Shareholder's properties is bound or affected, or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Shareholder pursuant to, any note, mortgage, contract, agreement, lease, license, permit, or other instrument or obligation to which the Shareholder is a party or by which the Shareholder or any of the Shareholder's properties is bound or affected. (b) The execution and delivery of this Agreement by the Shareholder do not, and the performance of this Agreement by the Shareholder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE ACT"), and the HSR Act and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the Shareholder of such Shareholder's obligations under this Agreement. SECTION 3.03. TITLE TO SHARES. At the Closing, the Shareholder will deliver good and valid title to the Shareholder's Shares, free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal or other limitation on disposition or encumbrance of any kind ("LIENS"), other than pursuant to this Agreement. The Shareholder has full right, power and authority to sell, transfer and deliver 5 the Shareholder's Shares pursuant to this Agreement. Upon delivery of the Shareholder's Shares and payment of the Purchase Price therefor as contemplated herein, the Purchaser will receive good, valid, marketable and freely transferable title to the Shareholder's Shares, free and clear of all Liens. The Shareholder's Shares, including such Shareholder's options and warrants to purchase Shares, are set forth on Exhibit A hereto and are all the securities of the Company owned of record or beneficially by the Shareholder on the date of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT The Purchaser and the Parent hereby represent and warrant to the Shareholder as follows: SECTION 4.01. DUE ORGANIZATION, ETC. Each of the Purchaser and the Parent is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation. Each of the Purchaser and the Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Purchaser and the Parent have been duly authorized by all necessary corporate action on the part of the Purchaser and the Parent. This Agreement has been duly executed and delivered by the Purchaser and the Parent and, assuming its due authorization, execution and delivery by the Shareholder, constitutes a legal, valid and binding obligation of the Purchaser and the Parent, enforceable against the Purchaser and the Parent in accordance with its terms. SECTION 4.02. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Purchaser and the Parent do not, and the performance of this Agreement by the Purchaser and the Parent will not, (i) conflict with or violate the Articles of Incorporation or By-laws or equivalent organizational documents of the Purchaser or the Parent, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Purchaser or the Parent or by which the Purchaser or the Parent or any of their properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Purchaser or the Parent pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Purchaser or the Parent is a party or by which they or any of their properties is bound or affected. 6 (b) The execution and delivery of this Agreement by the Purchaser and the Parent do not, and the performance of this Agreement by the Purchaser and the Parent will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act and the HSR Act and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the Purchaser or the Parent of their obligations under this Agreement. SECTION 4.03. INVESTMENT INTENT. The purchase of Shares from the Shareholder pursuant to this Agreement is for the account of the Purchaser and not with a view to the public distribution or resale thereof in any manner which would be in violation of applicable United States securities laws. ARTICLE V TRANSFER AND VOTING OF SHARES SECTION 5.01. TRANSFER OF SHARES. During the term of the Option, and except as otherwise provided herein, the Shareholder shall not (a) sell, pledge, hypothecate or otherwise dispose of any of the Shareholder's Shares, or any options or warrants with respect thereto, (b) deposit the Shareholder's Shares, or any options or warrants with respect thereto, into a voting trust or enter into a voting agreement or arrangement with respect to the Shareholder's Shares or grant any proxy with respect thereto or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect acquisition or sale, assignment, transfer or other disposition of any Shareholder's Shares. SECTION 5.02. VOTING OF SHARES; FURTHER ASSURANCES. (a) The Shareholder, by this Agreement, does hereby constitute and appoint the Purchaser, or any nominee of the Purchaser, with full power of substitution, during and for the term of the Option, as such Shareholder's true and lawful attorney and proxy, for and in its name, place and stead, to vote each of the Shareholder's Shares as such Shareholder's proxy, at every annual, special or adjourned meeting of the shareholders of the Company (including the right to sign its name (as shareholder) to any consent, certificate or other document relating to the Company that Pennsylvania Law may permit or require) (i) in favor of the adoption of the Merger Agreement and the Long-Form Merger, if applicable, and the other transactions contemplated by the Merger Agreement, (ii) against any proposal for any recapitalization, merger, sale of assets or other business combination between the Company and any person or entity (other than the Merger or the Long-Form Merger) or any other action or agreement that would result 7 in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or that could result in any of the conditions to the Company's obligations under the Merger Agreement not being fulfilled, and (iii) in favor of any other matter relating to consummation of the transactions contemplated by the Merger Agreement. The Shareholder further agrees to cause the Shareholder's Shares to be voted in accordance with the foregoing. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The Shareholder acknowledges receipt and review of a copy of the Merger Agreement. (b) If the Purchaser shall exercise all or part of the Option in accordance with the terms of this Agreement, and without additional consideration, the Shareholder shall execute and deliver further transfers, assignments, endorsements, consents and other instruments as the Purchaser may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and the Merger Agreement, including the transfer of any and all of the Shareholder's Shares to the Purchaser and the release of any and all liens, claims and encumbrances covering the Shareholder's Shares. (c) The Shareholder shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in the Purchaser and the Parent the power to carry out the provisions of this Agreement, including, without limitation, causing all certificates representing the Shareholder's Shares to bear, until the expiration of the Option granted with respect to the Shareholder's Shares, in a conspicuous place the following legend: THE SHARES REPRESENTED BY THE WITHIN CERTIFICATE MAY NOT BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE SHAREHOLDER AGREEMENT, DATED NOVEMBER 2, 1998, AMONG GROUPE DANONE, ZONEO ACQUISITION CORP. AND THE REGISTERED HOLDER OF THE WITHIN CERTIFICATE. ARTICLE VI GENERAL PROVISIONS SECTION 6.01. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or 8 by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.01): (a) If to Parent or Purchaser: Groupe Danone 7, rue de Teheran 75008 Paris France Fax: 011-33-1-44-35-20-97 Attention: M. Emmanuel Faber with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Attention: Clare O'Brien, Esq. Fax: (212) 848-7179 (b) If to the Shareholder: c/o AquaPenn Spring Water Company, Inc. One AquaPenn Drive/P.O. Box 938 Milesburg, Pennsylvania 16853 Fax: 814-353-9108 Attention: Mr. Matthew J. Suhey with a copy to: Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street 51st Floor Philadelphia, PA 19103-7599 Attention: Brian D. Doerner, Esq. Fax: 215-864-8999 SECTION 6.02. HEADINGS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 9 SECTION 6.03. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. SECTION 6.04. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. SECTION 6.05. ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise, except that the Parent and the Purchaser may assign any or all of their rights and obligations hereunder to any affiliate of the Parent. SECTION 6.06. PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. SECTION 6.07. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 6.08. AMENDMENTS. This Agreement may not be amended except by an instrument in writing signed by the Parent, the Purchaser and the Shareholder. SECTION 6.09. GOVERNING LAW; CONSENT TO JURISDICTION. Except to the extent that Pennsylvania Law is mandatorily applicable to the voting of the Shareholder's Shares and the related proxy, this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any New York State or federal court sitting in the City of New York. 10 SECTION 6.10. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties (with respect to the Parent and the Purchaser, by duly authorized officers thereof) have executed this Agreement as of the date first written above. GROUPE DANONE By /s/ Emmanuel Faber -------------------------------- Name: Emmanuel Faber Title: Director of Corporate Development ZONEO ACQUISITION CORP. By /s/ Mark S. Rodriguez -------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer /s/ Matthew J. Suhey ------------------------------------- By Matthew J. Suhey, in his individual capacity EX-99.(C)(4)(A) 15 EXHIBIT 99(C)(4)(A) GREAT BRANDS OF EUROPE, INC. November 2, 1998 Edward J. Lauth, III President Aqua Penn Spring Water Company, Inc. One Aqua Penn Drive Milesburg, Pennsylvania 16853-0938 EMPLOYMENT AGREEMENT Dear Mr. Lauth: This is to confirm our desire to engage in a continuing employment relationship with you following the closing of the pending acquisition (the "TRANSACTION") of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation ("AQUAPENN"), by Groupe Danone, a company incorporated under the law of the Republic of France, the parent company of Great Brands of Europe, Inc. (the "COMPANY"). The following sets forth the agreement between the Company and you regarding the terms of your employment as an employee of AquaPenn and the Company (the "AGREEMENT"). Capitalized terms not otherwise defined in the text of this Agreement are defined in Section 6 hereof. 1. TERM OF EMPLOYMENT. The term of your employment with the Company pursuant to this Agreement shall commence on the "Closing Date" of the Transaction (as such term is defined in the Agreement and Plan of Merger dated November 2, 1998 (the "EFFECTIVE DATE"), and shall continue for a period of up to one year thereafter (the "TERM"). 2. POSITION, REPORTING AND RESPONSIBILITIES. During the Term, you shall be employed as the President of AquaPenn and you will be based in Milesburg, Pennsylvania. You will report directly to the Chief Executive Officer of the Company. Your duties and responsibilities shall at all times be commensurate with your position and reporting responsibilities. During the Term, you shall devote all of your business time, attention, skills and efforts exclusively to the business and affairs of the Company, other than DE MINIMIS amounts of time devoted by you to the management of your personal finances or to engaging in charitable or community services. You understand and agree that you will be required to travel from time to time for business purposes. 2 3. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Term as compensation to you for all services rendered to the Company, the Company will pay you a base salary (the "SALARY") at the rate of $200,000 per annum, which will be reviewed annually by the Company and may be increased but not decreased on the basis of such review. Your Salary will be paid to you in accordance with the Company's payroll practices as established from time to time, but no less frequently than monthly. (b) BONUS. In addition to the Salary, beginning in calendar year 1999 you will participate in the Company's executive bonus program, which is offered by the Company to similarly situated executives of the Company, pursuant to which you may be awarded up to thirty-five percent of the Salary for each annual bonus period (the "ANNUAL BONUS"). The amount of your Annual Bonus will be determined based upon the achievement by you of personal objectives and the business results for the Company's North American operations during each bonus period and will be paid to you in a lump sum amount as soon as practicable after the business results for the bonus period have been determined. In the event that your employment hereunder terminates prior to the end of the 1999 bonus period, you will receive a pro rated portion of the Annual Bonus for such period; PROVIDED, HOWEVER, that in the event that prior to the end of the 1999 bonus period, your employment hereunder is terminated by the Company for Cause or you resign without Good Reason, you will forfeit any and all rights to the Annual Bonus. (c) BENEFITS. During the Term, you and your dependants shall be eligible to participate in such retirement, medical and other welfare benefit plans, programs and arrangements that are offered by the Company to similarly situated employees from time to time which benefits will be at least as favorable to you as those you enjoyed prior to the Effective Date. (d) BUSINESS EXPENSES. The Company shall pay or reimburse you for the reasonable expenses incurred by you in connection with the performance of your employment obligations to the Company, subject to your delivery to the Company of appropriate documentation of such expenses. (e) AUTOMOBILE. During the Term, the Company will provide you with an automobile pursuant to a program that is at least as favorable to you as the automobile program in which you participated immediately prior to the Effective Date. (g) EQUITY COMPENSATION. Subject to approval by the Board of Directors of Groupe Danone at its next meeting which is scheduled to take place in December 1998, as soon as practicable after the Effective Date, Groupe Danone shall grant you stock options 3 which will be exercisable for 750 ordinary shares of Groupe Danone, nominal value FF10 per share (the "STOCK OPTIONS"). Subject to the terms of Section 4(a) and 4(b) below, the Stock Options will become 100% vested on the second anniversary of the date of grant. 4. TERMINATION OF EMPLOYMENT. Subject to the provisions of this Agreement, the Company shall have the right to terminate your employment, and you shall have the right to resign from your employment with the Company, for any reason or for no stated reason. (a) TERMINATION OR RESIGNATION OF EMPLOYMENT - ALL CIRCUMSTANCES. In the event of your termination or resignation of employment for any reason during the Term, the Company shall pay you (or in the event of your death, your Beneficiary) (i) the full amount of the accrued but unpaid Salary you have earned through the Date of Termination (as defined in Section 4(g) below), (ii) a cash amount for any accrued but unused vacation (based on the highest rate of Salary in effect during the twelve months prior to the Date of Termination), and (iii) any earned but unpaid Annual Bonus for any bonus period ended prior to the Date of Termination (together, the "ACCRUED AMOUNTS"). The Accrued Amounts shall be paid to you in a lump sum cash payment as soon as practicable following the Date of Termination (but in no event later than thirty days following such date). All unvested Stock Options shall immediately lapse and become void either (i) on the Date of Termination other than in the event of an Involuntary Termination or (iii) the last day of the Term. (b) INVOLUNTARY TERMINATION. (i) In addition to the Accrued Amounts, in the event of your Involuntary Termination during the Term, the Company will provide you the payments and benefits set forth in this Section 4(b). The Company shall continue to pay to you an amount equal to the monthly portion of your Salary, as in effect on the Date of Termination (the "SEVERANCE PAYMENT"), for a period of one year after the Date of Termination (the "SEVERANCE PERIOD") and a pro rated portion of the Annual Bonus. In addition to the Severance Payment, you will receive in equal monthly payments during the Severance Period, an amount equal to AquaPenn's matching contribution to the AquaPenn Salary Savings Plan for a one-year period based on your contribution rate to the on the Date of Termination, subject to applicable limitation set forth in the Internal Revenue Code of 1986, as amended. (ii) As soon as practicable after the Date of Termination, the Company shall pay you a lump sum cash amount equal to the fair market value of the unvested Stock Options less the exercise price of such Stock Options (the "CASH-OUT AMOUNT"). Immediately upon payment to you of the Cash-Out Amount, the Stock Options shall lapse and become void. (iii) You and your dependents shall continue to be eligible to participate during the Benefit Continuation Period in the medical, dental and health insurance plans (but not the disability plans) applicable to you immediately prior to your Involuntary Termination 4 on the same terms and conditions in effect for you and your dependents immediately prior to such Involuntary Termination. (c) TERMINATION DUE TO DEATH OR DISABILITY. In addition to the Accrued Amounts, in the event that the Company terminates your employment during the Term as a result of your Disability or in the event of your death, the Company will provide you, of your Beneficiary, as the case may be, the payments and benefits set forth in this Section 4(c). The Company shall pay to you, or your Beneficiary, the Severance Payment during the Severance Period and a pro rated portion of the Annual Bonus; PROVIDED, HOWEVER, that the Severance Payment shall be reduced by any amounts you receive from other disability benefits including disability pension benefits, death benefits or life insurance proceeds. In addition, you and your dependents shall continue to be eligible to participate during the Benefit Continuation Period in the medical, dental and health insurance plans (but not the disability plans) applicable to you immediately prior to your termination on the same terms and conditions in effect for you and your dependents immediately prior to such termination, subject to payment of your share of all applicable premiums. (d) YOUR VOLUNTARY RESIGNATION. In the event that you resign from your employment hereunder during the Term for reasons that do not constitute Good Reason, you must provide the Company with at least thirty days notice of such resignation. The Company may, in its sole discretion, continue to pay your Salary for the thirty day period and request that you refrain from coming to the Company offices, which request you hereby agree to honor. On the Date of Termination, other than payment of the Accrued Amounts in accordance with Section 4(a) and as required by law, all obligations of the Company to you, other than as required by law, shall cease. (e) TERMINATION BY THE COMPANY FOR CAUSE. In the event that during the Term, your employment hereunder is terminated by the Company for Cause, the Company will pay you the Accrued Amount in accordance with the terms of Section 4(a) and, except for the payment by the Company to you of the Accrued Amount, on the Date of Termination all obligations of the Company to you, other than as required by law, shall cease. (f) NO OTHER PAYMENTS OR BENEFITS. On the Date of Termination, other than the payments and benefits expressly provided for in this Section 4, all obligations of the Company to you, other than as required by law, shall cease. (g) DATE AND NOTICE OF TERMINATION. Any termination of your employment by the Company or by you shall be communicated by a notice of termination to the other parties hereto (the "NOTICE OF TERMINATION"). The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your 5 employment under the provision so indicated. The date of your termination of employment with the Company (the "DATE OF TERMINATION") shall be determined as follows: (i) if your employment is terminated for Disability, thirty days after a Notice of Termination is given (PROVIDED that you shall not have returned to the full-time performance of your duties during such thirty-day period), (ii) if your employment is terminated by the Company in an Involuntary Termination, the date specified in the Notice of Termination (or if no date is specified in the Notice of Termination, the date the Notice of Termination is delivered to you) and (iii) if your employment is terminated by the Company for Cause, the later of the date specified in the Notice of Termination or ten days following the date such notice is received by you. If the basis for your termination is your resignation for Good Reason, the Date of Termination shall be, subject to the applicable cure provisions, ten days after the date your Notice of Termination is received by the Company. The Date of Termination for a resignation of employment other than for Good Reason shall be the date set forth in the Notice of Termination, which shall be no earlier than thirty days after the date such notice is received by the Company. The Date of Termination in the event of your death shall be the date of your death. (i) NO MITIGATION. You shall have no obligation or duty to mitigate any severance or other amounts payable to you under this Agreement and the amount of such payments shall not be subject to any right of setoff or offset by the Company. 5. PROTECTIVE AND RESTRICTIVE COVENANTS. (a) RESTRICTIONS ON COMPETITIVE ENGAGEMENTS. During the Restricted Period, you will not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 5% interest of a publicly traded company), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity, other than the Company or any parent or subsidiary of the Company (both individually and together, the "COMPANY GROUP"), render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to become a competitor) of the Company Group. (b) NON-SOLICITATION. During the Restricted Period, you shall not, directly or indirectly, without the prior written consent of the Company: (i) solicit business from, entice away from, accept orders involving or otherwise interfere with the relationships of the Company Group with any client or prospective client (including any person or entity who, during the most recent twelve months, was a client of any member of the Company Group); or 6 (ii) solicit the services of any individual who is employed by any member of the Company Group (or who was employed by any member of the Company Group during the then most recent twelve-month period) or who is retained by any member of the Company Group as an independent contractor or consultant (or who was retained by any member of the Company Group in such capacity in the most recent twelve-month period), or take any action that results, or might reasonably result, in any employee, independent contractor or consultant ceasing to perform services for any member of the Company Group. (c) NON-DISCLOSURE. You shall not at any time during the Term or thereafter in perpetuity, directly or indirectly, other than in the performance of your duties on behalf of the Company or with the prior written consent of the Company: (i) disclose any confidential or other proprietary information pertaining to the client accounts of the Company Group, including, but not limited to, contracts, client lists, systems, procedures, manuals, confidential reports and financial information concerning the Company Group's services, products or businesses; (ii) use any confidential or other proprietary information pertaining to the clients of any member of the Company Group (including, but not limited to, client lists, client contacts, client profiles and statistical or demographic analysis of any member of the Company Group's clients) in order to contact, solicit, accept or refer business from, or otherwise do business or deal with, any client of any member of the Company Group (including any person or entity who, during the most recent twelve months, was a client of any member of the Company Group) in connection with the provision of any product or service similar to any provided by the Company Group; or (iii) disclose the terms of this Agreement, other than to your legal, financial or tax advisors or as necessary to enforce the terms of this Agreement or as otherwise required by law. (d) RETURN OF COMPANY PROPERTY. Upon any termination or resignation of your employment hereunder, you shall immediately return to the Company all property and material in your possession that belongs or relates to the Company (the "COMPANY PROPERTY") unless the Company expressly agrees in writing that you may retain possession of any such property or material. Company Property shall include all originals and copies of files, writings, reports, memoranda, diaries, notebooks, nots of meetings or presentations, data, computer tapes or diskettes, drawings charts, photographs, slides, patents, or an other form of record which contains information created or produced for or at the direction of any member of the Company Group, or any employee or agent thereof. All Company Property shall be returned undamaged and intact. 7 (e) APPLICATION OF COVENANTS. The activities described in this Section 5 shall be prohibited regardless of whether undertaken by you in an individual or representative capacity, and regardless of whether performed for your own account or for the account of any other individual, partnership, firm, corporation or other business organization (other than the Company). (f) INJUNCTIVE RELIEF. Without limiting the remedies available to the Company, you acknowledge that a breach of any of the covenants contained in this Section 5 may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary or permanent injunction restraining you from engaging in activities prohibited by this Section 5 or such other relief as may be required to specifically enforce any of the covenants in this Section 5. (g) VIOLATION AND REMEDY. If the Company reasonably determines that you have breached any of the provisions of this Section 5, in addition to any other remedies available to the Company in law or equity, the Company shall be entitled to immediately suspend as of the date of such breach the provision to you of any payments or benefits under this Agreement. (h) THIRD-PARTY BENEFICIARY. The parties hereto acknowledge and agree that the subsidiary and parent companies of the Company are third-party beneficiaries to the terms of this Section 5 and may enforce the terms of this Agreement as they pertain to Section 5 to the full extent permitted by law and equity. 6. DEFINITIONS. For purposes of this Agreement, the following capitalized words shall have the meanings set forth below: "BENEFICIARY" shall mean the person or persons designated by you in writing to receive any benefits payable to you hereunder in the event of your death or, if no such persons are so designated, your estate. No Beneficiary designation shall be effective unless it is in writing and received by the Company prior to the date of your death. "BENEFIT CONTINUATION PERIOD" shall mean the period beginning on the Date of Termination and ending on the earlier to occur of (i) the end of the Severance Period and (ii) the date you are eligible and elect to be covered under the comparable benefit plans of a subsequent employer. "CAUSE" shall mean a termination of your employment which is a result of any of the following: (i) your felony conviction or your plea of "no contest" to a felony; 8 (ii) any fraud by you in connection with the performance of your duties as an employee of the Company; (iii) any act of intentional gross misconduct by you in the performance of your duties as an employee of the Company; or (iv) your continued and repeated neglect of your duties as an officer or employee of the Company (other than any such neglect resulting from your incapacity due to physical or mental illness); PROVIDED, HOWEVER, that an event described in clauses (ii), (iii) and (iv) shall not constitute Cause unless it is communicated to you by the Company in writing within thirty days of the date the Company knows or has reason to know of such event and is not corrected by you in a manner which is reasonably satisfactory to the Company within thirty days of your receipt of such written notice from the Company. No act or omission shall constitute Cause unless such act or omission was undertaken by you without the good faith belief that it was in furtherance of Company business or interests of the Company. "DISABILITY" shall mean (i) your incapacity due to physical or mental illness which causes you to be absent from the full-time performance of your duties with the Company for three consecutive months and (ii) your failure to return to full-time performance of your duties with the Company within thirty days after written Notice of Termination due to Disability is given to you. Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified independent physician selected by the Company and approved by you (or, if you are unable to provide such approval, such approval shall be provided by any adult member of your immediate family), which approval shall not be unreasonably withheld. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement. "GOOD REASON" shall mean a resignation of your employment as a result of any of the following: (i) the failure of the Company to renew the Term, (ii) the failure of the Company to pay you any material amount of compensation or to provide you with any material benefit when due, (iii) a significant and adverse change in your position or duties, (iv) any decrease in your Salary or (v) notice by the Company to you of the relocation of your principal place of business to a location more than fifty miles from Milesburg, Pennsylvania unless you consent to such relocation; PROVIDED, HOWEVER, that an event described in clauses (ii), (iii), (iv) or (v) of this sentence shall not constitute Good Reason unless it is communicated by you to the Company in writing within thirty days of the date you know or have reason to know of such event and is not corrected by the Company in a manner which is reasonably satisfactory to you (including full retroactive correction with respect to any monetary matter) within thirty days of the Company's receipt of such written notice from you. 9 "INVOLUNTARY TERMINATION" shall mean (i) your termination of employment by the Company other than for Cause or Disability or (ii) your resignation for Good Reason. "RESTRICTED PERIOD" shall mean the period beginning on the Effective Date and ending on the later of (i) the second anniversary of the Date of Termination or (ii) the last day of the Severance Period; PROVIDED, HOWEVER, that in the event that your employment continues until the last day of the Term, the Restricted Period shall mean the period beginning on the Effective Date and ending on the second anniversary of the last day of the Term. 7. NOTICE. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to the Company, to its offices at Groupe Danone, 7, rue de Teheran, 75381 Paris Cedex 08 France, and if to you at your last address of record, or to such other address as any party may have furnished to the other parties hereto in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. BINDING ARBITRATION. Except for the relief provided for in Section 5(f), any controversy or claim arising out of or relating to this Agreement (including any claims relating to employment or the termination of employment, whether arising under federal, state, or local law and whether in contract or in tort and including any discrimination or common law claims, but excluding workers' compensation and unemployment insurance) shall be settled by arbitration under the auspices of the American Arbitration Association ("AAA") in New York, New York, in accordance with the National Rules for the Resolution of Employment Disputes of the AAA. The dispute shall be submitted to a single arbitrator to be mutually agreed upon by the parties. If the parties cannot agree on a single arbitrator, each party shall appoint one arbitrator who shall then jointly appoint a single arbitrator. The arbitrator shall give effect to applicable statutes of limitations. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator. Judgment upon the arbitration award may be entered in any court having jurisdiction. The prevailing party in any arbitration proceeding, as determined by the arbitrator, or in any proceeding with respect thereto as determined by the person presiding, shall be entitled to receive from the non-prevailing party reasonable attorneys' fees and costs incurred by such prevailing party in connection therewith. In the event that there is no prevailing party, reasonable attorneys' fees and costs incurred by the parties shall be allocated between them by the arbitrator. 10 9. MISCELLANEOUS. (a) AMENDMENTS, WAIVERS, ETC. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing. No waiver by any party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by any party which are not expressly set forth in this Agreement and this Agreement shall supersede all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, with respect to the subject matter hereof and, unless otherwise expressly provided and incorporated into this Agreement, shall supercede all prior agreements, negotiations, correspondence, undertakings and communications, oral or written, with respect to your employment with AquaPenn prior to the Effective Date, including, without limitation, the Change in Control Agreement dated September 16, 1994, the Employment Agreement dated September 16, 1994, as amended by Amendment No. 1 to the Employment Agreement dated October 27, 1997, and all other prior agreements between you and AquaPenn; PROVIDED, HOWEVER, that the parties hereto acknowledge and agree that you will not forfeit any rights or benefits pursuant to the Non-Qualified Deferred Compensation Agreement between you and AquaPenn dated October 1, 1994 that had accrued to you prior to the Effective Date. (b) VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. The parties intend that any offending provision shall be enforced to the fullest extent to which it is enforceable, that any unenforceable portion thereof be severed from this Agreement, and that this Agreement, as modified to sever any such unenforceable portion, will be enforced to the fullest extent permitted by law. (c) COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (d) WITHHOLDING. Amounts paid to you hereunder shall be subject to all applicable federal, state and local tax withholdings. (e) HEADINGS. The headings contained in this Agreement are intended solely for convenience of reference and shall not affect the rights of the parties to this Agreement. 11 (f) GOVERNING LAW. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of New York applicable to contracts entered into and performed in such State without regard to the choice of law provisions thereof. 12 If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, GREAT BRANDS OF EUROPE, INC. By: /s/ Mark S. Rodriguez -------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer UNDERSTOOD, ACCEPTED AND AGREED: /s/ Edward J. Lauth, III - ------------------------------ Edward J. Lauth, III EX-99.(C)(4)(B) 16 EXHIBIT 99(C)(4)(B) GREAT BRANDS OF EUROPE, INC. November 2, 1998 Geoffrey F. Feidelberg Chief Operating Officer and Chief Financial Officer AquaPenn Spring Water Company, Inc. One AquaPenn Drive Milesburg, Pennsylvania 16853-0938 EMPLOYMENT AGREEMENT Dear Mr. Feidelberg: This is to confirm our desire to engage in a continuing employment relationship with you following the closing of the pending acquisition (the "TRANSACTION") of AquaPenn Spring Water Company, Inc., a Pennsylvania corporation ("AQUAPENN"), by Groupe Danone, a company incorporated under the law of the Republic of France, the parent company of Great Brands of Europe, Inc. (the "COMPANY"). The following sets forth the agreement between the Company and you regarding the terms of your employment as an employee of AquaPenn and the Company (the "AGREEMENT"). Capitalized terms not otherwise defined in the text of this Agreement are defined in Section 6 hereof. 1. TERM OF EMPLOYMENT. The term of your employment with the Company pursuant to this Agreement (the "TERM") shall commence on the "Closing Date" (the "EFFECTIVE DATE") of the Transaction (as such term is defined in the Agreement and Plan of Merger (the "MERGER AGREEMENT") dated November 2, 1998), and shall continue until the first anniversary of the Effective Date; PROVIDED that the Term shall automatically renew for additional one-year periods on each anniversary of the Effective Date (each, a "RENEWAL DATE") until either (a) your employment hereunder is terminated in accordance with the terms set forth in Section 4 below or (b) you or the Company give the other such party written notice of the intent not to so extend the Term at least ninety days prior to such Renewal Date. 2. POSITION, REPORTING AND RESPONSIBILITIES. Until you are relocated to Stamford, Connecticut, you shall be employed as (a) the Chief Operating Officer and Chief Financial Officer of AquaPenn and (b) the project manager with respect to the transitional period after the acquisition of AquaPenn by Groupe Danone. During the period that you are employed in the positions set forth above, you will be based in Milesburg, Pennsylvania and you will report directly to the Chief Executive Officer of the Company, which position was held by Mark 2 Rodriguez on the date the Merger Agreement was signed. You and the Company acknowledge and agree that you will thereafter be transferred to the Company's offices in Stamford, Connecticut where you will be employed in a position of Vice President and you will serve on the Executive Committee. Your duties and responsibilities shall at all times be commensurate with your position and reporting responsibilities. During the Term, you shall devote all of your business time, attention, skills and efforts exclusively to the business and affairs of the Company, other than DE MINIMIS amounts of time devoted by you to the management of your personal finances or to engaging in charitable or community services. You understand and agree that you will be required to travel from time to time for business purposes. 3. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Term as compensation to you for all services rendered to the Company, the Company will pay you a base salary (the "SALARY") at the rate of $160,000 per annum, which will be reviewed annually by the Company and may be increased but not decreased on the basis of such review. Your Salary will be paid to you in accordance with the Company's payroll practices as established from time to time, but no less frequently than monthly. (b) BONUS. In addition to the Salary, beginning in calendar year 1999, you will participate in the Company's executive bonus program, which is offered by the Company to similarly situated executives of the Company, pursuant to which you may be awarded up to thirty-five percent of the Salary for each annual bonus period (the "ANNUAL BONUS"). The amount of your Annual Bonus will be determined based upon the achievement by you of personal objectives and the business results for the Company's North American operations during each bonus period; PROVIDED, HOWEVER, that you will forfeit any right to receive the Annual Bonus or any prorated portion thereof in the event your employment with the Company terminates prior to December 31 of any bonus period during the Term. (c) BENEFITS. During the Term, you and your dependants shall be eligible to participate in such retirement, medical and other welfare benefit plans, programs and arrangements that are offered by the Company to similarly situated employees from time to time which benefits will be at least as favorable to you as those you enjoyed prior to the Effective Date. Such benefits will include your participation in the Company's relocation program, including any mortgage assistance for which you may qualify under the terms of the relocation program. (d) BUSINESS EXPENSES. The Company shall pay or reimburse you for the reasonable expenses incurred by you in connection with the performance of your employment obligations to the Company, subject to your delivery to the Company of appropriate documentation of such expenses. 3 (e) AUTOMOBILE. During the Term, the Company will provide you with an automobile pursuant to a program that is at least as favorable to you as the automobile program in which you participated immediately prior to the Effective Date. After your transfer to Stamford, Connecticut, you shall participate in the Company's Executive Committee Car Program, which provides a gross monthly automobile allowance of $1,300. (f) RELOCATION EXPENSES. The Company shall pay or reimburse you, in accordance with the Company's relocation policy, for the reasonable expenses incurred by you in connection with the relocation of you and your family from Milesburg, Pennsylvania to Stamford, Connecticut. (g) EQUITY COMPENSATION. Subject to approval by the Board of Directors of Groupe Danone at its next meeting which is scheduled to take place in December 1998, as soon as practicable after the Effective Date, Groupe Danone shall grant you stock options which will be exercisable for 1,500 ordinary shares of Groupe Danone, nominal value FF10 per share (the "STOCK OPTIONS"). Subject to Section 4(a) below, the Stock Options will become 100% vested on the fifth anniversary of the date of grant and shall be exercisable during the two year period following the date that the Stock Options become vested. 4. TERMINATION OF EMPLOYMENT. Subject to the provisions of this Agreement, the Company shall have the right to terminate your employment, and you shall have the right to resign from your employment with the Company, for any reason or for no stated reason. (a) TERMINATION OR RESIGNATION OF EMPLOYMENT - ALL CIRCUMSTANCES. In the event of your termination or resignation of employment for any reason during the Term, the Company shall pay you (or in the event of your death, your Beneficiary) (i) the full amount of the accrued but unpaid Salary you have earned through the Date of Termination (as defined in Section 4(g) below), (ii) a cash amount for any accrued but unused vacation (based on the highest rate of Salary in effect during the twelve months prior to the Date of Termination), and (iii) any earned but unpaid bonus for any calendar year ended prior to the Date of Termination (together, the "ACCRUED AMOUNTS"). The Accrued Amounts shall be paid to you in a lump sum cash payment as soon as practicable following the Date of Termination (but in no event later than thirty days following such date). You will not be entitled to receive the Annual Bonus or any prorated portion thereof for any partial calendar year during the Term during which your employment terminates. Furthermore, all unvested Stock Options shall immediately lapse and become void on the Date of Termination or at the time you cease to be employed by the Company or AquaPenn at the end of the Term. 4 (b) INVOLUNTARY TERMINATION. In the event of your Involuntary Termination during the Term, in addition to the Accrued Amounts the Company will provide you the payments and benefits set forth in this Section 4(b). (i) In the event of your Involuntary Termination on or after the first anniversary of the Effective Date, the Company shall continue to pay to you an amount equal to the monthly portion of your Salary, as in effect on the Date of Termination (the "SEVERANCE PAYMENT"), for a period of one year after the Date of Termination (the "SEVERANCE PERIOD"). (ii) In the event of your Involuntary Termination prior to the first anniversary of the Effective Date, the Company shall continue to pay to you the Severance Payment for a period of two years after the Date of Termination (the "EXTENDED SEVERANCE PERIOD"). (iii) In addition to the Severance Payment, you will receive in equal monthly payments during the Severance Period, an amount equal to AquaPenn's matching contribution to the AquaPenn Salary Savings Plan for a one-year period based on your contribution rate to the on the Date of Termination, subject to applicable limitation set forth in the Internal Revenue Code of 1986, as amended. (iv) You and your dependents shall continue to be eligible to participate during the Benefit Continuation Period in the medical, dental and health insurance plans (but not the disability plans) applicable to you immediately prior to your Involuntary Termination on the same terms and conditions in effect for you and your dependents immediately prior to such Involuntary Termination. (c) TERMINATION DUE TO DEATH OR DISABILITY. In addition to the Accrued Amounts, in the event that the Company terminates your employment during the Term as a result of your Disability or in the event of your death, the Company will provide you, of your Beneficiary, as the case may be, the payments and benefits set forth in this Section 4(c). The Company shall pay to you, or your Beneficiary, the Severance Payment during the Severance Period; PROVIDED, HOWEVER, that the Severance Payment shall be reduced by any amounts you receive from other disability benefits including disability pension benefits, death benefits or life insurance proceeds. In addition, you and your dependents shall continue to be eligible to participate during the Benefit Continuation Period in the medical, dental and health insurance plans (but not the disability plans) applicable to you immediately prior to your termination on the same terms and conditions in effect for you and your dependents immediately prior to such termination, subject to payment of your share of all applicable premiums. 5 (d) YOUR VOLUNTARY RESIGNATION. In the event that you resign from your employment hereunder during the Term for reasons that do not constitute Good Reason, you must provide the Company with at least ninety days notice of such resignation. The Company may, in its sole discretion, continue to pay your Salary for the ninety day period and request that you refrain from coming to the Company offices, which request you hereby agree to honor. On the Date of Termination, other than payment of the Accrued Amounts in accordance with Section 4(a) and as required by law, all obligations of the Company to you, other than as required by law, shall cease. (e) TERMINATION BY THE COMPANY FOR CAUSE. In the event that during the Term, your employment hereunder is terminated by the Company for Cause, the Company will pay you the Accrued Amount in accordance with the terms of Section 4(a) and, except for the payment by the Company to you of the Accrued Amount, on the Date of Termination all obligations of the Company to you, other than as required by law, shall cease. (f) NO OTHER PAYMENTS OR BENEFITS. On the Date of Termination, other than the payments and benefits expressly provided for in this Section 4, all obligations of the Company to you, other than as required by law, shall cease. (g) DATE AND NOTICE OF TERMINATION. Any termination of your employment by the Company or by you shall be communicated by a notice of termination to the other parties hereto (the "NOTICE OF TERMINATION"). The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. The date of your termination of employment with the Company (the "DATE OF TERMINATION") shall be determined as follows: (i) if your employment is terminated for Disability, thirty days after a Notice of Termination is given (PROVIDED that you shall not have returned to the full-time performance of your duties during such thirty-day period), (ii) if your employment is terminated by the Company in an Involuntary Termination, the date specified in the Notice of Termination (or if no date is specified in the Notice of Termination, the date the Notice of Termination is delivered to you) and (iii) if your employment is terminated by the Company for Cause, the later of the date specified in the Notice of Termination or ten days following the date such notice is received by you. If the basis for your termination is your resignation for Good Reason, the Date of Termination shall be, subject to the applicable cure provisions, ten days after the date your Notice of Termination is received by the Company. The Date of Termination for a resignation of employment other than for Good Reason shall be the date set forth in the Notice of Termination, which shall be no earlier than ninety days after the date such notice is received by the Company. The Date of Termination in the event of your death shall be the date of your death. 6 (h) NO MITIGATION. You shall have no obligation or duty to mitigate any severance or other amounts payable to you under this Agreement and the amount of such payments shall not be subject to any right of setoff or offset by the Company. 5. PROTECTIVE AND RESTRICTIVE COVENANTS. (a) RESTRICTIONS ON COMPETITIVE ENGAGEMENTS. During the Restricted Period, you will not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 5% interest of a publicly traded company), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity, other than the Company or any parent or subsidiary of the Company (both individually and together, the "COMPANY GROUP"), render any service to or in any way be affiliated with the bottled water business or a bottled water brand. (b) NON-SOLICITATION. During the Restricted Period, you shall not, directly or indirectly, without the prior written consent of the Company: (i) solicit business from, entice away from, accept orders involving or otherwise interfere with the relationships of the Company Group with any client or prospective client (including any person or entity who, during the most recent twelve months, was a client of any member of the Company Group); or (ii) solicit the services of any individual who is employed by any member of the Company Group (or who was employed by any member of the Company Group during the then most recent twelve-month period) or who is retained by any member of the Company Group as an independent contractor or consultant (or who was retained by any member of the Company Group in such capacity in the most recent twelve-month period), or take any action that results, or might reasonably result, in any employee, independent contractor or consultant ceasing to perform services for any member of the Company Group. (c) NON-DISCLOSURE. You shall not at any time during the Term or thereafter in perpetuity, directly or indirectly, other than in the performance of your duties on behalf of the Company or with the prior written consent of the Company: (i) disclose any confidential or other proprietary information pertaining to the client accounts of the Company Group, including, but not limited to, contracts, client lists, systems, procedures, manuals, confidential reports and financial information concerning the Company Group's services, products or businesses; 7 (ii) use any confidential or other proprietary information pertaining to the clients of any member of the Company Group (including, but not limited to, client lists, client contacts, client profiles and statistical or demographic analysis of any member of the Company Group's clients) in order to contact, solicit, accept or refer business from, or otherwise do business or deal with, any client of any member of the Company Group (including any person or entity who, during the most recent twelve months, was a client of any member of the Company Group) in connection with the provision of any product or service similar to any provided by the Company Group; or (iii) disclose the terms of this Agreement, other than to your legal, financial or tax advisors or as necessary to enforce the terms of this Agreement or as otherwise required by law. (d) RETURN OF COMPANY PROPERTY. Upon any termination or resignation of your employment hereunder, you shall immediately return to the Company all property and material in your possession that belongs or relates to the Company (the "COMPANY PROPERTY") unless the Company expressly agrees in writing that you may retain possession of any such property or material. Company Property shall include all originals and copies of files, writings, reports, memoranda, diaries, notebooks, nots of meetings or presentations, data, computer tapes or diskettes, drawings charts, photographs, slides, patents, or an other form of record which contains information created or produced for or at the direction of any member of the Company Group, or any employee or agent thereof. All Company Property shall be returned undamaged and intact. (e) APPLICATION OF COVENANTS. The activities described in this Section 5 shall be prohibited regardless of whether undertaken by you in an individual or representative capacity, and regardless of whether performed for your own account or for the account of any other individual, partnership, firm, corporation or other business organization (other than the Company). (f) INJUNCTIVE RELIEF. Without limiting the remedies available to the Company, you acknowledge that a breach of any of the covenants contained in this Section 5 may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary or permanent injunction restraining you from engaging in activities prohibited by this Section 5 or such other relief as may be required to specifically enforce any of the covenants in this Section 5. (g) VIOLATION AND REMEDY. If the Company reasonably determines that you have breached any of the provisions of this Section 5, in addition to any other remedies 8 available to the Company in law or equity, the Company shall be entitled to immediately suspend as of the date of such breach the provision to you of any payments or benefits under this Agreement. (h) THIRD-PARTY BENEFICIARY. The parties hereto acknowledge and agree that the subsidiary and parent companies of the Company are third-party beneficiaries to the terms of this Section 5 and may enforce the terms of this Agreement as they pertain to Section 5 to the full extent permitted by law and equity. 6. DEFINITIONS. For purposes of this Agreement, the following capitalized words shall have the meanings set forth below: "BENEFICIARY" shall mean the person or persons designated by you in writing to receive any benefits payable to you hereunder in the event of your death or, if no such persons are so designated, your estate. No Beneficiary designation shall be effective unless it is in writing and received by the Company prior to the date of your death. "BENEFIT CONTINUATION PERIOD" shall mean the period beginning on the Date of Termination and ending on the earliest to occur of (i) the end of the Severance Period, (ii) the end of the Extended Severance Period, if any, and (iii) the date you are eligible and elect to be covered under the comparable benefit plans of a subsequent employer. "CAUSE" shall mean a termination of your employment which is a result of any of the following: (i) your felony conviction or your plea of "no contest" to a felony; (ii) any fraud by you in connection with the performance of your duties as an employee of the Company; (iii) any act of intentional gross misconduct by you in the performance of your duties as an employee of the Company; or (iv) your continued and repeated neglect of your duties as an officer or employee of the Company (other than any such neglect resulting from your incapacity due to physical or mental illness); PROVIDED, HOWEVER, that an event described in clauses (ii), (iii) and (iv) shall not constitute Cause unless it is communicated to you by the Company in writing within thirty days of the date the Company knows or has reason to know of such event and is not corrected by you in a manner which is reasonably satisfactory to the Company within thirty days of your receipt of such written notice from the Company. No act or omission shall constitute Cause unless such act or omission was undertaken by you without the good faith belief that it was in furtherance of Company business or interests of the Company. "DISABILITY" shall mean (i) your incapacity due to physical or mental illness which causes you to be absent from the full-time performance of your duties with the Company for three consecutive months and (ii) your failure to return to full-time 9 performance of your duties with the Company within thirty days after written Notice of Termination due to Disability is given to you. Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified independent physician selected by the Company and approved by you (or, if you are unable to provide such approval, such approval shall be provided by any adult member of your immediate family), which approval shall not be unreasonably withheld. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement. "GOOD REASON" shall mean a resignation of your employment as a result of any of the following: (i) the failure of the Company to renew the Term, (ii) the failure of the Company to pay you any material amount of compensation or to provide you with any material benefit when due, (iii) a significant and adverse change in your position or duties, (iv) any decrease in your Salary or (v) if, during the Term, Groupe Danone sells or otherwise disposes of the portion of its U.S. operations that engage in the bottled water business; PROVIDED, HOWEVER, that an event described in clauses (ii), (iii) or (iv) of this sentence shall not constitute Good Reason unless it is communicated by you to the Company in writing within thirty days of the date you know or have reason to know of such event and is not corrected by the Company in a manner which is reasonably satisfactory to you (including full retroactive correction with respect to any monetary matter) within thirty days of the Company's receipt of such written notice from you. "INVOLUNTARY TERMINATION" shall mean (i) your termination of employment by the Company other than for Cause or Disability or (ii) your resignation for Good Reason. "RESTRICTED PERIOD" shall mean the period beginning on the Effective Date and ending on the latest of (i) the second anniversary of the Date of Termination, (ii) the last day of the Severance Period or (iii) the last day of the Extended Severance Period; PROVIDED, HOWEVER, that in the event that your employment continues until the last day of the Term, the Restricted Period shall mean the period beginning on the Effective Date and ending on the second anniversary of the last day of the Term. 7. NOTICE. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to the Company, to its offices at Groupe Danone, 7, rue de Teheran, 75381 Paris Cedex 08 France, and if to you at your last address of record, or to such other address as any party may have furnished to the other parties hereto in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 10 8. BINDING ARBITRATION. Except for the relief provided for in Section 5(f), any controversy or claim arising out of or relating to this Agreement (including any claims relating to employment or the termination of employment, whether arising under federal, state, or local law and whether in contract or in tort and including any discrimination or common law claims, but excluding workers' compensation and unemployment insurance) shall be settled by arbitration under the auspices of the American Arbitration Association ("AAA") in New York, New York, in accordance with the National Rules for the Resolution of Employment Disputes of the AAA. The dispute shall be submitted to a single arbitrator to be mutually agreed upon by the parties. If the parties cannot agree on a single arbitrator, each party shall appoint one arbitrator who shall then jointly appoint a single arbitrator. The arbitrator shall give effect to applicable statutes of limitations. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator. Judgment upon the arbitration award may be entered in any court having jurisdiction. The prevailing party in any arbitration proceeding, as determined by the arbitrator, or in any proceeding with respect thereto as determined by the person presiding, shall be entitled to receive from the non-prevailing party reasonable attorneys' fees and costs incurred by such prevailing party in connection therewith. In the event that there is no prevailing party, reasonable attorneys' fees and costs incurred by the parties shall be allocated between them by the arbitrator. 9. MISCELLANEOUS. (a) AMENDMENTS, WAIVERS, ETC. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing. No waiver by any party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by any party which are not expressly set forth in this Agreement and this Agreement shall supersede all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, with respect to the subject matter hereof and, unless otherwise expressly provided and incorporated into this Agreement, shall supercede all prior agreements, negotiations, correspondence, undertakings and communications, oral or written, with respect to your employment with AquaPenn prior to the Effective Date, including, without limitation, the Change in Control Agreement dated September 16, 1994, the Employment Agreement dated September 16, 1994, as amended by Amendment No. 1 to the Employment Agreement dated October 27, 1997, and all other prior agreements between you and AquaPenn; PROVIDED, 11 HOWEVER, that the parties hereto acknowledge and agree that you will not forfeit any rights or benefits pursuant to the Non-Qualified Deferred Compensation Agreement between you and AquaPenn dated October 1, 1994 that had accrued to you prior to the Effective Date. (b) VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. The parties intend that any offending provision shall be enforced to the fullest extent to which it is enforceable, that any unenforceable portion thereof be severed from this Agreement, and that this Agreement, as modified to sever any such unenforceable portion, will be enforced to the fullest extent permitted by law. (c) COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (d) WITHHOLDING. Amounts paid to you hereunder shall be subject to all applicable federal, state and local tax withholdings. (e) HEADINGS. The headings contained in this Agreement are intended solely for convenience of reference and shall not affect the rights of the parties to this Agreement. (f) GOVERNING LAW. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of New York applicable to contracts entered into and performed in such State without regard to the choice of law provisions thereof. 12 If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, GREAT BRANDS OF EUROPE, INC. By: /s/ Mark S. Rodriguez -------------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer UNDERSTOOD, ACCEPTED AND AGREED: /s/ Geoffrey F. Feidelberg - ------------------------------ Geoffrey F. Feidelberg EX-99.(C)(4)(C) 17 EXHIBIT 99(C)(4)(C) GREAT BRANDS OF EUROPE, INC. November 2, 1998 Matthew Suhey Aqua Penn Spring Water Company, Inc. One Aqua Penn Drive Milesburg, Pennsylvania 16853-0938 CONSULTING AGREEMENT -------------------- Dear Mr. Suhey: This is to confirm our desire to engage in a continuing consulting relationship with you following the closing of the pending acquisition (the "TRANSACTION") of Aqua Penn Spring Water Company, Inc., a Pennsylvania corporation ("AQUAPENN"), by Groupe Danone, a company incorporated under the law of the Republic of France, and the parent company of Great Brands of Europe, Inc. (the "COMPANY"). The following sets forth the agreement between the Company and you regarding the terms of your consulting arrangement with the Company (the "AGREEMENT"). 1. TERM. The term of your consulting arrangement with the Company pursuant to this Agreement (the "TERM") shall commence on the Closing Date of the Transaction (as such term is defined in the Agreement and Plan of Merger dated November 2, 1998 (the "EFFECTIVE DATE") and shall end on the first anniversary of the Effective Date; PROVIDED that the Term shall automatically renew for one additional one-year period on the first anniversary of the Effective Date unless you or the Company give the other party written notice of the intent not to so extend the Term for an additional year at least ninety days prior to the first anniversary of the Effective Date. 2. RESPONSIBILITIES. During the Term, you shall provide such consulting services as the Company reasonably requests with regard to assisting in the transitions that the Transaction will precipitate, identifying additional key accounts and developing strategies for securing such additional key accounts. You will report to the Director of National Accounts of the Company, or his designee. 3. CONSULTING FEE AND BONUSES. (a) During the Term as compensation to you for all services rendered to the Company, the Company will pay you a consulting fee (the 2 "CONSULTING FEE") of $250,000 per annum, payable in equal installments no less frequently than monthly. (b) In the event that on or before the end of the sixth month after the Effective Date (the "BONUS PERIOD"), the volume of your current account base in the existing format (which includes value, convenience and jug) increases sufficiently so as to equal the water category growth rate as measured based on the most current available syndicated data, the Company shall pay you a bonus of $50,000 in a lump sum cash payment as soon as practicable after the Bonus Period (but in no event prior to July 31, 1999. (c) As soon as practicable after the Effective Date, you and the Company shall, in good faith, approve in writing a categorized list of potential new key accounts (the "NEW KEY ACCOUNTS"). In addition, you and the Company shall, in good faith, mutually agree upon a bonus formula or determination method (the "BONUS FORMULA") which will measure your success in securing New Key Accounts for the Company during the period prior to the first anniversary of the Effective Date. The approval of the New Key Accounts and agreement with respect to the formula or determination method may not be unreasonably withheld by either party. As soon as practicable after the first anniversary of the Effective Date, the Company shall pay you an additional bonus of up to $50,000 based on the application of the Bonus Formula to the one-year period following the Effective Date. (d) Your entitlement to either of the bonuses set forth in Sections 3(b) and 3(c) above shall be determined in the discretion of the Company based on a fair evaluation of the factors upon which such bonuses are based. The decision of the Company shall be final and binding on the parties hereto. 4. EXPENSES. The Company shall pay or reimburse you for the reasonable expenses incurred by you in connection with the performance of your consulting obligations to the Company, subject to your delivery to the Company of appropriate documentation of such expenses. 5. TERMINATION OF CONSULTING ARRANGEMENT. Subject to the provisions of this Agreement, each of you and the Company shall have the right to terminate the consulting arrangement, for any reason or for no stated reason. (a) TERMINATION GENERALLY. In the event of the termination of the consulting arrangement for any reason during the Term, the Company shall pay you the full amount of the accrued but unpaid Consulting Fee you have earned and unreimbursed business expenses you have incurred through the Date of Termination (the "ACCRUED AMOUNTS"). The Accrued Amounts shall be paid to you in a lump sum cash payment as soon as practicable following the Date of Termination (but in no event later than thirty days following such date). "DATE OF TERMINATION" 3 shall mean either (i) the date on which the consulting arrangement set forth hereunder is terminated either by you, by the Company or by mutual agreement of both parties hereto or (ii) if the consulting arrangement continues until the end of the Term, the last day of the Term. (b) TERMINATION BY MUTUAL AGREEMENT; TERMINATION BY THE COMPANY. In addition to the Accrued Amounts, in the event that the Consulting Arrangement is terminated either by the Company or by mutual agreement of the parties prior to the first anniversary of the Effective Date, as liquidated damages, the Company shall pay you a lump sum amount equal to the portion of the Consulting Fee that you would have received for the period beginning on the Date of Termination and ending on the first anniversary of the Effective Date. (c) NO OTHER PAYMENTS. On the Date of Termination, other than the payments expressly provided for in this Section 5, all obligations of the Company to you shall cease. 6. PROTECTIVE AND RESTRICTIVE COVENANTS. (a) RESTRICTIONS ON COMPETITIVE ENGAGEMENTS. Beginning on the Effective Date and continuing until the first anniversary of the Date of Termination, you will not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 1% interest of a publicly traded company), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity, other than the Company or any parent or subsidiary of the Company (together, the "COMPANY GROUP"), render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to become a competitor) of the Company Group. (b) NON-SOLICITATION. Beginning on the Effective Date and continuing until the second anniversary of the Date of Termination, you shall not, directly or indirectly, without the prior written consent of the Company: (i) solicit business from, entice away from, accept orders involving or otherwise interfere with the relationships of the Company Group with any client or prospective client (including any person or entity who, during the most recent twelve months, was a client of any member of the Company Group); or (ii) solicit the services of any individual who is employed by any member of the Company Group (or who was employed by any member of the Company Group during the then most recent twelve-month period) or who is retained by any member of the Company Group as an independent contractor or consultant (or who was retained by any member of the Company Group in such capacity in the most recent twelve-month period), or take any action that results, or might reasonably result, in any employee, 4 independent contractor or consultant ceasing to perform services for any member of the Company Group. (c) NON-DISCLOSURE. You shall not at any time during the Term or thereafter in perpetuity, directly or indirectly, other than in the performance of your duties on behalf of the Company or with the prior written consent of the Company: (i) disclose any confidential or other proprietary information pertaining to the client accounts of the Company Group, including, but not limited to, contracts, client lists, systems, procedures, manuals, confidential reports and financial information concerning the Company Group's services, products or businesses; (ii) use any confidential or other proprietary information pertaining to the clients of any member of the Company Group (including, but not limited to, client lists, client contacts, client profiles and statistical or demographic analysis of any member of the Company Group's clients) in order to contact, solicit, accept or refer business from, or otherwise do business or deal with, any client of any member of the Company Group (including any person or entity who, during the most recent twelve months, was a client of any member of the Company Group) in connection with the provision of any product or service similar to any provided by the Company Group; or (iii) disclose the terms of this Agreement, other than to your legal, financial or tax advisors or as necessary to enforce the terms of this Agreement or as otherwise required by law. (d) RETURN OF COMPANY PROPERTY. Upon the termination of the consulting arrangement, you shall immediately return to the Company all property and material in your possession that belongs or relates to the Company (the "COMPANY PROPERTY") unless the Company expressly agrees in writing that you may retain possession of any such property or material. Company Property shall include all originals and copies of files, writings, reports, memoranda, diaries, notebooks, notes of meetings or presentations, data, computer tapes or diskettes, drawings, charts, photographs, slides, patents, or an other form of record which contains information created or produced for or at the direction of any member of the Company Group, or any employee or agent thereof. All Company Property shall be returned undamaged and intact. (e) APPLICATION OF COVENANTS. The activities described in this Section 6 shall be prohibited regardless of whether undertaken by you in an individual or representative capacity, and regardless of whether performed for your own account or for the account of any other individual, partnership, firm, corporation or other business organization (other than the Company). 5 (f) INJUNCTIVE RELIEF. Without limiting the remedies available to the Company, you acknowledge that a breach of any of the covenants contained in this Section 6 may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary or permanent injunction restraining you from engaging in activities prohibited by this Section 6 or such other relief as may be required to specifically enforce any of the covenants in this Section 6. (g) VIOLATION AND REMEDY. If the Company reasonably determines that you have breached any of the provisions of this Section 6, in addition to any other remedies available to the Company in law or equity, the Company shall be entitled to immediately suspend as of the date of such breach the provision to you of any payments or benefits under this Agreement. (h) THIRD-PARTY BENEFICIARY. The parties hereto acknowledge and agree that the subsidiary and parent companies of the Company are third-party beneficiaries to the terms of this Section 6 and may enforce the terms of this Agreement as they pertain to Section 6 to the full extent permitted by law and equity. 7. NOTICE. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to the Company, to its offices at Groupe Danone, 7, rue de Teheran, 75381 Paris Cedex 08 France, and if to you at your last address of record, or to such other address as any party may have furnished to the other parties hereto in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. BINDING ARBITRATION. Except for the relief provided for in Section 6(f), any controversy or claim arising out of or relating to this Agreement, whether arising under federal, state, or local law and whether in contract or in tort and including any discrimination or common law claims, shall be settled by arbitration under the auspices of the American Arbitration Association ("AAA") in New York, New York. The dispute shall be submitted to a single arbitrator to be mutually agreed upon by the parties. If the parties cannot agree on a single arbitrator, each party shall appoint one arbitrator who shall then jointly appoint a single arbitrator. The arbitrator shall give effect to applicable statutes of limitations. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator. Judgment upon the arbitration award may be entered in any court having jurisdiction. The prevailing party in any arbitration proceeding, as determined by the arbitrator, or in any proceeding with respect thereto as determined by the person presiding, shall be entitled to receive from the non-prevailing party reasonable attorneys' fees and costs incurred by such prevailing party in connection 6 therewith. In the event that there is no prevailing party, reasonable attorneys' fees and costs incurred by the parties shall be allocated between them by the arbitrator. 9. MISCELLANEOUS. (a) AMENDMENTS, WAIVERS, ETC. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing by both parties hereto. No waiver by any party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by any party which are not expressly set forth in this Agreement and this Agreement shall supersede all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, with respect to the subject matter hereof and shall supercede all prior agreements, negotiations, correspondence, undertakings and communications, oral or written, with respect to your employment and/or consulting arrangement with AquaPenn prior to the Effective Date. (b) VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. The parties intend that any offending provision shall be enforced to the fullest extent to which it is enforceable, that any unenforceable portion thereof be severed from this Agreement, and that this Agreement, as modified to sever any such unenforceable portion, will be enforced to the fullest extent permitted by law. (c) COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (d) INDEPENDENT CONTRACTOR STATUS. The parties hereto acknowledge and agree that you will be an independent contractor and not an employee of the Company and that the amounts paid to you hereunder are not subject to federal, state or local tax withholdings. You will be responsible for all taxes incurred by you as a result of the consulting arrangement. (e) HEADINGS. The headings contained in this Agreement are intended solely for convenience of reference and shall not affect the rights of the parties to this Agreement. (f) GOVERNING LAW. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of New York applicable to contracts entered into and performed in such State without regard to the choice of law provisions thereof. 7 If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, GREAT BRANDS OF EUROPE, INC. By: /s/ Mark S. Rodriguez ----------------------------- Name: Mark S. Rodriguez Title: Chief Executive Officer UNDERSTOOD, ACCEPTED AND AGREED: /s/ Matthew Suhey - ----------------------------- Matthew Suhey EX-99.(C)(5) 18 EXHIBIT 99(C)(5) September 11, 1998 Groupe Danone 7, rue de Teheran 75381 Paris Cedex 08 In connection with your consideration of a possible negotiated transaction with AquaPenn Spring Water Company, Inc. and/or its subsidiary corporations (collectively "AquaPenn"), AquaPenn is prepared to make available to you certain information concerning the business, financial condition, operations, assets and liabilities of AquaPenn. As a condition to such information being furnished to you and your directors, officers, employees, agents or advisors (including, without limitation, attorneys, accountants, consultants, financing sources, bankers and financial advisors) (collectively "Representatives"), you agree to treat any information concerning AquaPenn (whether prepared by AquaPenn, its advisors or otherwise and irrespective of the form of communication) which has been or is furnished to you or to your Representatives previously, now or in the future by or on behalf of AquaPenn (herein collectively referred to as the "Evaluation Material") in accordance with the provisions of this letter agreement, and to take or abstain from taking certain other actions hereinafter set forth. The term "Evaluation Material" also shall be deemed to include all notes, analyses, compilations, studies, interpretations or other documents prepared by you or your Representatives which contain, reflect or are based upon, in whole or in part, the information furnished to you or your Representatives pursuant hereto. The term "Evaluation Material" does not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives, (ii) was within your possession prior to its being furnished to you by or on behalf of AquaPenn pursuant hereto, provided that the source of such information was not known by you to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to AquaPenn or any other party with respect to such information or (iii) becomes available to you on a non-confidential basis from a source other than AquaPenn or any of its Representatives, provided that such source is not bound by a confidentiality agreement with or other contractual, legal, or fiduciary obligation of confidentiality to AquaPenn or any other party with respect to such information. You hereby agree that you and your Representatives shall use the Evaluation Material solely for the purpose of evaluating a possible negotiated transaction between AquaPenn and you, that the Evaluation Material will be kept confidential and that you and your Representatives will not disclose any of the Evaluation Material in any manner whatsoever; provided, however, that (i) you may make any disclosure of such information to which AquaPenn gives its prior written consent and (ii) any of such information may be disclosed to your Representatives who need to know such information for the sole purpose of evaluating a possible negotiated transaction with AquaPenn, who agree to keep such information confidential and who are provided with a copy of this letter agreement and agree to be bound by the terms hereof to the same extent as if they were parties hereto. In any event, you shall be responsible for any breach of this letter agreement by any of your Representatives. In addition, you agree that, without the prior written consent of AquaPenn, you and your Representatives will not disclose to any other person the fact that the Evaluation Material has been made available to you, that discussions or negotiations are taking place concerning a possible transaction involving AquaPenn or any of the terms, conditions or other facts with respect thereto (including the status thereof) provided, that you may make such disclosure if such disclosure is requested pursuant to, or required by, applicable law or regulation or any legal process and you give prior notice to AquaPenn of such disclosure. Without limiting the generality of the foregoing, you further agree that, without the prior written consent of AquaPenn, you will not, directly or indirectly, enter into any agreement, arrangement or understanding, or any discussions which might lead to such agreement, arrangement or understanding, with any person regarding a possible transaction involving AquaPenn other than your Representatives. The term "Person" as used in this letter agreement shall be broadly interpreted to include the media and any corporation, partnership, group, individual or other entity. In the event that you or any of your Representatives are requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any of the Evaluation Material, you shall provide AquaPenn with prompt written notice of any such request or requirement so that AquaPenn may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this letter agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by AquaPenn, you or any of your Representatives are nonetheless, legally required to disclose Evaluation Material to any tribunal or else stand liable for contempt or suffer other censure or penalty, you or your Representative may, without liability hereunder, disclose to such tribunal only that portion of the Evaluation Material which such counsel advises you is legally required to be disclosed, provided that you exercise all reasonable efforts to preserve the confidentiality of the Evaluation Material, including, without limitation, by cooperating with AquaPenn to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Evaluation Material by such tribunal. If you decide that you do not wish to proceed with a transaction with AquaPenn, you will promptly inform AquaPenn of that decision. In that case, or at any time upon the request of AquaPenn for any reason, you will promptly deliver to AquaPenn all Evaluation Material (and all copies thereof) furnished to you or your Representatives by or on behalf of AquaPenn pursuant hereto. In the event of such a decision or request, all other Evaluation Material prepared by you or your Representatives shall be destroyed and no copy thereof shall be retained. Notwithstanding the return or destruction of the Evaluation Material, you and your Representatives will continue to be bound by your obligations of confidentiality and other obligations hereunder. You understand and acknowledge that neither AquaPenn nor any of its Representatives (including without limitation any of AquaPenn's directors, officers, employees, or agents) make any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material. You agree that neither AquaPenn nor any of its Representatives (including without limitation any of AquaPenn's directors, officers, employees, or agents) shall have any liability to you or to any of your Representatives relating to or resulting from the use of the Evaluation Material or any errors therein or omissions therefrom. Only those representations or warranties which are made in a final definitive agreement regarding any transactions contemplated hereby, when, as and if executed, and subject to such limitations and restrictions as may be specified therein, will have any legal effect. You agree that, for a period commencing on the date hereof and for a period ending on the earlier of (i) the second anniversary of the date of this agreement, and (ii) the occurrence of a Terminating Event (as defined below), unless such shall have been specifically invited in writing by AquaPenn, neither you nor any of your affiliates (as such term is defined under the Securities Exchange Act of 1934, as amended (the "1934 Act")) or Representatives will in any manner, directly or indirectly, (a) effect or seek, offer or propose (whether publicly or otherwise) to effect, or cause or participate in or in any way assist any other person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in, (i) any acquisition of any securities (or beneficial ownership thereof) or assets of AquaPenn or any of its subsidiaries; (ii) any tender or exchange offer, merger or other business combination involving AquaPenn or any of its subsidiaries; (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to AquaPenn or any of its subsidiaries; or (iv) any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting securities of AquaPenn; (b) form, join or in any way participate in a "group" (as defined under the 1934 Act); (c) otherwise act, alone or in concert with others, to seek to control or influence the management, Board of Directors or policies of AquaPenn; (d) take any action which might force AquaPenn to make a public announcement regarding any of the types of matters set forth in (a) above; or (e) enter into any discussions or arrangements with any third party with respect to any of the foregoing. You also agree during such period not to request AquaPenn (or its directors, officers, employees or agents), directly or indirectly, to amend or waive any provision of this paragraph (including this sentence). For purposes hereof a Terminating Event shall mean (a) the commencement of a tender offer by any person or "group" (as defined above) under which beneficial ownership of voting securities of AquaPenn representing more than 50% of the aggregate voting power of AquaPenn would be acquired; (b) AquaPenn enters into a definitive agreement to effect a merger, consolidation or other business combination (including a sale of all or substantially all of the assets of AquaPenn), if immediately after giving effect to such transaction, any person or "group" would beneficially own voting securities of the surviving company representing more than 50% of the aggregate voting power of the surviving corporation. You hereby agree that neither you nor any of your Representatives shall contact any officer, director or employee of AquaPenn other than Messieurs Lauth or Feidelberg with respect to the Transaction without AquaPenn's prior consent. You also agree that for a period of two (2) years from the date of this letter agreement you will not, directly or indirectly, solicit for employment or hire any employee or officer of AquaPenn; provided that the foregoing will not prevent you from employing any such person who contacts you on his or her own initiative or conducting a general solicitation of employees. You understand and agree that no contract or agreement providing for any transaction involving AquaPenn shall be deemed to exist between you and AquaPenn unless and until a final definitive agreement has been executed and delivered, and you hereby waive, in advance, any claims (including, without limitation, breach of contract), except with respect to AquaPenn's agreements set forth in this Letter Agreement, in connection with any transaction involving AquaPenn unless and until you and AquaPenn shall have entered into a final definitive agreement. You also agree that unless and until a final definitive agreement regarding a transaction between AquaPenn and you has been executed and delivered, neither AquaPenn nor you will be under any legal obligation of any kind whatsoever with respect to such a transaction by virtue of this letter agreement except for the matters specifically agreed to herein. You further acknowledge and agree that AquaPenn reserves the right, in its sole discretion, to reject any and all proposals made by you or any of your Representatives with regard to a transaction between AquaPenn and you, and to terminate discussions and negotiations with you at any time. You further understand that, except as otherwise provided in this Letter Agreement (i) AquaPenn and its Representatives shall be free to conduct any process for any action involving AquaPenn, if and as they in their sole discretion shall determine (including, without limitation, negotiating with any other interested parties and entering into a definitive agreement without prior notice to you or any other person), (ii) any procedures relating to such process or transaction may be changed at any time without notice to you or any other person, and (iii) except with respect to AquaPenn's agreements set forth in this Letter Agreement, you shall not have any claims whatsoever against AquaPenn, its Representatives or any of their respective directors, officers, stockholders, owners, affiliates or agents arising out of or relating to any transaction involving AquaPenn (other than those as against the parties to a definitive agreement with you in accordance with the terms thereof) nor, unless a definitive agreement is entered into with you, against any third party with whom a transaction is entered into. Neither this paragraph nor any other provision in this agreement can be waived or amended except by written consent of AquaPenn, and you (regarding AquaPenn's obligations hereunder) which consent shall specifically refer to this paragraph (or such provision) and explicitly make such waiver or amendment. It is understood and agreed that no failure or delay by AquaPenn or you in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or future exercise thereof or the exercise of any other right, power or privilege hereunder. It is further understood and agreed that money damages would not be a sufficient remedy for any breach of this letter agreement by you or any of your Representatives or AquaPenn or any AquaPenn Representatives and that the non-breaching party hereto shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach by any party of this letter agreement but shall be in addition to all other remedies available at law or equity to such party. In the event of litigation relating to this letter agreement, if a court of competent jurisdiction determines that you or any of your Representatives or AquaPenn or any AquaPenn Representatives have breached this letter agreement, then such breaching party shall be liable and pay to the non-breaching party hereto the reasonable legal fees incurred by such non-breaching party in connection with such litigation, including any appeal therefrom. This letter agreement is for the benefit of AquaPenn and their directors, officers, stockholders, owners, affiliates, and agents, and shall be governed by and construed in accordance with the laws of the State of Delaware. Each party hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware and of the United States of America located in the State of Delaware for any actions, suits or proceedings arising out of or relating to this agreement and the transactions contemplated hereby (and each such party agrees not to commence any action, suit or proceeding relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by U.S. registered mail (i) with respect to you, to your address set forth above and (ii) with respect to us, to our address set forth below, in each case shall be effective service of process for any action, suit or proceeding brought against you or us, respectively in any such suit. Each party hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this agreement or the transactions contemplated hereby, in the courts of the State of Delaware or the United States of America located in the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Please confirm your agreement with the foregoing by signing and returning one copy of this letter to the undersigned, whereupon this letter agreement shall become a binding agreement between you and AquaPenn. Very truly yours, /s/ Edward J. Lauth, III ------------------------ Edward J. Lauth, III Chairman, President and Chief Executive Officer AquaPenn Spring Water Company, Inc. P.O. Box 938 One AquaPenn Drive Milesburg, PA 16853-0938 Accepted and agreed as of the date first written above: By: /s/ Emmanuel Faber ------------------- Name: Emmanuel Faber Title: Director of Corporate Development and Strategy -----END PRIVACY-ENHANCED MESSAGE-----