17(c)(8)
EARNOUT AGREEMENT
Earnout Agreement, dated as of June 9, 2000, between Saratoga
Beverage Group, Inc., a Delaware corporation (the "Company"), and XXXXXX XXXXX
(the "Stockholder").
WHEREAS, the Company and the Stockholder are parties to the
Stockholders Agreement, dated as of January 5, 2000 (as amended from time to
time, the "Stockholders Agreement"; capitalized terms used herein without
definition shall have the meanings set forth in the Stockholders Agreement),
setting forth certain corporate governance provisions of the Company and certain
rights and obligations that attach to the ownership of common stock, par value
$0.01 per share (the "Common Stock") of the Company;
WHEREAS, the Company and the Stockholder are also parties to the
Registration Rights Agreement, dated as of January 5, 2000 (as amended from time
to time, the "Registration Rights Agreement"), pursuant to which the Stockholder
is entitled to certain registration rights;
WHEREAS, the Company desires to issue, and the Stockholder desires to
purchase, additional shares of Common Stock;
WHEREAS, the Company and the Stockholder desire to set forth certain
additional rights and obligations that shall attach to the ownership of certain
of the Common Stock held by the Stockholder;
NOW THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Share Purchase. (a) Subject to the terms and conditions hereof,
immediately following the Closing, the Stockholder shall purchase from the
Company, and the Company shall issue and sell to the Stockholder, 56,000
newly-issued shares of Common Stock (the "New Shares") at a price of $6.00 per
share.
(b) The closing of the purchase and sale of the New Shares shall
take place at the offices of Debevoise & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx,
XX, at 10 a.m., New York time, immediately following the Closing. At the closing
hereunder, the Company shall deliver to the Stockholder a certificate or
certificates representing the New Shares, and the Stockholder shall irrevocably
direct the Exchange Agent under the Recapitalization Agreement to deliver the
purchase price for the New Shares to the
Company by wire transfer of immediately available funds, it being understood
that the Stockholder shall direct the Exchange Agent to make such payment by
delivering to the Company a portion of the merger consideration that is payable
to the Stockholder under the Recapitalization Agreement.
2. Legend. The Stockholder acknowledges that the certificate or
certificates representing the New Shares will bear a legend as set forth in the
Stockholders Agreement and that, with respect to Callable Shares only, such
legend will be modified to add reference to this Agreement.
3. Purchase Right. (a) Immediately prior to the occurrence of the
first NCP Liquidity Event, the Company shall purchase from the Stockholder, and
the Stockholder shall sell to the Company, the Callable Shares owned by the
Stockholder at a per share price of $0.01. The Company shall not be required to
purchase from the Stockholder, and the Stockholder shall not be required to sell
to the Company, any Callable Shares owned by the Stockholder upon the occurrence
of any subsequent NCP Liquidity Event.
(b) The closing for the purchase and sale of the Callable Shares
shall take place immediately prior to the closing of the first NCP Liquidity
Event, at such place and such time as shall be designated by the Company. At
such closing, the Stockholder shall deliver to the Company, in exchange for the
payment by the Company of the purchase price in respect of each Callable Share
owned by the Stockholder, the certificate or certificates representing the
Callable Shares.
(c) "Callable Shares" means (i) 55,000 Rollover Shares and (ii)
56,000 New Shares.
(d) "Rollover Shares" shall mean the shares of Common Stock held by
the Stockholder immediately after the Closing but prior to the sale of the New
Shares to the Rollover Stockholder.
(e) An "NCP Liquidity Event" means any Change of Control, Exit Event
or Public Offering that upon consummation thereof would result in the North
Castle Partners II, L.P. (the "Fund") realizing an internal rate of return on
the portion of its indirect equity investment (the "IRR") in the Company that is
disposed of by the Fund or any partnership controlled by the Fund (a "Controlled
Partnership") or, in the event of a share exchange pursuant to Section 5 (a
"Share Exchange"), the portion of its indirect equity investment in the top tier
holding company for investments by the Fund in the refrigerated juice industry
("Holdco") that does not equal or exceed 25% compounded annually. For purposes
of the foregoing, the IRR shall be measured from the date of such Controlled
Partnership's
2
investment in such disposed-of portion of the equity in (i) the Company or, (ii)
in the event of a Share Exchange, Holdco, which date shall be deemed to be the
date on which such Controlled Partnership invested in any company that is a
constituent part of Holdco, to the date such Controlled Partnership receives the
proceeds of the NCP Liquidity Event. The IRR shall be calculated, with respect
to shares of the Company or Holdco, as the case may be, by applying a first-in,
first-out convention. For purposes of this calculation, in the event of a Share
Exchange in which M. H. Zeiglers and Sons, Inc. ("Zeiglers") becomes Holdco,
convertible subordinated debt of Zeiglers shall be deemed equity that was
invested immediately after the Controlled Partnership acquired common stock of
Zeiglers. The Fund's IRR shall be determined in good faith by the Fund at least
10 days in advance of such Change of Control, Exit Event or Public Offering,
provided that if a majority of the Rollover Stockholders disagree with such
determination, then the Fund's IRR shall be determined by an independent
investment bank or valuation firm (the "Valuation Firm") selected by the Company
and the Rollover Stockholders. If the Company and the Rollover Stockholders
cannot agree on the Valuation Firm within five days of the date of determination
of the Fund's IRR, then the Valuation Firm shall be chosen by the two valuation
firms selected by the Company and the Rollover Stockholders. The fees and
expenses of the Valuation Firm shall be borne equally by the Company and the
Rollover Stockholders. The Company and the Stockholder agree that the
determination of the Valuation Firm shall be final and binding.
4. Other Agreements. (a) The Stockholder, the Rollover Shares and the
New Shares shall be subject to the rights and obligations of the Stockholders
Agreement and the Registration Rights Agreement, provided that in the event of a
conflict between the between the provisions of such agreements and this Earnout
Agreement, the terms of this Earnout Agreement shall control.
(b) The Stockholder may not sell, transfer, pledge, encumber or
otherwise dispose of any Covered Security except in accordance with the
Stockholders Agreement and the Registration Rights Agreement and provided that
the transferee of such Covered Security agrees in writing to be bound by this
Earnout Agreement. Any sale, transfer, pledge, encumbrance or other disposition
of any Covered Security other than as permitted by this Earnout Agreement shall
be void ab initio and of no effect.
5. Share Exchange. At the request of NCP-SBG, the Stockholder shall
exchange its Rollover Shares and New Shares for shares of capital stock of an
equivalent value of Holdco. Upon any Share Exchange, Holdco shall succeed to the
rights and obligations of the Company hereunder and under the Stockholders
Agreement and the Registration Rights Agreement. The Company will endeavor to
effect any Share Exchange in a manner that is tax efficient for all of its
stockholders.
3
6. Board Composition. Notwithstanding anything to the contrary
contained in the Stockholders Agreement, so long as there are 800,000 Callable
Shares (such number to be adjusted for any share exchange or conversion, stock
dividend or stock split) outstanding, then the Rollover Stockholders shall be
entitled to nominate at least one director to the board of directors of the
Company or its successor Holdco, as the case may be, and the applicable
Controlled Partnership shall vote its shares of Common Stock to elect such
nominee.
7. Tax Withholding. Whenever any cash payment is to be made
hereunder, the Company shall have the power to withhold, or require the
Stockholder to remit to the Company, an amount sufficient to satisfy the
statutory minimum amount of all Federal, state, and local withholding tax
requirements relating to such transaction, and the Company may defer payment of
cash until such requirements are satisfied.
8. Effectiveness of Agreement; Termination. This Agreement will
become effective upon the occurrence of the Closing under the Recapitalization
Agreement. Once effective, this Agreement may be terminated by either the
Stockholder or the Company by written notice to the other on the first occurring
Change of Control, Exit Event or Public Offering, in each case, that does not
give rise to an NCP Liquidity Event. Upon termination, this Agreement will be of
no further force or effect.
9. Miscellaneous. This Earnout Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York, without giving effect to the conflict of laws
rules thereof to the extent any such rules would require or permit the
application of the laws of any other jurisdiction, except to the extent that the
corporate law of the state of incorporation of the Company specifically and
mandatorily applies.
4
IN WITNESS WHEREOF, the parties hereto have duly executed this
Earnout Agreement as of the date first written above.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Name: Xxxxx Xxxxxx
Title: CEO
/s/ Xxxxxx Xxxxx
------------------------------------------
XXXXXX XXXXX
4
