AGREEMENT AND PLAN OF MERGER
by and among
Vincor International Inc.,
Vincor Holdings, Inc.,
Toast Acquisition Company, Inc.,
and
X.X. Xxxxxxxx, Inc.
August 25, 2000
TABLE OF CONTENTS
Page
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ARTICLE I THE OFFER.................................................................2
Section 1.01. The Offer........................................................2
Section 1.02. Company Actions..................................................4
Section 1.03. Directors........................................................5
Section 1.04. Stock Options and Warrants.......................................5
ARTICLE II THE MERGER................................................................7
Section 2.01. The Merger.......................................................7
Section 2.02. Closing Effective Time...........................................7
Section 2.03. Effects of the Merger............................................7
Section 2.04. Additional Actions...............................................8
Section 2.05. Conversion of Common Shares......................................8
Section 2.06. Conversion of Purchaser Common Stock.............................8
Section 2.07. Merger Without Meeting of Shareholders...........................8
ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES.....................................9
Section 3.01. Dissenting Shares................................................9
Section 3.02. Payment for Common Shares........................................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................11
Section 4.01. Organization and Qualification..................................11
Section 4.02. Charter and Bylaws..............................................12
Section 4.03. Capitalization..................................................12
Section 4.04. Authority Relative to this Agreement............................12
Section 4.05. No Conflict; Required Filings and Consents......................13
Section 4.06. SEC Reports and Financial Statements............................13
Section 4.07. Information.....................................................14
Section 4.08. Absence of Certain Developments.................................15
Section 4.09. Inventory.......................................................16
Section 4.10. Real Property...................................................17
Section 4.11. Personal Property...............................................18
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Section 4.12. Tax Matters.....................................................19
Section 4.13. Contracts and Commitments.......................................19
Section 4.14. Intellectual Property...........................................20
Section 4.15. Licenses and Permits............................................20
Section 4.16. Litigation......................................................21
Section 4.17. Governmental Consents, Etc......................................21
Section 4.18. Employee Benefit Plans..........................................21
Section 4.19. Insurance.......................................................23
Section 4.20. Compliance with Laws............................................23
Section 4.21. Environmental Matters...........................................23
Section 4.22. Affiliated Transactions.........................................26
Section 4.23. Brokers.........................................................26
Section 4.24. Labor Relations.................................................26
Section 4.25. Immigration Matters.............................................26
Section 4.26. Water Rights....................................................27
Section 4.27. Distributor Relations...........................................27
Section 4.28. Suppliers.......................................................27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER GROUP........................27
Section 5.01. Organization and Qualification..................................27
Section 5.02. Authority Relative to this Agreement............................28
Section 5.03. No Conflict; Required Filings and Consents......................28
Section 5.04. Information.....................................................29
Section 5.05. Financing.......................................................29
Section 5.06. Brokers.........................................................29
ARTICLE VI COVENANTS................................................................29
Section 6.01. Conduct of Business of the Company..............................29
Section 6.02. Access to Information...........................................31
Section 6.03. Reasonable to Notify of Certain Developments....................31
Section 6.04. Consents........................................................32
Section 6.05. Public Announcements............................................32
Section 6.06. Indemnification.................................................33
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Section 6.07. Notification of Certain Matters.................................33
Section 6.08. No Solicitation; Termination Right..............................34
Section 6.09. Cooperation for Financing.......................................35
Section 6.10. Support Agreements..............................................36
Section 6.11. Employment Agreements...........................................36
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER.................................37
Section 7.01. Conditions......................................................37
ARTICLE VIII TERMINATION; AMENDMENTS; WAIVER..........................................38
Section 8.01. Termination.....................................................38
Section 8.02. Effect of Termination; Fees and Expenses........................39
Section 8.03. Amendment.......................................................40
Section 8.04. Extension; Waiver...............................................41
ARTICLE IX MISCELLANEOUS............................................................41
Section 9.01. Non-Survival of Representations and Warranties..................41
Section 9.02. Entire Agreement; Assignment....................................41
Section 9.03. Validity........................................................41
Section 9.04. Notices.........................................................41
Section 9.05. Governing Law...................................................43
Section 9.06. Descriptive Headings............................................43
Section 9.07. Counterparts....................................................43
Section 9.08. Parties in Interest.............................................43
Section 9.09. Specific Performance............................................43
ARTICLE X DEFINITIONS..............................................................43
Section 10.01. Certain Definitions.............................................43
ANNEX I .........................................................................50
ANNEX II .........................................................................52
ANNEX III .........................................................................53
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AGREEMENT AND PLAN OF MERGER
This is an AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
August 25, 2000 by and among: (i) Vincor International Inc., a corporation
validly existing under the laws of Canada ("Parent"), Vincor Holdings, Inc., a
Delaware corporation and a direct or indirect wholly-owned subsidiary of Parent
(the "Hold Co.") and Toast Acquisition Company, Inc., a California corporation
and a wholly-owned subsidiary of Hold Co. (the "Purchaser") (Parent, Hold Co.
and Purchaser shall collectively be referred to as the "Purchaser Group"); and
(ii) X.X. Xxxxxxxx, Inc., a California corporation (the "Company").
WHEREAS, the respective Boards of Directors of Purchaser Group and the
Company have approved the acquisition of the Company by Purchaser on the terms
and subject to the conditions set forth in this Agreement; and
WHEREAS, the parties hereto desire that the Purchaser commence a
tender offer as it may be amended from time to time in accordance with this
Agreement (the "Offer") to purchase all of the shares of common stock, no par
value, of the Company (the "Common Shares") in accordance with the terms of
this Agreement; and
WHEREAS, the Board of Directors of the Company (the "Board") has
unanimously approved the terms of the Offer, which will provide that, among
other things, the price to be paid thereunder for each outstanding Common Share
will be not less than $7.00 net to the seller of each such share (such price,
as it may hereafter be increased, the "Offer Price"), and is unanimously
recommending that the Company's shareholders accept the Offer; and
WHEREAS, the respective boards of directors of Purchaser Group and the
Company have approved the merger of the Purchaser with and into the Company, as
set forth below (the "Merger"), in accordance with the General Corporation Law
of the State of California (the "GCL") and Applicable Securities Laws and upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding Common Share not owned directly or indirectly by
Parent or the Company will be converted into the right to receive $7.00 per
Common Share, in cash (the "Merger Consideration") and without interest thereon,
less any requested withholding taxes;
WHEREAS, Purchaser Group and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
acquisition of the Company by Parent pursuant to the Offer and the Merger and
also to prescribe various conditions to the Offer and the Merger;
WHEREAS, the Board of the Company has received the opinion of its
financial adviser, First Security Xxx Xxxxxx ("FSVK"), that the Offer Price and
Merger Consideration is fair to the shareholders of the Company from a financial
point of view; and
WHEREAS, certain capitalized terms used in this Agreement have the
meanings set forth or referred to in Article X hereof.
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Purchaser Group and the Company agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. THE OFFER.
The obligations of Parent, Hold Co. and Purchaser, and each
of them, under this Agreement are primary, binding obligations of each of them
as to one another and as to the Company, in all cases jointly and severally,
irrespective of any references in this Agreement to obligations of any one or
combination of Parent, Hold Co. and Purchaser.
(a) If this Agreement shall not have terminated in
accordance with its terms and none of the events set forth in Paragraphs (a)
through (e) of Annex I hereto shall have occurred or be existing, no later than
ten (10) business days after the public announcement of the terms of this
Agreement, the Purchaser shall commence the Offer, in accordance with the
requirements of Regulations 14D and 14E promulgated under the Exchange Act, and
any applicable State securities laws, to purchase all of the issued and
outstanding Common Shares for the Offer Price net to the seller thereof in cash
(subject to applicable withholding taxes); provided, however, that the
Purchaser shall commence the Offer as soon as practicable after the public
announcement of the terms of this Agreement, but in no event later than ten
(10) business days after such public announcement. The obligation of Purchaser
to purchase any Common Shares under this Agreement shall be subject to there
being tendered and not withdrawn prior to the Expiration Date (or any
subsequent expiration date if the Expiration Date shall be extended as provided
for herein) not less than 90% of the outstanding Common Shares of the Company
(the "Minimum Purchase").
(b) The Offer shall expire and terminate on the twentieth
(20th) business day from the commencement of the Offer (the "Expiration Date")
subject to any extension of the Offer required by Applicable Securities Laws to
disseminate revised Offer Documents pursuant to Section 1(c)-(e) of the
Agreement; provided, however, that the Purchaser shall extend the Expiration
Date up to the maximum period permitted by law, to satisfy any of the conditions
set forth in Annex I hereto, provided that (i) the failure of such conditions to
be satisfied is not due to a breach of this Agreement by the Company, which
breach cannot be cured within a reasonable time and (ii) Purchaser reasonably
believes that such extensions are necessary to satisfy the conditions set forth
in Annex I, but notwithstanding the foregoing, the Purchaser shall not be
required to extend the Expiration Date beyond ten (10) business days.
(c) If this Agreement shall not have been terminated in
accordance with its terms and none of the events set forth in Paragraphs (a)
through (e) of Annex I hereto shall have occurred or be existing, no later than
ten (10) business days after the public announcement of the
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terms of this Agreement, the Purchaser shall file with the Securities and
Exchange Commission (the "SEC") the Purchaser's Tender Offer Statement on
Schedule TO with respect to the Offer, the Merger and the other transactions
contemplated thereby (together with any supplements or amendments thereto,
the "Offer Documents"), containing (as exhibits) the Purchaser's offer to
purchase the Common Shares (the "Offer to Purchase") which shall be mailed to
the holders of Common Shares with respect to the Offer, and which shall
contain the conditions set forth in Annex I hereto and no others; it being
understood that the Offer shall be on the terms and subject to the conditions
that are agreed to by the parties hereto and no others and that the Purchaser
shall file the Tender Offer Statement on Schedule TO as soon as practicable,
but in no event later than ten (10) business days after such public
announcement. The Company and its advisors shall be given an opportunity to
review and comment upon the Offer Documents prior to the filing thereof with
the SEC, and the Purchaser shall consider such comments in good faith.
Purchaser agrees to provide the Company and its counsel any comments which
Purchaser or its counsel may receive from the Staff or the SEC with respect
to the Offer Documents promptly after receipt thereof.
(d) The obligation of Purchaser to accept for payment or
pay for any Common Shares tendered pursuant to the Offer will be subject only to
the satisfaction or waiver (to the extent permitted by this Agreement) of the
conditions set forth in Annex I hereto. Without the prior written consent of the
Company, the Purchaser shall not (i) purchase any Common Shares unless such
purchases (by themselves or in combination with prior purchases) constitute more
than 50% of the outstanding Common Shares (ii) decrease the price per Common
Share or change the form of consideration payable in the Offer, (iii) decrease
the number of Common Shares sought to be purchased in the Offer, or (iv) change
the conditions set forth in Annex I, impose additional conditions to the Offer
or amend any other term of the Offer in any manner adverse to the holders of
Common Shares; provided, however, the Purchaser expressly reserves the right to
waive any condition to the Offer without the consent of the Company. Subject to
the terms of the Offer and this Agreement and the satisfaction or waiver of all
of the conditions of the Offer set forth in Annex I hereto as of any expiration
date, Purchaser will accept for payment and pay for all Common Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
such Expiration Date (the time of such purchase being referred to herein as the
"Offer Purchase Closing").
(e) Subject to Section 8.01, if any of the conditions set
forth in Annex I hereto are not satisfied or, to the extent permitted by this
Agreement, waived by the Purchaser as of the Expiration Date (or any
subsequently scheduled expiration date), Purchaser may extend the Offer from
time to time, including a subsequent offering period pursuant to Rule 14d-11. In
each such instance, Purchaser may extend the Offer for the shortest time periods
permitted by law and to the extent that Purchaser reasonably believes such
extensions are necessary until the consummation of the Offer. Each of the
parties hereto shall use its reasonable best efforts to cause all conditions
precedent set forth in Annex I to be fulfilled and avoid the occurrence of any
event or to cure any event which may prevent such conditions precedent set forth
in Annex I from being fulfilled (it being understood that notwithstanding the
satisfaction of the conditions set forth in Annex I hereto, the Purchaser shall
have the right to extend the Offer for as long as such Offer may remain open
under applicable state and federal law).
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(f) The Offer Documents shall comply in all material
respects with the provisions of Applicable Securities Laws on the date such
Offer Documents are filed with the SEC. On the date first published, sent or
given to the Company's shareholders, the Offer Documents shall not 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 were made, not misleading, except
that no representation is made by the Purchaser Group with respect to
information supplied by the Company in writing for inclusion in the Offer
Documents. Each of Parent, Hold Co. and the Purchaser, on the one hand, and the
Company, on the other hand, agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect; and the Purchaser Group and
each of them further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to the
Company's shareholders, in each case, as and to the extent required by
Applicable Securities Laws.
(g) Purchaser shall terminate the Offer as soon as
practicable following termination of this Agreement pursuant to Section 8.01 of
this Agreement.
SECTION 1.02. COMPANY ACTIONS.
(a) The Company shall promptly (and in any event within
ten (10) business days after the public announcement of the terms of this
Agreement) file with the SEC and mail to the holders of Common Shares the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 with respect
to the Offer (together with any amendments or supplements thereto, the "Schedule
14D-9"). The Schedule 14D-9 will set forth, and the Company hereby represents,
that the Board, at a meeting duly called and held, has (i) determined that the
Offer and the Merger are fair to and in the best interests of the Company and
its shareholders, (ii) approved the Offer and the Merger in accordance with
Section 1101 or 1110 of the GCL, and (iii) resolved to recommend and continues
to recommend acceptance of the Offer and approval and adoption of the Merger and
this Agreement by the Company's shareholders (if such approval is required by
applicable law) (such recommendation to the Company's shareholders being
referred to as the "Board Recommendation"); provided, however, that such
recommendation and approval may be withdrawn, modified or amended as provided in
Section 6.08. The Company further represents that FSVK has delivered to the
Board its written opinion to the effect that, as of the date of this Agreement,
the cash consideration to be received for the Common Shares pursuant to the
Offer and the Merger is fair to the holders of the Common Shares (other than
Parent and its affiliates) from a financial point of view.
(b) Each of the Company, on the one hand, and Purchaser
Group, on the other hand, agree promptly to correct any information provided by
either of them for use in the Schedule 14D-9 if and to the extent that it 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 to be disseminated to the holders of the Common Shares, in each case, as
and to the extent required by applicable federal securities law.
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(c) In connection with the Offer, the Company will use
reasonable best efforts to cause to be furnished to Purchaser mailing labels,
security position listings, any non-objecting beneficial owner lists and any
available listing or computer file containing the names and addresses of the
record holders of the Shares, options, warrants or any other securities
convertible into, exercisable or exchangeable for Shares as of a recent date and
shall furnish Purchaser with such additional information and assistance
(including, without limitation, updated lists of shareholders, mailing labels,
lists of securities positions, and any non-objecting beneficial owner lists) as
Purchaser or its agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares and to holders of all options, warrants
or any other securities convertible into, exercisable or exchangeable for
Shares. Subject to the requirements of applicable law, and except for such steps
as are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Merger, Purchaser and its affiliates and associates
shall hold in confidence the information contained in any such labels, listings
and files, will use such information only in connection with the Offer and the
Merger, and, if this Agreement shall be terminated, will deliver to the Company
all copies of such information then in their possession or certify the
destruction thereof.
SECTION 1.03. DIRECTORS.
(a) Subject to compliance with applicable law, promptly
upon the payment by the Purchaser for Common Shares pursuant to the Offer, and
from time to time thereafter, Parent shall be entitled to designate at least
such number of directors, rounded up to the next whole number, on the Board as
is equal to the product of the total number of directors on the Board
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Common
Shares beneficially owned by Parent or its affiliates bears to the total number
of Common Shares then outstanding, and the Company shall, upon request of
Parent, or Hold Co. promptly take all actions necessary to cause Parent's
designees to be so elected, including, if necessary, seeking the resignations of
one or more existing directors.
(b) The Company's obligations to appoint Parent's
designees to the Board shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder. The Company shall promptly take all actions required
pursuant to such Section and Rule to fulfill its obligations under this Section
1.03. The Company shall include in the Schedule 14D-9, and transmit to all
holders of record as of the date the Purchaser files its Offer Documents or such
other record date as may be established by the Company pursuant to its Bylaws,
such information with respect to the Company and its officers and directors as
is required under such Section and Rule in order to fulfill its obligations
under this Section 1.03. Parent will supply to the Company any information with
respect to itself and its officers, directors and affiliates required by such
Section and Rule.
SECTION 1.04. STOCK OPTIONS AND WARRANTS.
(a) Promptly following the commencement of the Offer, the
Company shall offer to cancel any or all of the outstanding options to purchase
Common Shares (each such option to
5
purchase one share referred to as an "Option") granted under the Company's
1995 Stock Option Plan (the "1995 Plan") for cash consideration as set forth
herein. Each holder of an Option (whether or not vested or exercisable) shall
be offered the right to have one hundred percent (100%) of his or her Options
canceled by the Company in consideration of a payment by the Company to such
holder for each Option in an amount equal to the excess of the Offer Price
over the applicable exercise price of such Option, subject to withholdings as
contemplated in Section 3.02(e). Cancellation of the Options and payment of
the consideration therefor shall be conditioned upon the purchase of Common
Shares by the Purchaser pursuant to the Offer. If such condition is met, the
cancellation of Options and payment of the consideration therefor in
accordance with this section shall be made as promptly as possible following
the Offer Purchase Closing.
(b) Promptly following the commencement of the Offer, the
Company shall offer to cancel any or all of the outstanding warrants to purchase
Common Shares (collectively the "Warrants") for cash consideration as set forth
herein. Each holder of Warrants shall be offered the right to have one hundred
percent (100%) of his or her Warrants canceled by the Company in consideration
of a payment by the Company to such holder for each Warrant in an amount equal
to the excess of the Offer Price over the applicable exercise price of such
Warrant subject to withholding as contemplated in Section 3.02(e). Cancellation
of the Warrants and payment of the consideration therefor shall be conditioned
upon the purchase of Common Shares by the Purchaser pursuant to the Offer. If
such condition is met, the cancellation of Warrants and payment of the
consideration therefor in accordance with this Section shall be made as promptly
as possible following the Offer Purchase Closing.
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the
satisfaction or waiver of the conditions of this Agreement, and in accordance
with the applicable provisions of this Agreement and the GCL, at the Effective
Time (as defined in Section 2.02) the Purchaser shall be merged with and into
the Company. Following the Merger, the separate corporate existence of the
Purchaser shall cease and the Company shall continue as the surviving
corporation and shall succeed to and assume all the rights and obligations of
Purchaser in accordance with the GCL. In its capacity as the surviving
corporation of the Merger, the Company is sometimes referred to herein as the
"Surviving Corporation."
SECTION 2.02. CLOSING EFFECTIVE TIME. The closing of the Merger
(the "Closing") will take place as promptly as practicable following the
satisfaction or waiver of the conditions set forth in Section 7.01 of this
Agreement (the "Closing Date"), at the offices of Sheppard, Mullin, Xxxxxxx &
Hampton LLP, Four Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxxx Xxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000. Immediately following the Closing, the parties hereto shall
cause the Merger to become effective by filing a Certificate of Merger or, if
permitted, a Certificate of Ownership and Merger, with the California Secretary
of State, in accordance with the relevant provisions of the GCL (the
6
time of such filing being the "Effective Time") and shall make all other
filings or recordings required under the GCL.
SECTION 2.03. EFFECTS OF THE MERGER.
(a) The Merger shall have the effects set forth in the
GCL.
(b) 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 in
accordance with the provisions thereof and hereof and applicable law.
(c) Subject to the provisions of Section 6.06 of this
Agreement, the Bylaws of the Purchaser in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation until amended in accordance with the
provisions thereof and applicable law.
(d) Subject to applicable law, the directors of the
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or until their earlier death,
resignation or removal.
(e) The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until their respective successors are duly elected and
qualified, or until their earlier death, resignation or removal.
SECTION 2.04. ADDITIONAL ACTIONS. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances in law or any other acts are necessary
or desirable to (a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its rights, title or interest in, to or under any of the
rights, properties or assets of the Company, or (b) otherwise carry out the
provisions of this Agreement, the Company and its officers and directors shall
be deemed to have granted the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments or assurances in law
and to take all acts necessary, proper or desirable to vest, perfect or confirm
title to and possession of such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the provisions of this Agreement, and the
officers and directors of the Surviving Corporation are authorized in the name
of the Company or otherwise to take any and all such action.
SECTION 2.05. CONVERSION OF COMMON SHARES. At the Effective Time,
by virtue of the Merger and without any action on the part of the holders
thereof, (i) each Common Share issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares, as defined in Section 3.01, and
Common Shares held by the Company, Purchaser Group and their respective
Subsidiaries) shall be converted into the right to receive the Merger
Consideration in cash, payable to the holder thereof, without interest thereon,
upon surrender of the certificate formerly representing such Common Share; and
(ii) each Common Share owned by the Company or by Parent, Hold Co. or Purchaser
or one of its Subsidiaries shall be canceled without payment and without
surrender of the certificate formerly representing such Common Shares.
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SECTION 2.06. CONVERSION OF PURCHASER COMMON STOCK. At the
Effective Time, each share of common stock of the Purchaser issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and non-assessable share of
common stock of the Surviving Corporation.
SECTION 2.07. MERGER WITHOUT MEETING OF SHAREHOLDERS. If Purchaser
acquires ninety percent (90%) or more of the Common Shares, the Purchaser Group
agrees to take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after the acceptance for payment of and
payment for Common Shares by the Purchaser pursuant to the Offer without a
meeting of shareholders of the Company, in accordance with Section 1110 or 1101
of the GCL.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.01. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Common Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented in writing thereto and who has demanded appraisal for such Shares in
accordance with Sections 1300 and 1301 of the GCL, if such Sections 1300 and
1301 provide for appraisal rights for such shares in the Merger ("Dissenting
Shares"), shall not be converted into the right to receive the Merger
Consideration as provided in Section 2.05, unless and until such holder fails to
perfect or withdraws or otherwise loses his right to appraisal and payment under
the GCL. If, after the Effective Time, any such holder fails to perfect or
withdraws or loses his right to appraisal, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Consideration, if any, to which such holder is
entitled, without interest or dividends thereon. The Company shall give Parent
prompt notice of any demands received by the Company for appraisal of Common
Shares and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands.
SECTION 3.02. PAYMENT FOR COMMON SHARES.
(a) From and after the Effective Time, LaSalle National
Bank, or such other bank or trust company as shall be mutually acceptable to
Parent and the Company, shall act as paying agent (the "Paying Agent") in
effecting the payment of the Merger Consideration in respect of certificates
(the "Certificates") that, prior to the Effective Time, represented Common
Shares entitled to payment of the Merger Consideration pursuant to Section 2.05.
At the Effective Time, Parent or the Purchaser shall deposit, or cause to be
deposited, in trust with the Paying Agent the aggregate Merger Consideration to
which holders of Common Shares shall be entitled at the Effective Time pursuant
to Section 2.05.
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(b) Promptly after the Effective Time, the Paying Agent
shall mail to each record holder of Certificates that immediately prior to the
Effective Time represented Common Shares (other than Certificates representing
Dissenting Shares and Certificates representing Common Shares held by Purchaser
Group or the Company or their respective Subsidiaries) a form of letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent and instructions for use in surrendering such
certificates and receiving the Merger Consideration in respect thereof. Upon the
surrender of each such Certificate together with such letter of transmittal duly
completed and validly executed in accordance with the instructions thereto, the
Paying Agent shall pay the holder of such Certificate the Merger Consideration
multiplied by the number of Common Shares formerly represented by such
Certificate, in consideration therefor, and such Certificate shall forthwith be
canceled. Until so surrendered, each such Certificate (other than Certificates
representing Dissenting Shares and Certificates representing Common Shares held
by Purchaser Group, or the Company or their respective Subsidiaries) shall
represent solely the right to receive the aggregate Merger Consideration
relating thereto. No interest or dividends shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion thereof) is to
be delivered to any person other than the person in whose name the Certificate
formerly representing Common Shares surrendered therefor is registered, it shall
be a condition to such right to receive such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person surrendering such Common Shares shall pay
to the Paying Agent any transfer or 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 establish to the satisfaction of the
Paying Agent that such tax has been paid or is not applicable.
(c) Promptly following the date which is 180 days after
the Effective Time, the Paying Agent shall deliver to the Surviving Corporation
all cash, Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent's duties shall
terminate. Thereafter, holders of Common Shares who have not theretofore
complied with this Section 3.02 shall look only to the Surviving Corporation for
payment of the Merger Consideration in respect thereof (subject to applicable
abandoned property, escheat and similar laws), in each case, without interest or
dividends thereon.
(d) To the extent permitted by applicable law, (i) none
of Purchaser Group, the Surviving Corporation or the Paying Agent shall be
liable to any person in respect of any Common Shares (or dividends or
distributions with respect thereto) or cash deposited by Parent or the Purchaser
with the Paying Agent that is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law, and (ii) if any
Certificates shall not have been surrendered prior to seven (7) years after the
Effective Time (or immediately prior to such earlier date on which any cash
would otherwise escheat to or become the property of any Governmental Entity),
any such cash in respect of such Certificate shall, to the extent permitted by
applicable law become the property of Parent, free and clear of all claims or
interest of any person previously entitled thereto.
9
(e) Purchaser Group, the Surviving Corporation and the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable or issuable pursuant to this Agreement to any holder of Common
Shares, Options or Warrants such amounts as Purchaser Group, the Surviving
Corporation or the Paying Agent are required to deduct and withhold with respect
to such payment or issuance under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holders of Common Shares in respect of which such deduction and
withholding was made.
(f) All cash issued upon surrender of Certificates in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Common Shares formerly represented
thereby. After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Common Shares are presented to the
Surviving Corporation or the Paying Agent, they shall be surrendered and
canceled in return for the payment of the aggregate Merger Consideration
relating thereto, as provided in this Article III, subject to applicable law in
the case of Dissenting Shares.
(g) If any certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person a bond in such amount as the
Surviving Corporation may direct as indemnity against any claim that may be made
against it with respect to the Certificate, the Paying Agent shall deliver in
exchange for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser Group (and the Company
acknowledges that Purchaser Group are relying on those representations and
warranties in entering into this Agreement) that except as set forth in any of
the Disclosure Schedules (as hereinafter defined) as of the date hereof (or such
other later date as is specified), the statements made in this Article IV are
true, correct and complete and will continue to be true, correct and complete
until the Expiration Date (and any subsequent expiration date). All information
set forth in any Disclosure Schedule as to one section of this Agreement shall
be deemed to constitute an exception to all other sections of the Agreement
whether or not disclosed under a particular caption or subheading. It shall not
be considered a breach of this Article IV if (i) an exception to a
representation and warranty is not disclosed on a Disclosure Schedule but is
included in the Company's Form 10-K for the year ended December 31, 1999 and the
Company's Forms 10-Q for the quarters ended March 31, 2000 and June 30, 2000
(collectively, the "Recent SEC Reports") filed with the SEC, as they may be
amended prior to the date hereof, and (ii) any nondisclosure would result in an
undisclosed event, condition, development or circumstance having an effect on
the assets, business operations or financial condition of the company that is
adverse to the
10
Company taken as a whole and is less than Two Hundred and Fifty Thousand
Dollars ($250,000) in the aggregate.
SECTION 4.01. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company does not own, directly or indirectly,
any interest in a corporation, limited liability company, partnership or other
business organization (any such majority owned entity is referred to as a
"Subsidiary"). The Company has the requisite corporate power to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and the Company is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary.
SECTION 4.02. CHARTER AND BYLAWS. The Company has heretofore made
available to the Purchaser Group a complete and correct copy of the Articles of
Incorporation and Bylaws, each as amended to the date hereof, of the Company.
SECTION 4.03. CAPITALIZATION. The authorized capital stock of
the Company consists of 12,500,000 Common Shares and 4,500,000 shares of
Preferred Stock, no par value. As of the close of business on August 7, 2000,
6,695,331 Common Shares were issued and outstanding, and no shares of
Preferred Stock were issued and outstanding. The Company has no shares
reserved for issuance, except that, as of August 7, 2000, there were 724,754
Common Shares reserved for issuance pursuant to outstanding Options under the
1995 Plan, 150,000 Common Shares reserved for issuance under the X.X.
Xxxxxxxx, Inc. Stock Purchase Plan (the "1999 Plan"), and 1,515,314 Common
Shares reserved for issuance pursuant to outstanding Warrants. Schedule 4.03
sets forth the name of each holder of an outstanding Option or Warrant and
with respect to each Option or Warrant held by any such holder, the grant
date, exercise price and number of Common Shares for which such Option or
Warrant is exercisable. As of the date hereof, the Company has no Options or
Warrants to purchase Common Shares outstanding other than as set forth in
Schedule 4.03. Since March 31, 2000, the Company has not issued any shares of
capital stock except pursuant to the exercise of Options or Warrants
outstanding as of such date. All of the outstanding Common Shares are, and
all Common Shares which may be issued pursuant to the exercise of outstanding
Options or Warrants will be, when issued in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and nonassessable.
There are no bonds, debentures, notes or other indebtedness having general
voting rights (or convertible into securities having such rights) of the
Company issued and outstanding. Except as set forth on Schedule 4.03, there
are no existing options, warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company, obligating the Company to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock of, or other equity interest in or voting security of, the
Company or securities convertible into or exchangeable for such shares or
equity interests or voting securities and the Company is not obligated to
grant or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment. All existing options, warrants,
calls, subscriptions or other rights, agreements, arrangements or commitments
of any character, relating to the issued or unissued capital stock of the
Company,
11
not cancelled pursuant to Section 1.04, shall terminate pursuant their terms
on or before completion of the transactions contemplated in this Agreement.
There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any Common Shares or the capital
stock of the Company. Except as disclosed on Schedule 4.03, the Company has
not agreed to register any securities under the Securities Act or under any
state securities law or granted registration rights to any person or entity.
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company 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 by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board and no other corporate proceedings on the
part of the Company or on the part of the shareholders of the Company are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby except as required by California law. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due and valid authorization, execution and delivery of this
Agreement by Parent, Hold Co. and the Purchaser, this Agreement constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) None of the execution and delivery of this Agreement
by the Company, the consummation by the Company of the Merger, compliance by the
Company with any of the provisions hereof or consummation of the Merger or any
other transaction contemplated hereby will (i) conflict with or violate the
Articles of Incorporation or Bylaws of the Company, (ii) conflict with or
violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to the Company or by which its properties or assets may be bound, or
(iii) result in a violation or 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 any loss of any material benefit, or the creation
of any Lien on any of the property or assets of the Company (any of the
foregoing referred to in clause (ii) or this clause (iii) being a "Violation")
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties may be bound
or affected.
(b) Except as disclosed on Schedule 4.05, none of the
execution and delivery of this Agreement by the Company, the consummation by the
Company of the Merger or any other transaction contemplated hereby or compliance
by the Company with any of the provisions hereof will require any consent,
waiver, approval, authorization or permit of, or registration or filing with or
notification to (any of the foregoing being a "Consent") any government or
subdivision thereof, domestic, foreign or supranational or any administrative,
governmental or
12
regulatory authority, agency, commission, tribunal or body, domestic, foreign
or supranational (a "Governmental Entity") or any third party, except for (i)
compliance with any applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (ii) the filing of a certificate of
merger, or, if permitted, a certificate of ownership and merger, pursuant to
the GCL, (iii) compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act") and any requirements of any foreign
or supranational antitrust laws.
SECTION 4.06. SEC REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has filed with the SEC all forms,
reports, schedules, registration statements and definitive proxy statements
required to be filed by the Company with the SEC since January 1, 1996 (the "SEC
Reports"). As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act or the Securities
Act of 1933 and the rules and regulations of the SEC promulgated thereunder
applicable, as the case may be, to such SEC Reports, and none of the SEC Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading (except to the extent revised or superceded by a subsequent filing
with the SEC).
(b) The balance sheets as of December 31, 1999, 1998,
1997 and the related statements of income, shareholders' equity and cash flows
for each of the three (3) years in the period ended December 31, 1999 (including
the related notes and schedules thereto) of the Company contained in the Form
10-Ks for the years ended December 31, 1999, 1998, 1997 included in the SEC
Reports and the balance sheet as of March 31, 2000 and the related statements of
income and cash flows for the quarter ended March 31, 2000 contained in the Form
10-Q for the quarter ended March 31, 2000 included in the SEC Reports present,
and the balance sheet as of June 30, 2000 and the related statements of income
and cash flows for the six months ended June 30, 2000 contained in the Form 10-Q
for the quarter ended June 30, 2000 present, fairly, in all material respects,
the financial position and the results of operations and cash flows of the
Company as of the dates or for the periods presented therein in conformity with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved except as otherwise noted therein,
including the related notes. The audited balance sheet as of December 31, 1999
is herein referred to as the "December Balance Sheet," the unaudited balance
sheet as of March 31, 2000 is herein referred to as the "March Balance Sheet,"
and the unaudited balance sheet as of June 30, 2000 is herein referred to as the
"June Balance Sheet." The March Balance Sheet and the June Balance Sheet do not
include footnotes.
(c) Since December 31, 1999, there has not been any
event, condition, development or circumstance which the Company believes will
adversely effect the assets, business operation or financial condition of the
Company.
(d) Except as set forth on Schedule 4.06, the Company is
not subject to any material liabilities or obligations (absolute, accrued,
contingent or otherwise) other than (i) reflected in, reserved against or
otherwise disclosed in the December Balance Sheet, March
13
Balance Sheet or June Balance Sheet, or (ii) incurred in the ordinary course
of business consistent with past practice.
SECTION 4.07. INFORMATION. None of the information supplied by the
Company in writing specifically for inclusion or incorporation by reference in
(i) the Offer Documents, (ii) the Schedule 14D-9, or, (iii) any other document
to be filed with the SEC or any other Governmental Entity in connection with the
transactions contemplated by this Agreement (the "Other Filings") will, at the
respective times filed with the SEC or other Government Entity, 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 were made, not misleading. The
Schedule 14D-9 will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
SECTION 4.08. ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth
on Schedule 4.08 and except as expressly contemplated by this Agreement, since
December 31, 1999, the Company has not engaged in any material transaction
outside the ordinary course of business consistent with past practice or:
(a) Incurred any indebtedness for borrowed money, except
borrowings from banks (or other financial institutions) necessary to meet
ordinary course working capital requirements and to finance capital expenditures
in the ordinary course of business consistent with past practice, which at no
time exceeded $50,000 in the aggregate;
(b) Mortgaged, pledged or subjected to any Lien, any
asset or related group of assets;
(c) Sold, leased, assigned or transferred any tangible
asset or related group of assets except for the sale of inventory and obsolete
or used machinery and equipment in the ordinary course of business consistent
with past practice;
(d) Sold, leased, assigned or transferred any interest in
real estate;
(e) Sold, licensed, assigned or transferred any patents,
trademarks, trade names, copyrights, trade secrets or other intangible assets;
(f) Waived or relinquished any right or claim or related
group of rights or claims;
(g) (x) Issued or sold any of its Common Shares or other
equity securities or any warrants, options or other rights to acquire its Common
Shares or other securities of the Company, except for the issuance of Common
Shares upon exercise of Options outstanding as of June 30, 2000 or (y) purchased
or redeemed or agreed to purchase or redeem any Common Shares or other equity
securities;
14
(h) Made or entered into binding commitment for any
capital expenditures or related group of capital expenditures other than in the
ordinary course of business consistent with past practice, which at no time
exceed $50,000 in the aggregate;
(i) Modified or amended in any material manner or
terminated or entered into any Material Contract (as hereinafter defined);
(j) Granted any increase in the base compensation of, or
made any other material change in the employment terms for, any of its
directors, officers, and employees other than normal periodic increases or
changes reflecting or based upon changed responsibilities or duties made in the
ordinary course of business consistent with past practice;
(k) Adopted, modified, or terminated any bonus,
profit-sharing, incentive, severance or other plan or contract for the benefit
of any of its directors, officers, and employees, other than for changes which
are required by law; or
(l) Declared or paid any dividend or other distribution
with respect to the Common Shares.
SECTION 4.09. INVENTORY.
(a) Except for bottled and barreled wine, the Company's
inventory, whether or not reflected in the March Balance Sheet or the June
Balance Sheet, consists of a quality and quantity usable and salable in the
ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the March Balance Sheet or the June Balance Sheet of the
Company, as the case may be. To the Company's Knowledge, the Company's bottled
and barreled wine inventory, whether or not reflected in the March Balance Sheet
or the June Balance Sheet, consists of a quality and quantity usable and salable
in the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the March Balance Sheet or the June Balance Sheet of the
Company, as the case may be. All inventories not written off have been priced at
the lower of cost or net realizable value. The quantities of each item of
inventory (whether raw materials, work-in-progress, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company. All
inventory owned by the Company has been produced, labeled and recorded in
compliance with the requirements of all applicable governmental laws and
regulations.
(b) Except as set forth in Schedule 4.09(b), the grape
vines on the vineyard portion of the Real Property are in good condition, and to
the Company's Knowledge, free of disease, infestation or other defects. Provided
that the Purchaser and its agents cultivate and care for such vines from and
after the Closing Date in accordance with standard practices in the counties in
which the vineyards are located, the Company Knows of no reason that the grapes
produced therefrom will not be merchantable for the production of premium or
super premium quality wines.
15
(c) The irrigation systems located on the vineyards are
in good condition and working order and deliver sufficient water to the vines
planted on the vineyards for the production of premium or super premium quality
wine grapes.
(d) The Company has provided to Purchaser for its
inspection prior to the date hereof (i) all books and records of the Company
with respect to its vineyard operations on the Real Property, including
operating statements for the full three (3) fiscal years prior to the date
hereof and the current fiscal year to date; (ii) production records for the
three (3) years prior to the date hereof and the current year to date
containing, to the extent applicable, the following information with respect to
the vines planted on the Real Property: varieties planted, number of vines of
each variety, quality or grapes produced and sugar content, age of plantings,
rootstock used, source of budwood, and conditions of the vines with respect to
pests and diseases; (iii) any soils tests in the Company's possession with
respect to the Real Property, including, without limitation, any tests for the
presence of pests or toxic substances in the soil or the presence or lack of
nutrients; (iv) any reports of the company's possession relating to the
condition of or quality of water delivered by the irrigation systems on the Real
Property; and (v) all other information requested by Purchaser concerning the
use and cultivation of the Real Property that is possessed by the Company. All
of the foregoing books, records, tests, reports and other information are true,
correct and complete.
SECTION 4.10. REAL PROPERTY.
(a) Schedule 4.10(a) sets forth all material real
property interests owned in fee by the Company (the "Owned Real Property").
(b) Schedule 4.10(b) sets forth the following information
with regard to each material parcel or tract of Owned Real Property: (i) an
identification of the deed or other instrument of conveyance; (ii) recording
information (if available, and if not, the state and county where the relevant
parcel or tract is located); (iii) the names of at least one grantor and one
grantee thereunder; and (iv) the approximate size of the relevant parcel or
tract when acquired.
(c) Schedule 4.10(c) sets forth all real property
interests in which the Company has a leasehold interest (the "Leased Real
Property") (Owned Real Property and Leased Real Property collectively referred
to as "Real Property").
(d) Schedule 4.10(d) sets forth the following information
with regard to each parcel or tract of Leased Real Property: (i) an
identification of the lease or sublease agreement and any and all amendments,
modifications and side letters; (ii) recording information (if available), and
if not, the state and county where the relevant parcel or tract is located;
(iii) the names of at least one lessor and one lessee (or sublessor or
sublessee) thereunder; (iv) the approximate size of the relevant parcel or tract
leased thereunder when acquired; and (v) the term thereof, including any
extension options.
(e) The Company holds (i) good and marketable Title, as
hereinafter defined, to the Owned Real Property and (ii) as to the Leased Real
Property, an interest of record valid
16
binding, enforceable and not in default, free and clear of all encumbrances
except for the Permitted Encumbrances or a leasehold interest from a person
or entity which the Company reasonably believe has an interest of record
valid binding, enforceable and not in default, free and clear of all
encumbrances except for the Permitted Encumbrances. As used in this
subparagraph (e), Title means fee simple absolute.
(f) Except as disclosed on Schedule 4.10(f), the Company
has not received any written notice alleging that the Company is in default
under any material lease. The Company is not in default under any lease relating
to the Leased Real Property.
(g) Each of the leases on Schedule 4.10(c) is, and will
be on and immediately following the Closing Date, valid and enforceable against
the lessor or other parties thereto in accordance with its terms. To the
Knowledge of the Company, there are no unwritten modifications to such leases.
(h) The present use and operation of the Real Property
and the vineyards located thereon is authorized by and is in compliance with all
existing zoning, land use and similar laws, ordinances, rules, regulations and
administrative interpretations applicable thereto, and the Company has received
no notice that any entity or governmental authority considers the operation, use
or ownership of the Real Property or the vineyards to have violated any such
law, ordinance, rule or regulation, or that any investigation has been commenced
regarding such possible violation.
(i) To the Company's Knowledge, there is no present plan
or study by any governmental authority or agency which affects or would affect
in any material respect the continued operation of the vineyard portion of the
Real Property as commercial vineyards in substantially the same manner in which
the same have been operated.
(j) Copies of all existing maps, surveys, title insurance
policies, abstracts and other evidence of title have been provided or otherwise
made available by the Company to the Purchaser.
(k) No condemnation or eminent domain proceeding against
any part of the Real Property is pending or threatened, and the Company has no
knowledge that any such proceeding is contemplated.
(l) There are no adverse possession claims regarding the
Real Property.
(m) "Permitted Encumbrances" as used in this Agreement
means: (i) all existing easements or rights of way, whether of record or
apparent on the premises, including, but not limited to, roads, highways,
pipelines, underground gas storage rights, railroad and utility easements or
rights-of-way, none of which could reasonably be expected to have a Material
Adverse Effect on the Company; (ii) real estate taxes not yet due and payable;
and (iii) terms, agreements, provisions, conditions, and limitations contained
in leases and rights of lessors, their heirs, executors, administrators,
successors, and assigns (applies to leasehold estates).
17
SECTION 4.11. PERSONAL PROPERTY.
(a) The Company has good and marketable title to, or a
valid leasehold interest in, the personal property owned or used by them.
Schedule 4.11 sets forth the Company's leased personal property for which the
monthly payments exceed One Thousand Dollars ($1,000) and is used by the Company
or in possession of the Company (the "Leased Personal Property") and includes
monthly payment and owner of the Leased Personal Properties.
(b) The machinery and equipment owned or used by the
Company has been maintained in accordance with industry practice, are in
generally good operating condition and adequate for carrying out the purposes
for which such personal property is employed, except for normal obsolescence and
wear and tear incurred in the ordinary course of business.
SECTION 4.12. TAX MATTERS. The Company has filed all income Tax
Returns and other Tax Returns required by law to be filed by it prior to the
date of this Agreement, in each case, subject to applicable extensions. All Tax
Returns for the Company in respect of all years not barred by the statute of
limitations have heretofore been made available by the Company to Purchaser and
such returns are true, correct, and complete in all material respects. Except as
set forth on Schedule 4.12: (a) all Taxes shown thereon as owing by the Company
on all such Tax Returns have been fully paid; (b) (i) the provision for taxes on
the March Balance Sheet and the June Balance Sheet are sufficient for all
accrued and unpaid Taxes as of the date thereof and (ii) all Taxes which the
Company is obligated to withhold from amounts owing to any employee, creditor or
third party have been fully paid or properly accrued; (c) there are no claims
pending, or to the Company's Knowledge, threatened, for Taxes against the
Company with respect to any period ending as of or prior to the date hereof; (d)
the Company has not waived, or agreed to the extension of, the statute of
limitations with respect to any Tax Return; (e) the Company has no liability for
Taxes for any Person (other than the Company) under Treasury Regulation 1.1502-6
(or any similar provision of state, local or foreign income Tax law) as a
transferee or successor by contract or otherwise; and (f) the Company has
maintained their respective records with respect to Taxes in a commercially
reasonable manner.
SECTION 4.13. CONTRACTS AND COMMITMENTS.
(a) Except as set forth on Schedule 4.13, the Company is
not a party to any: (i) collective bargaining agreement with any labor union;
(ii) bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) stock purchase, stock option, stock appreciation or
similar plan; (iv) contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis involving an annual
compensation commitment by the Company; (v) agreement or indenture relating to
the borrowing of money or mortgaging, pledging or otherwise placing a Lien
(other than a Permitted Lien) on any portion of the Company's assets; (vi)
guaranty of any obligation for borrowed money; (vii) lease or agreement under
which it is lessee of, or holds or operates any personal property owned by any
other party; (viii) contract or group of related contracts with the same party
for the supply of wine to any Person or providing for deliveries extending
beyond December 31, 2000; (ix) contract or group of
18
related contracts with the same party for the purchase of inventories,
supplies or services, under which the undelivered balance of such
inventories, supplies or services has a selling price in excess of $100,000
(other than contracts to purchase fruit in the ordinary course of business in
an amount less than $200,000; (x) contract or group of related contracts with
the same party for the sale of products or services; (xi) contract which
prohibits or limits the Company in any respect from freely engaging in
business in the United States or anywhere else in the world; or (xii) any
other contract or commitment involving the payment by or to the Company of
$10,000 or more (whether in cash or other assets) in any twelve (12) month
period or $50,000 or more (whether in cash or other assets) in the aggregate
over the life of the contract.
(b) Purchaser either has been supplied with, or has been
given access to, a true and correct copy of all written contracts which are
referred to on Schedule 4.13, together with all material amendments, arbitration
decisions and grievance settlements related to collective bargaining agreements
and contracts with any labor union, waivers or other changes thereto.
(c) Each contract listed on Schedule 4.13 is legal,
valid, binding, enforceable and in full force and effect, and will continue to
be legal, valid, binding, enforceable and in full force and effect following
consummation of the transactions contemplated hereby. The Company is not in
default, breach or violation (or would be in default, breach or violation with
notice or lapse of time, or both) under any contract listed on the
Schedule 4.13.
SECTION 4.14. INTELLECTUAL PROPERTY. Set forth on Schedule 4.14 are
all of the material patents, trademarks, copyrights and service marks (and any
registrations or applications therefor) and all material trade names and
corporate names used in the conduct of the business of the Company as now
conducted (collectively, the "Intellectual Property"). Except as set forth on
Schedule 4.14, the Company owns or has sufficient rights to use the Intellectual
Property to conduct their current operations. Except as set forth on Schedule
4.14, the Company has not received any written notices of material infringement
or misappropriation from any third party with respect to the Intellectual
Property; and to the Company's Knowledge, the Company has not infringed nor is
it currently infringing the intellectual property of any other Person.
SECTION 4.15. LICENSES AND PERMITS.
(a) The Company possesses all necessary permits, leases,
rights, licenses, agreements and similar authorizations and approvals to engage
in any business to manufacture, distribute, import, sell or use alcohol products
(beverage or nonbeverage) (collectively, the "Wine Permits"). Schedule 4.15 sets
forth Wine Permits, and other licenses, permits, certifications and other
governmental or regulatory authorizations and approvals, (collectively,
"Permits"), necessary to enable the Company to carry on its business as
presently conducted, and all such permits are valid, and in full force and
effect and there exists no default thereunder. Except as set forth on Schedule
4.15, there is no pending or, to the Company's Knowledge, threatened litigation
or other proceeding under which, and there has been no action or omission by the
Company or any of its directors, officers or representatives as a consequence of
which, any Wine Permit or other Permit could reasonably be expected to be
revoked, terminated or suspended.
19
(b) Except as provided for in Schedule 4.15(b), the
Company has: (i) never had a permit, license or other authorization to engage in
any business to manufacture, distribute, import, sell or use alcohol products
(beverage or nonbeverage) revoked, suspended or otherwise terminated by any
government agency (Federal, State, local or foreign) or subject to an
offer-in-compromise or fine in lieu of such action by any government agency
(Federal, State, local or foreign); or (ii) never been charged or convicted of
any crime under Federal, State or foreign laws.
SECTION 4.16. LITIGATION. Except as set forth on the attached
Schedule 4.16, there are no actions, suits or proceedings pending or, to the
Company's Knowledge, threatened against the Company (or, in each case, in which
the Company is a party), at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign. Except as set forth on Schedule
4.16, the Company is not subject to any outstanding judgment, injunction, order
or decree of any court or Government Entity to which this Company is a party
which adversely affects the operations of the Company.
SECTION 4.17. GOVERNMENTAL CONSENTS, ETC. Except as set forth in
Section 4.05, on Schedule 4.17 or in connection with the Purchaser's financing
of the transactions contemplated in this Agreement, no consent, waiver, approval
or authorization, order, permit or qualification of, or declaration to or filing
with, any governmental or regulatory authority is required in connection with
the execution, delivery or performance of this Agreement by the Company or the
consummation by the Company of any other transaction contemplated hereby.
SECTION 4.18. EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Section 4.18, the term "employee
benefit plan(s)" shall have the meaning ascribed to it in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
regulations promulgated thereunder, and the term "employee pension benefit
plan(s)" shall have the meaning ascribed to it in Section 3(2) of ERISA.
(b) Schedule 4.18 sets forth a complete list of all
employee benefit plans, policies and practices (whether or not subject to ERISA)
applicable to employees of the Company, including, without limitation, plans,
funds or programs providing medical, surgical or hospital care or benefits;
benefits in the event of sickness, accident, disability, death or unemployment;
vacation benefits; apprenticeship or other training programs; day care centers;
scholarship funds; prepaid legal services; benefits described in Section 302(c)
of the Labor Management Relations Act; retirement income; income deferral for
periods extending to the termination of covered employment or beyond; severance
pay arrangements; and supplemental retirement income payments which take into
account increases in the cost of living. Each employee benefit plan, policy or
practice which is funded through a policy of insurance is indicated by the word
"insured" placed by the listing of the plan on the Employee Benefits Schedule.
20
(c) True and complete copies of all (i) employee benefit
plans and related trust agreements; (ii) policies and practices; (iii) summary
plan descriptions; (iv) allocation or actuarial reports prepared for each
employee pension benefit plan; (v) insurance policies; and (vi) communications
to or from the Internal Revenue Service (the "IRS") (including all Form 5500s
filed with the IRS and the most recent determination letter received from the
IRS), the Pension Benefit Guaranty Corporation (the "PBGC") or the United States
Department of Labor and other governmental filings with respect to the employee
benefit plans have been delivered by the Company to Purchaser.
(d) Except as specifically provided in the documents
described in this Section 4.18 and delivered to Purchaser, or as otherwise
described on Schedule 4.18, there are no amendments, modifications, extensions,
changes in benefits or benefit structures, or other alterations which are
currently in effect or which the shareholders or the Company have undertaken to
become effective in the future, or which the shareholders have knowledge of, to
any of the employee benefit plans, policies or practices.
(e) Each of the Company's employee benefit plans has been
executed, managed and administered in material compliance with the applicable
provisions of ERISA, the Code, and the regulations promulgated thereunder, and
all other applicable laws. The shareholders have no knowledge of any fact which
would adversely affect the qualified status of any of the employee benefit
plans, or of any threatened or pending claim against any of the employee benefit
plans or their fiduciaries by any participant, beneficiary or government agency.
(f) The Company has fully complied with the notice and
continuation requirements of Sections 601 through 608 of ERISA and the proposed
regulations thereunder and with the health plan portability and other
requirements of Sections 701 through 707 of ERISA and the proposed regulations
thereunder. Except as noted on Schedule 4.18, all reports, statements, returns
and other information required to be furnished or filed with respect to the
Company's respective employee benefit plans have been timely furnished, filed or
both in accordance with Sections 101 through 105 of ERISA and Sections 6057
through 6059 of the Code, and they are true, correct and complete in all
material respects. Records with respect to the employee benefit plans have been
maintained in material compliance with Section 107 of ERISA. Neither the Company
nor any other fiduciary (as that term is defined in Section 3(21) of ERISA) with
respect to any of the Company's employee benefit plans has any material
liability for any breach of any fiduciary duties under Sections 404, 405 or 409
of ERISA.
(g) The Company has not, with respect to any of the
employee benefit plans, nor has any administrator of any of the employee benefit
plans, the related trusts or any trustee thereof, engaged in any prohibited
transaction which would subject the shareholders, the Company, any of the
employee benefit plans, any administrator or trustee or any party dealing with
any of the employee benefit plans or any such trusts, to a tax or penalty on
prohibited transactions imposed by ERISA, Section 4975 of the Code, or to any
other liability under ERISA.
(h) All employee pension benefit plans maintained by or
covering employees of the Company which are intended to be qualified under
Section 401(a) or 403(a) of the Code, and
21
the related trusts which are intended to be exempt under Section 501(a) of
the Code, are, and have been since adoption, so qualified, and are identified
on the Employee Benefits Schedule as "qualified plans," and the date of the
most recent determination letter from the IRS confirming the qualification of
each such plan is set out on the Employee Benefits Schedule.
(i) Except as set forth on the Schedule 4.18, none of the
employee pension benefit plans nor any of the related trusts has been
terminated. The Company does not maintain, and has never maintained, a money
purchase pension plan or defined benefit plan.
(j) None of the employee pension benefit plans is, and
the Company has never contributed to, a "multiemployer plan," as that term is
defined in Section 3(37) of ERISA (as particularly amended by The Multiemployer
Pension Plan Amendments Act of 1980.
(k) The Company has provided to Purchaser the information
reasonably necessary to determine the accounting treatment which may be accorded
any of the Company's retiree welfare benefits currently in force at the Company
under proposed Financial Accounting Standards Board guidelines.
SECTION 4.19. INSURANCE. Schedule 4.19 sets forth the insurance
policies maintained by the Company and their respective coverage and renewal
dates. All of such insurance policies are in full force and effect and the
Company is not in material default with respect to its obligations under any of
such insurance policies. No notice of cancellation or termination or rejection
of any claim has been received by the Company with respect to any such policy in
the last year. The Company has been covered during the past five (5) years by
insurance in scope and amount customary and reasonable for the businesses in
which they have engaged during such period, and the Company has no knowledge
that any contractors, lessees and licensees which performed services and/or
engaged in the production of wine on behalf of the Company were not or are not
covered by insurance in scope and amount customary and reasonable for the
business in which they have engaged during such period.
SECTION 4.20. COMPLIANCE WITH LAWS. To the Company's Knowledge, the
Company is in compliance with every statute, rule, restriction, law, regulation,
order, judgment or decree of any Governmental Entity applicable to it or by
which it is bound, including, without limitation, the Fair Labor Standards Act
or regulations under such act or other laws and regulations relating to wages,
hours, labor agreements, the payment of Social Security and similar taxes,
unemployment or workers' compensation and/or similar state laws and regulations.
The Company has not received from any governmental or regulatory authority any
written notice alleging any violation of law or claiming any material liability
of the Company as a result of any such alleged violation.
SECTION 4.21. ENVIRONMENTAL MATTERS.
(a) As used in this Section 4.21 of this Agreement, the
term "Hazardous Material" means any substance, chemical, contaminant, or waste
(including, without limitation, asbestos, polychlorinated biphenyls (PCBs),
pesticides, and petroleum) that is designated or defined (either by inclusion in
a list of materials or by reference to exhibited characteristics) as
22
hazardous, toxic or dangerous, or as a pollutant or contaminant, in any
federal, State of California (or other states in which Company has Real
Property) or local environmental, health, or safety law, code or ordinance,
now existing or hereafter in effect, and all rules and regulations
promulgated thereunder, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Sections 9601 ET SEQ., the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. Sections 6901 ET SEQ., the Toxic Substances Control Act ("TSCA"),
15 U.S.C. Sections 2601 ET SEQ., the Occupational Safety and Health Act
("OSHA"), 29 U.S.C. Sections 651 ET SEQ., the Clean Water Act, 33 U.S.C.
Sections 1251 ET SEQ., the Clean Air Act, 42 U.S.C. Sections 7401 ET SEQ.,
and all other similar federal, state, and local laws, statutes, and
ordinances (collectively defined as "Environmental Laws").
(b) The Company has duly complied with, and the Business
and the Company's assets, including, without limitation, the Real Property, are
in substantial compliance with, the provisions of all Environmental Laws
including, without limitation, all laws and regulations with respect to storage
of Hazardous Materials, reporting releases of Hazardous Materials and the
registration, testing, upgrading and maintenance of underground storage tanks.
(c) The Company has been issued, will maintain, and will
be in compliance with until Closing, all federal, state and local permits,
licenses, certificates and approvals required for the operation of the Business,
including those relating to (i) air emissions; (ii) discharges to surface water
or ground water or the sewer, septic system, or any dry xxxxx servicing the Real
Property; (iii) noise emissions; (iv) solid or liquid waste disposal; (v) the
use, generation, treatment, storage, transportation or disposal of Hazardous
Materials; and (vi) other environmental, health or safety matters. A true,
accurate and complete list of all such permits, licenses, certificates or
approvals is set forth on Schedule 4.21 to this Agreement.
(d) The Company has not received notice of, or does not
know of or suspect, any fact(s) that might constitute violations of any
Environmental Laws that relate to the use, ownership or occupancy of any of the
Real Property or the operation of the Business. The Company is not in violation
of any covenants, conditions, easements, rights of way or restrictions affecting
any of the Real Property or any rights appurtenant thereto. The Company has not
received notice of, or has knowledge of or suspects, any facts that indicate
that there exists or may exist an environmental lien on any of the Real
Property, or any liability or corrective or remedial obligation, arising under
any Environmental Laws associated with any of the Real Property or the operation
of the Business.
(e) Except in compliance with Environmental Laws, there
has been no emission, spill, release, disposal, discharge or threatened release
into or upon (i) the air; (ii) the soils or any improvements located thereon;
(iii) the surface water or ground water; or (iv) the sewer, septic system, dry
xxxxx or waste treatment, storage or disposal system servicing the Real
Property, of any Hazardous Material at, under or from any of the Real Property
(any of which is hereafter referred to as a "Hazardous Discharge").
(f) The Company has not received and does not know of any
actual or threatened complaint, order, directive, claim, citation, notice of
violation or notice of potential
23
liability from any governmental authority or any other Person with respect to
(i) air emissions; (ii) Hazardous Discharges; (iii) noise emissions; (iv)
solid or liquid waste disposal; (v) the use, generation, treatment, storage,
transportation or disposal of Hazardous Materials; or (vi) other
environmental, health or safety matters, affecting the Company, its assets,
any of the Real Property, any improvements located thereon or the Business
conducted thereon (any of which is hereafter referred to as an "Environmental
Complaint").
(g) Hazardous Materials used, generated, transported,
disposed of, treated or stored on or off-site of any real property owned or
operated at any time by the Company have been used, generated, transported,
disposed of, treated and stored in full compliance with all Environmental Laws.
Schedule 4.21 to this Agreement identifies all of the locations where Hazardous
Materials used, transported, owned, possessed or generated at any time by the
Company have been disposed of or have been, or are being, treated or stored.
Schedule 4.21 identifies all underground storage tanks owned or operated at any
time by the Company and includes for each underground storage tank: (i) the size
of the tank, (ii) the date the tank was installed, (iii) the date the tank was
removed, if applicable, (iv) the date the tank was upgraded, if applicable, (v)
the substance(s) stored in the tank, and (vi) all owners and operators of the
tank.
(h) To the Company's Knowledge, all of the Real Property
is free of all (i) Hazardous Materials; (ii) underground storage tanks; and
(iii) underground pipelines. The Company has not used, generated, transported,
stored, treated or disposed of any Hazardous Materials on, in or under the Real
Property, or any part thereof, and has not permitted the Real Property, or any
part thereof, to be used for the use, generation, transportation, storage,
treatment or disposal of Hazardous Materials. There has been no use, generation,
transportation, storage, treatment, disposal or release of Hazardous Materials
on, in or under the Real Property at any time by any Person.
(i) The Company has not transported or accepted for
transport any Hazardous Materials.
(j) The Company has provided the Purchaser with all
information including all documents in the Company's possession concerning (i)
the environmental condition of the Real Property, (ii) the environmental
condition of any property adjacent to the Real Property that reasonably may be
anticipated to adversely affect the Real Property and (iii) any environmental
conditions relating to the operation of the Business. Such documents include,
without limitation, true, accurate and complete copies of all reports (whether
prepared for submission to a governmental organization or for some other
Person), data, sampling results, notes, maps, drawings, correspondence to and
from governmental agencies or other Entities, notice of violations and
compliance orders. A true, accurate and complete list of all such documents is
set forth on Schedule 4.21 to this Agreement.
(k) The Company does not know of any environmental
conditions on, in, or under adjacent or neighboring properties that may create
any liability or corrective or remedial obligation arising under any
Environmental Laws with respect to the Real Property.
24
(l) Except for the disposal facilities listed on the
Environmental Compliance Schedule 4.21 to this Agreement, the Company has not
disposed or arranged for the disposal of any Hazardous Materials or solid waste
at any disposal facility.
SECTION 4.22. AFFILIATED TRANSACTIONS. Except as set forth on
Schedule 4.22, no officer, director, or principal shareholder of the Company
or, to the Company's Knowledge, any individual in such officer's or
director's immediate family is a party to any agreement, contract, commitment
or transaction with the Company or has any interest in any real or personal
property used by the Company other than arrangements with employees that are
available to similarly situated employees.
SECTION 4.23. BROKERS. Except as set forth on Schedule 4.23,
neither of the Company, nor any of its respective officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement.
SECTION 4.24. LABOR RELATIONS. Except as set forth on Schedule 4.24:
(a) The Company is in compliance with applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours. The Company is in compliance with applicable
collective bargaining agreements, and arbitration, administrative and
judicial decisions interpreting and/or affecting such agreements.
(b) There is no unfair labor practice charge or complaint
or any other labor employment matter against or involving the Company pending or
to the Company's Knowledge threatened before the National Labor Relations Board
or any court of law as of the date of this Agreement. There is, and, except as
disclosed on Schedule 4.24, as of the date hereof there has been, no labor
organizing activity, strike, dispute, lockout, slowdown or stoppage actually
pending or, to the knowledge of the Company, threatened against the Company.
(c) There is, and except as disclosed on Schedule 4.24,
as of the date hereof, there has been, no certified collective bargaining
representative of the Company's or employees, no demand made to the Company for
recognition by any collective bargaining representative, and no petition for an
election filed with the National Labor Relations Board or any other governmental
authority or Person with respect to the Company's employees.
(d) Except as set forth on Schedule 4.24, there are no
known charges, investigations administrative proceedings or formal complaints of
discrimination (including discrimination based upon sex, age, marital status,
race, color, religion, national origin, sexual preference, disability, handicap
or veteran status) pending or, to the knowledge of the Company, threatened
before the Equal Employment Opportunity Commission or any federal, state or
local agency or court against the Company.
SECTION 4.25. IMMIGRATION MATTERS. Except as set forth on Schedule
4.25, the Company has complied with all relevant provisions of Section 274A of
the Immigration and Naturalization Act,
25
as amended (the "Act"). Without limiting the foregoing, (a) each "employee"
(as that term is defined in the Act) of the Company is permitted to be so
employed in the United States under the Act; (b) the Company has examined
(and made copies of, if applicable) the documents presented by each employee
to establish appropriate employment eligibility under the Act; (c) the
company has completed and required each employee hired on or since November
11, 1986 to complete a Form I-9 verifying employment eligibility under the
Act; (d) the Company has retained each such completed Form I-9 for the length
of time required under the Act; and (e) no monetary penalties have been
assessed against the Company for violation of Section 274A of the Act.
SECTION 4.26. WATER RIGHTS. The Company has secured from sources on
or adjacent to the Real Property and has maintained a good and sufficient
water supply for the viticultural and related operations on the Real
Property. Schedule 4.26 sets forth a true and complete description of the
nature of the water rights that pertain to the Real Property. If any such
rights are by appropriation, the Company has filed and prosecuted such
applications for permits to appropriate water as have been necessary in
connection with such water supply. The Company's use of water with respect to
the Real Property has at all times been in accordance with applicable laws,
rules and regulations and is not and has not been in violation of the water
rights of any other person or entity. To Company's Knowledge, a good and
sufficient water supply for the intended viticultural and related operations
on the Real Property will continue to be available on and after the Closing,
in substantially the same manner as prior to the Closing. The Company has
obtained all easements which are necessary or appropriate for the conveyance
of such water supply to the Real Property.
SECTION 4.27. DISTRIBUTOR RELATIONS. Schedule 4.27 sets forth the
Company's five (5) largest customers (measured by revenues) as of the December
Balance Sheet and the revenues from each such customer and from all customers
(in the aggregate) for the fiscal year then ended. No customer of the Company
has advised the Company that it is (x) terminating or considering terminating
the handling of its business by the Company (prior to or after the Expiration
Date) as a whole or in respect of any particular product, or (y) planning to
reduce, in any material amount, its future spending with the Company (prior to
or after the Expiration Date).
SECTION 4.28. SUPPLIERS. Schedule 4.28 sets forth the Company's
five (5) largest suppliers of fruit to the Company (measured by expense) as of
the December Balance Sheet and the expense from each such supplier for the
fiscal year then ended. No supplier of the Company has advised the Company that
it is (x) terminating or considering terminating its business with the Company
(prior to or after the Expiration Date) as a whole or in respect to any
particular product of (y) planning to reduce, in any material amount, its future
sales to the Company (prior to or after the Expiration Date).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER GROUP
Purchaser Group represents and warrants to the Company as follows:
26
SECTION 5.01. ORGANIZATION AND QUALIFICATION. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of Canada. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Hold
Co. is a corporation duly organized, validly existing and in good standing
under the laws of the state of Delaware. Purchaser Group have the requisite
corporate power and authority to own, operate or lease its properties and to
carry on its business as it is now being conducted and to enter into this
Agreement and to perform all of their respective obligations hereunder.
SECTION 5.02. AUTHORITY RELATIVE TO THIS AGREEMENT. The execution
and delivery of this Agreement by Purchaser Group and the consummation by
Purchaser Group of the transactions contemplated hereby have been duly and
validly authorized and approved by the Boards of Directors of Purchaser Group
and (i) by Parent as shareholder of Hold Co. and (ii) Hold Co. as parent of
the Purchaser and no other corporate proceedings on the part of Purchaser
Group are necessary to authorize or approve this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Purchaser Group and, assuming the due and valid
authorization, execution and delivery by the Company, each such agreement
constitutes a valid and binding obligation of each of Purchaser Group
enforceable against each of them in accordance with its terms, except that
such enforceability (x) may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to the enforcement of creditors'
rights generally and (y) is subject to general principles of equity.
SECTION 5.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) None of the execution and delivery of this Agreement
by Parent or the Purchaser, the consummation by Purchaser Group of the
transactions contemplated hereby or compliance by Purchaser Group with any of
the provisions hereof will (i) conflict with or violate the organizational
documents of Purchaser Group, (ii) conflict with or violate any statute,
ordinance, rule, regulation, order, judgment or decree applicable to Purchaser
Group, or any of their subsidiaries, or by which any of them or any of their
respective properties or assets may be bound or affected, or (iii) result in a
Violation pursuant to any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Purchaser Group, or any of their subsidiaries, is a party or by which any of
their respective properties or assets may be bound or affected, except for any
such actions which would not have a Material Adverse Effect on Parent or
adversely affect the ability of Purchaser Group to consummate the transactions
contemplated hereby.
(b) None of the execution and delivery of this Agreement
by Parent, Hold Co. and the Purchaser, the consummation by Purchaser Group of
the transactions contemplated hereby or compliance by Purchaser Group with any
of the provisions hereof will require any Consent of any Government Entity or
third party, except for (i) compliance with any applicable requirements of the
Exchange Act, (ii) the filing of a certificate of merger, or, if permitted, a
certificate of ownership and merger, pursuant to the GCL, and (iii) compliance
with the Xxxx-Xxxx-Xxxxxx Act and any requirements of any foreign or
supranational antitrust laws, (iv) any required consent of the Toronto Stock
Exchange and (v) Consents the failure of which to obtain
27
or make would not have a Material Adverse Effect on Parent or adversely
affect the ability of Purchaser Group to consummate the transactions
contemplated hereby.
SECTION 5.04. INFORMATION. None of the information supplied or to
be supplied by Parent and the Purchaser in writing specifically for inclusion in
(a) the Schedule TO, (b) the Offer Documents or (c) the Other Filings will, at
the respective times filed with the SEC or such other Governmental Entity
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 were made, not
misleading.
SECTION 5.05. FINANCING. Each of Purchaser and Hold Co. is a newly
formed corporation which has not conducted any business other than in connection
with the transactions contemplated by this Agreement. The Parent has received a
written commitment (the "Commitment Letter") to obtain, subject to the terms and
conditions therein, the funds necessary for the consummation of the transactions
contemplated hereby, including payment of the Offer Price and the Merger
Consideration with respect to all Common Shares and all payments with respect to
Options and Warrants and all related costs and expenses. The Parent has
delivered true, correct and complete copies of the Commitment Letter to the
Company. The Parent has paid all commitment fees required to be paid to date and
taken all other actions required to cause such Commitment Letter to be effective
and to constitute the valid commitment of the issuer of such letter, and the
Commitment Letter is a valid and binding commitment of the Purchaser and the
issuer thereof. The Purchaser is not, as of the date hereof, aware of any fact,
occurrence or condition that makes any of the assumptions or statements therein
inaccurate in any material respect or that would cause the commitment provided
in the Commitment Letter to be terminated or ineffective or any of the
conditions contained therein not to be met.
SECTION 5.06. BROKERS. Except as set forth on Schedule 5.06, none
of Parent, Hold Co. or Purchaser, or any of its officers or directors, has
entered into any agreement pursuant to which the Company may be liable for
brokerage fees, commissions, finder's fees, or other fees or liabilities of
similar character.
ARTICLE VI
COVENANTS
SECTION 6.01. CONDUCT OF BUSINESS OF THE COMPANY. Except as
provided in Section 6.08 hereof or as otherwise contemplated by this Agreement
or with the written consent of Parent or as set forth on Schedule 4.08 or 4.13,
during the period from the date of this Agreement to the Offer Purchase Closing,
the Company will conduct its operations only in the ordinary course of business
consistent with past practice and will use all reasonable efforts to preserve
intact the business organization of the Company, to keep available the services
of its and their present officers and key employees, and to preserve the
goodwill of those having business relationships with it. Without limiting the
generality of the foregoing, and except as provided in Section 6.08 hereof, or
as otherwise contemplated by this Agreement, the Company will not, prior to the
Effective Time:
28
(a) Adopt any amendment to its Articles of Incorporation
or Bylaws or comparable organizational documents;
(b) Except as contemplated by this Agreement and/or for
the issuance of Common Shares pursuant to the exercise of Options or Warrants
outstanding on the date hereof, issue, reissue, pledge or sell, or authorize the
issuance, reissuance, pledge or sale of (i) additional Common Shares or other
shares of capital stock of any class, or securities convertible into Common
Shares or other capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock (including pursuant to
the 1999 Plan), or (ii) any other securities in respect of, in lieu of, or in
substitution for, Common Shares outstanding on the date hereof;
(c) Declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock.
(d) Split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem, purchase or otherwise
acquire, any Common Shares or any other capital stock;
(e) Make any loans, advances or capital contributions to,
or investments in, any other Person;
(f) Fail to (i) maintain the Real Property in a manner
consistent with past practice, (ii) pay when due all Taxes, water and sewer
rents, assessments and insurance premiums affecting the Real Property, other
than those being contested in good faith for which appropriate reserves have
been established on the Company's books and records, (iii) timely comply with
the terms and provisions of all Leases, other than those being contested in good
faith for which appropriate reserves have been established on the Company's
books and records, contracts and agreements relating to or affecting the Real
Property and the use and operation thereof, in each case;
(g) Enter into, establish, adopt, amend or renew any
material employment, consulting, severance or similar agreements or arrangements
with any director, officer or employee; grant any salary or wage increase (other
than as may be required by law); or establish, adopt, amend, or increase
benefits under, any pension, retirement, stock option, stock purchase, savings,
profit sharing, deferred compensation, consulting, welfare benefit contract,
plan or arrangement (other than as may be required by law);
(h) Enter into any labor or collective bargaining
agreement, memorandum of understanding, grievance settlement or any other
agreement or commitment to or relating to any labor union;
29
(i) Take any action that, if taken after March 31, 1999
but prior to the date hereof, would have caused the representations and
warranties contained in Article IV to be untrue in any material respect; or
(j) Waive, modify, amend or terminate any standstill,
confidentiality, exclusivity or other similar agreement (each a "Exclusivity
Agreement") to which the Company is a party and which was entered into in
connection with the sale process undertaken by the Company to identify a
purchaser of the Company that resulted in the execution of this Agreement.
SECTION 6.02. ACCESS TO INFORMATION. From the date of this
Agreement until the Closing, the Company will cause its respective officers,
directors, counsel, advisors and representatives (collectively, the "Company
Representatives") to, give Purchaser Group and their respective officers,
employees, counsel, advisors and representatives (collectively, the "Parent
Representatives") full access (subject, however, during the term of this
Agreement and following any termination hereof, to Purchaser Group keeping and
causing their respective subsidiaries and affiliates to keep such information
confidential in a manner consistent with existing confidentiality and similar
non-disclosure obligations, including those contained in the Confidentiality
Agreement dated May 4, 2000 and the Expression of Interest letter dated July 21,
2000, and the preservation of attorney client and work product privileges),
during normal business hours, to the offices and other facilities and to the
books and records of the Company and will cause the Company Representatives to
furnish Parent, the Purchaser and the Parent Representatives to the extent
available with such financial and operating data and such other information with
respect to the business and operations of the Company as Purchaser Group may
from time to time reasonably request. Prior to the Offer Purchase Closing,
neither Purchaser Group nor the Parent Representatives shall contact or in any
manner communicate with the employees, customers, lessors and suppliers of the
Company with respect to any matter related to the transactions contemplated
hereby, except with the prior consent of the Company.
SECTION 6.03. REASONABLE EFFORTS TO NOTIFY OF CERTAIN DEVELOPMENTS.
(a) Subject to the terms and conditions herein provided
and to applicable legal requirements, each of the parties hereto agrees to use
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done (in the case of the Company consistent with the fiduciary
duties of the Company's Board under applicable law), and to assist and cooperate
with the other parties hereto in doing, as promptly as practicable, all things
necessary, proper or advisable under applicable laws and regulations to ensure
that the conditions set forth in Article VII are satisfied and to consummate and
make effective the transactions contemplated by the Offer, the Merger and this
Agreement.
(b) If at any time prior to the Effective Time any event
or circumstance relating to either the Company or Purchaser Group or any of
their respective Subsidiaries, is discovered by the Company or Parent, as the
case may be, which should be set forth in an amendment to the Offer Documents or
Schedule 14D-9, the discovering party will promptly inform the other party of
such event or circumstance. If at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
including the execution of
30
additional instruments, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
SECTION 6.04. CONSENTS.
(a) Each party hereby agrees to use its reasonable best
efforts to file the premerger notification report, and all other documents to be
filed in connection therewith, required by the HSR Act and the Premerger
Notification Rules promulgated thereunder with the United States Federal Trade
Commission ("FTC") and the United States Department of Justice ("DOJ") as soon
as practicable following the date hereof, but in any event (i) with respect to
Parent and Purchaser, within five (5) days following the date hereof and (ii)
with respect to the Company, within five (5) days following the date hereof.
Each party shall respond promptly to any request for additional information that
may be issued by either FTC or DOJ and shall use commercially reasonable efforts
to assure that the waiting period required by the HSR Act has expired or been
terminated prior to the date that is twenty (20) days following the commencement
of the Offer.
(b) Each of the parties will use commercially reasonable
efforts to obtain as promptly as practicable all Consents of any Governmental
Entity or any other person required in connection with, and waivers of any
Violations that may be caused by, the consummation of the transactions
contemplated by the this Agreement.
(c) Any party hereto shall promptly inform the others of
any material communication from the SEC, Ontario Securities Commission, Toronto
Stock Exchange, NASDAQ, United States Federal Trade Commission, the Department
of Justice or any other domestic or foreign government or governmental or
multinational authority regarding any of the transactions contemplated by this
Agreement. If any party or any affiliate thereof receives a request for
additional information or documentary material from any such government or
authority with respect to the transactions contemplated by this Agreement, then
such party will endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request. Parent will advise the
Company promptly in respect of any understandings, undertakings or agreements
(oral or written) which Parent proposes to make or enter into with the Federal
Trade Commission, the Department of Justice, or any other domestic or foreign
government or governmental or multinational authority in connection with the
transactions contemplated by this Agreement.
SECTION 6.05. PUBLIC ANNOUNCEMENTS. Prior to the Closing, except as
required by applicable law or by any rule or regulation of the Toronto Stock
Exchange and the NASDAQ-National Market System, no party hereto shall issue any
press release or otherwise make any public statement with respect to this
Agreement and the transactions contemplated hereby without the prior written
consent of the other parties hereto. With respect to any public statement of
either party that does not require the consent of the other party, the party
making such statement shall, prior to public disclosure thereof, first consult
with and provide the other party a reasonable opportunity to review the contents
of such statement.
31
SECTION 6.06. INDEMNIFICATION.
(a) Parent agrees that all rights to indemnification now
existing in favor of any director or officer of the Company (the "Indemnified
Parties") as provided in its Articles of Incorporation or Bylaws or, in an
agreement between an Indemnified Party and the Company, shall survive the Merger
and shall continue in full force and effect for a period of not less than six
(6) years from the Effective Time; provided that in the event any claim or
claims are asserted or made within such six (6) year period, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims. Parent agrees to cause the
Surviving Corporation to honor all rights to indemnification referred to in the
preceding sentence. Without limitation of the foregoing, in the event any such
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter, including, without
limitation, the transactions contemplated by this Agreement, occurring prior to,
and including, the Effective Time, Parent will cause to be paid in accordance
with the applicable Articles, Bylaws and agreements, as incurred such
Indemnified Party's legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith. The Surviving
Corporation shall pay all reasonable expenses, including attorneys' fees, that
may be incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 6.06 subject to the limitations of the
Applicable Securities Laws and the GCL, to the extent each may be applicable.
(b) Parent agrees that the Company, and from and after
the Effective Time, the Surviving Corporation shall cause to be maintained in
effect for not less than six (6) years from the Effective Time for the benefit
of all current and former directors and officers of the Company the current
policies of the directors' and officers' liability insurance maintained by the
Company; provided that the Surviving Corporation may substitute therefor other
policies not less advantageous (other than to a de minimus extent) to the
beneficiaries of the current policies and provided that such substitution shall
not result in any gaps or lapses in coverage with respect to matters occurring
prior to the Effective Time; and provided, further, that the Surviving
Corporation shall not be required to pay an annual premium in excess of two
hundred percent (200%) of the last annual premium paid by the Company prior to
the date hereof which is set forth in the Insurance Schedule and if the
Surviving Corporation is unable to obtain the insurance required by this Section
6.06(b) it shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.
SECTION 6.07. NOTIFICATION OF CERTAIN MATTERS. Parent and the
Company shall promptly notify each other of (a) (i) each becoming aware of any
fact or event which would be reasonably likely to demonstrate that any
representation or warranty of any party hereto contained in this Agreement was
or is untrue or inaccurate in any material respect as of the date of this
Agreement or (ii) the occurrence or non-occurrence of any fact or event which
would be reasonably likely to cause any material covenant, condition or
agreement of any party hereto under this Agreement not to be complied with or
satisfied in all material respects and (b) any failure of any party hereto to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect
32
the representations or warranties of any party or the conditions to the
obligations of any party hereunder.
SECTION 6.08. NO SOLICITATION; TERMINATION RIGHT.
(a) The Company agrees that, during the term of this
Agreement it shall not, and shall not authorize, support or encourage any of its
directors, officers, employees, agents or representatives, directly or
indirectly, to (i) solicit, initiate, encourage, facilitate, furnish or disclose
non-public information in furtherance of, any inquiries or the making of any
proposal with respect to any recapitalization, merger, consolidation or other
business combination involving the Company, or acquisition of any capital stock
(other than upon exercise of the Options and Warrants which are outstanding as
of the date hereof) or any portion of the assets (except for acquisition of
assets in the ordinary course of business consistent with past practice) of the
Company, or any combination of the foregoing (a "Competing Transaction"); (ii)
negotiate, or otherwise engage in discussions with any person (other than
Purchaser Group or their respective directors, officers, employees, agents and
representatives) for the purpose of facilitating any Competing Transaction; or
(iii) enter into any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement. The Company shall use its best efforts to cause
its directors, officers, employees, agents and representatives immediately to
cease all existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any Competing Transaction and use its best
efforts to ensure that no directors, officers, employees, agents or
representatives, directly or indirectly, undertakes any such activities during
the term of this Agreement, and, if the Board learns of any such action, the
Company shall take reasonable steps to cause the party or parties undertaking
such action to cease such action immediately, including termination of parties
that breach this Section 6.08. If, however, prior to Offer Purchase Closing, a
party makes a bona fide written proposal regarding a Competing Transaction,
which (A) was not solicited by the Company after the date of this Agreement, (B)
does not violate any Exclusivity Agreement, and (C) is accompanied by evidence
of such party's ability to finance the Competing Transaction, to the extent that
the Board shall have concluded in good faith, on the basis of advice from its
legal counsel (that is recorded in writing and incorporated in the Company's
minutes) and the Company's financial advisors, that (y) such Competing
Transaction is more favorable to the shareholders of the Company than the
transactions contemplated by the Offer and this Agreement (taking into account
all legal, financial, regulatory and other aspects of the proposal and the
person making the proposal) and (z) failing to consider and cooperate with such
other party regarding the proposed Competing Transaction would constitute a
breach of the fiduciary duties of the Board to the Company's shareholders under
applicable law, the Company may furnish information to, and negotiate or
otherwise engage in discussions with that party. The Company shall immediately
advise Parent in writing of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations or correspondence relating to a Competing
Transaction, which becomes known to the Board during the term of this Agreement
and keep Parent fully apprised of the status and terms of any proposal relating
to a Competing Transaction on a current basis. The Company further agrees that
neither the Board nor any committee thereof will (A) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Purchaser Group,
the Board Recommendation, or (B) approve or recommend, or propose publicly to
approve or
33
recommend, any Competing Transaction. Notwithstanding the foregoing,
if prior to the Offer Purchase Closing, the Board determines in good faith, on
the basis of advice from its legal counsel (that is recorded in writing and
incorporated in the Company's minutes) and the Company's financial advisors that
its failure to cooperate with such other party regarding the proposed Competing
Transaction would constitute a breach of the fiduciary duties of the Board to
the Company's shareholders under applicable law, the Board may (subject to this
and the following sentences) withdraw or modify the Board Recommendation;
provided, however, that the Company shall immediately inform Purchaser orally
and in writing of the terms and conditions of such Competing Transaction and the
identity of the person making it and if any Competing Transaction is in writing,
the Company shall immediately deliver a copy thereof to Purchaser. Any
withdrawal or modification of the Board Recommendation shall not change the
approval of the Board for purposes of causing any state takeover statute or
other state law to be inapplicable to the transactions contemplated hereby,
including the Offer, the Merger.
(b) If, prior to the purchase of any Common Shares by the
Purchaser pursuant to the Offer, a party makes a bona fide written proposal for
a Competing Transaction, which (i) was not solicited by the Company in violation
of this Agreement, (ii) does not violate any Exclusivity Agreement, and (iii) is
accompanied by evidence of such party's ability to finance the Competing
Transaction, to the extent that the Board shall have concluded in good faith, on
the basis of advice from its legal counsel and the Company's financial advisors,
that (A) such Competing Transaction is more favorable to the shareholders of the
Company than the transactions contemplated by the Offer and this Agreement
(taking into account all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal) and (B) failing to consider and
cooperate with such other party regarding the proposed Competing Transaction
would constitute a breach of the fiduciary duties of the Board to the Company's
shareholders under applicable law, the Company may terminate this Agreement at
any time prior to the Offer Purchase Closing and enter into a letter of intent,
agreement-in-principle, acquisition agreement or other similar agreement with
respect to such Competing Transaction, provided that the Company immediately
informs Parent orally and in writing of such contemplated termination and
delivers to Parent within five (5) full business days following such termination
(A) by check or wire transfer of same day funds, (y) an amount equal to Parent's
Costs (as defined in Section 8.02) as the same may have been estimated by Parent
in good faith prior to the date of such delivery (subject to an adjustment
payment between the parties upon Parent's definitive determination of such
costs), and (z) the amount of the Termination Fee as provided in Section 8.02
and (B) a written acknowledgment from the Company and the other party to the
Competing Transaction that the Company and such other party have irrevocably
waived any right to contest such payments.
SECTION 6.09. COOPERATION. The Company agrees that, during the term
of this Agreement, it shall provide reasonable cooperation to the Purchaser to
facilitate the Purchaser's efforts to obtain the financing contemplated by the
Commitment Letters (including assisting the Purchaser in obtaining required
consents, making available management of the Company and allowing any direct or
indirect wholly owned Subsidiary of the Parent to satisfy the obligation of the
Purchaser Group under this Agreement) and provide all information reasonably
requested by the Purchaser.
34
SECTION 6.10. SUPPORT AGREEMENTS. The Company shall not amend,
modify, release under or otherwise lessen the obligations of the Key
Shareholders under the Support Agreements. The Company agrees to enforce fully
and promptly all provisions of the Support Agreements, including, without
limitation, seeking specific performance of (or other equitable and legal
remedies with respect to) each Key Shareholder's obligations under its
respective Support Agreement.
SECTION 6.11. EMPLOYMENT AGREEMENTS. Contemporaneous with the
execution of this agreement, the Company shall cause each of the Employees
listed on Schedule 6.11 ("Key Employees") to execute an employment agreement
substantially in the form attached hereto as ANNEX III (the "Employment
Agreements"). The Company shall not permit the amendment, modification, release
under or otherwise change the obligations of the Key Employees under the
Employee Agreements. The Company agrees to enforce fully and promptly all
provisions of the Employment Agreements, including, without limitation, seeking
specific performance of (or other equitable and legal remedies with respect to)
each Key Employee's obligations under its respective Employment Agreement.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01. CONDITIONS. The respective obligations of
Purchaser Group and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) PURCHASE OF COMMON SHARES. The Purchaser shall have
accepted for payment and paid for Common Shares pursuant to the Offer in
accordance with the terms hereof; provided that this condition shall be deemed
to have been satisfied with respect to the Purchaser Group if Purchaser fails to
accept for payment or pay for Common Shares pursuant to the Offer in violation
of the terms of the Offer.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No (i)
order or preliminary or permanent injunction shall be entered in any action or
proceeding before any court of competent jurisdiction or any statute, rule,
regulation, legislation, or order shall be enacted, entered, enforced,
promulgated, amended or issued by any United States legislative body, court,
government or governmental, administrative or regulatory authority or agency
(other than the waiting period provisions of the HSR Act) which shall remain in
effect and which shall have the effect of (x) making illegal or restraining or
prohibiting the making of the Offer, the acceptance for payment of, or payment
for, the Common Shares by Parent, the Purchaser or any other affiliate of
Parent, or the consummation of the Offer or the Merger or (y) imposing material
limitations on the ability of the Purchaser effectively to acquire or hold or
exercise full rights of ownership of the Common Shares, including, without
limitation, the right to vote the Common Shares purchased by the Purchaser on
all matters properly presented to the shareholders of the Company; (ii)
proceeding brought by an administrative agency or commission or other domestic
Governmental Entity seeking any of the foregoing shall be pending; or (iii)
action or proceeding
35
shall be commenced following the date of this Agreement and be pending before
any court of competent jurisdiction.
(c) SUPPORT AGREEMENTS. Each of the shareholders listed
on Schedule 7.01(c) ("Key Shareholder") shall have executed and delivered a
Support Agreement in the form attached hereto as Annex II.
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the shareholders of the Company (with
any termination by Parent also being an effective termination by the Purchaser
and Hold Co.):
(a) By the mutual written consent of Parent and the
Company;
(b) By the Company if (i) the Purchaser fails to commence
the Offer as provided in Section 1.01 hereof or, (ii) the Purchaser fails to
purchase validly tendered Common Shares in violation of the terms of the Offer
or this Agreement;
(c) By Parent or the Company if the Offer is terminated
or withdrawn pursuant to its terms without any Common Shares being purchased
thereunder; provided, however, that neither Parent nor the Company may terminate
this Agreement pursuant to this Section 8.01(c) if such party shall have
materially breached this Agreement or, in the case of Parent, if Parent or the
Purchaser is in material violation of the terms of the Offer.
(d) By Parent or the Company if any court or other
Governmental Entity shall have issued, enacted, entered, promulgated or enforced
any order, judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment, decree, injunction, ruling or other action shall have become final and
nonappealable; provided that the party seeking to terminate the Agreement shall
have used its reasonable efforts to remove or lift such order, decree or ruling;
(e) By Parent or the Company if any other condition set
forth in Annex I attached hereto shall be impossible to satisfy by the end of
the thirtieth (30th) business day following commencement of the Offer, unless
such circumstance results from the failure of the terminating party to perform
in any material respect its obligations under this Agreement; provided, however,
that the Company may not terminate this Agreement pursuant to this Section
8.01(e) if Parent waives in writing the relevant condition;
(f) By the Company upon any "material" breach of the
covenants and/or representations and warranties of Purchaser Group contained in
this Agreement; it being
36
understood that for the purposes of this 8.01(f), "material" means the
material threshold set forth in the first paragraph of Article IV;
(g) By Parent if prior to the Offer Purchase Closing the
Company's Board shall have withdrawn or modified in a manner adverse to Parent
(including in the circumstances described in Section 6.08(a)), or refrained from
making the Board Recommendation, or shall have publicly disclosed its intention
to change such recommendation, or shall have failed to reaffirm the Board
Recommendation within five (5) days of receipt from Parent or the Purchaser of a
request to so reaffirm the Board Recommendation, in each case except due to
Parent or Purchaser's material breach of this Agreement or material violation of
the terms of the Offer;
(h) By the Company, pursuant to and in accordance with
Section 6.08(b);
(i) By Parent in the event of any "material" breach of
the covenants and/or representations and warranties of the Company contained in
this Agreement; it being understood that for the purpose of this Section 8.01(i)
"material" means the material threshold set forth in the first paragraph of
Article IV;
(j) By Parent, if any Key Shareholder breaches any of
his, her or its obligations under the Support Agreements prior to the Effective
Time; or
(k) By the Company, if Parent's offer financing
commitment evidenced by the Acquisition Facility Commitment Letter from The Bank
of Nova Scotia, dated August 18, 2000 or other letter in amendment or
replacement, is terminated for any reason prior to October 9, 2000.
37
SECTION 8.02 EFFECT OF TERMINATION. If this Agreement terminates
pursuant to Section 8.01, all further obligations of the parties under this
Agreement shall terminate and forthwith become void and have no effect, without
any liability on the part of any party or its directors, officers or
shareholders, except that the provisions Section 8.02, and 5.06 and the
confidentiality provisions referenced in the first sentence of Section 6.02
shall survive any such termination.
IF EITHER OR BOTH PARTIES TERMINATE THIS AGREEMENT PURSUANT TO
SECTION 8.01 HEREOF, PARENT OR THE COMPANY SHALL PAY THE OTHER'S COSTS (AS
DEFINED) AND SUCH FEES AS ARE PROVIDED FOR HEREIN, IF ANY. PURCHASER GROUP
AND THE COMPANY AGREE THAT (i) ANY FEES DUE PURSUANT TO THIS SECTION 8.02 ARE
A REASONABLE ESTIMATE OF 1) OF EACH PARTIES' DAMAGES IN THE EVENT OF
TERMINATION UNDER SECTION 8.01, PLUS 2) THE INCREASE IN VALUE TO TOAST'S
SHAREHOLDERS CAUSED BY PURCHASER'S INTEREST IN ACQUIRING TOAST'S OUTSTANDING
SHARES, AND (ii) THE PAYMENT OF COSTS AND FEES SHALL BE THE SOLE MEASURE OF
THE PARTIES' REMEDIES REGARDLESS OF ACTUAL DAMAGES OR ACTUAL INCREASE IN
VALUE TO TOAST'S SHAREHOLDERS.
(a) Nothing contained in this Section 8.02 shall relieve
any party from liability for such party's breach of this Agreement; and if it
shall be judicially determined that termination of this Agreement was caused by
an intentional breach of this Agreement, then, in addition to other remedies at
law or equity for breach of this Agreement, the party so found to have
intentionally breached this Agreement shall indemnify and hold harmless the
other parties for their respective costs, fees and expenses of their legal
counsel, accountants, financial advisors and other experts and advisors as well
as fees and expenses incident to negotiation, financing, preparation and
execution of this Agreement and the transactions contemplated hereby ("Costs"),
it being understood that the bank commitment fees associated with Purchaser's
financing costs referred to in this subsection 8.02(a) shall be limited to the
lesser of actual documented financing costs or Five Hundred Thousand Dollars
($500,000).
(b) If this Agreement is terminated pursuant to Section
8.01(g), (h) or (i), the Company will within five (5) business days following
any such termination pay to Parent in cash by wire transfer in immediately
available funds to an account designated by Parent (i) in reimbursement for
Parent's expenses an amount equal to the aggregate amount of Purchaser Group's
documented Costs, and (ii) a payment in an amount equal to One Million Dollars
($1,000,000) (the "Termination Fee").
(c) If this Agreement is terminated pursuant to Section
8.01(f), Parent will within five (5) business days following any such
termination pay to the Company in cash by wire transfer in immediately available
funds to an account designated by the Company (i) in reimbursement for the
Company's expenses an amount equal to the aggregate amount of the Company's
documented Costs, and (ii) a payment in an amount equal to the Termination Fee.
(d) Notwithstanding Sections 8.02(b) and 8.02(c), if this
Agreement is terminated pursuant to 8.01(i) or 8.01(f) and such breach of the
Company's or Purchaser Group's
38
covenants and/or representations and warranties has a Material Adverse Effect
and was caused by Force Majeure, this Agreement shall become void and have no
effect, without any liability on the part of any party or its directors,
officers or shareholders.
(e) If this Agreement is terminated pursuant to Section
8.01(j) or Section 8.01(k), the breaching party shall pay to the non-breaching
party within five (5) business days following any such termination, in cash by
wire transfer in immediately available funds to an account designated by the
non-breaching party, (i) in reimbursement for the non-breaching party's expenses
an amount equal to the aggregate amount of the non breaching party's documented
Costs, and (ii) a payment in an amount equal to $1,500,000; it being understood
that any payment under this Section 8.02(e) is in lieu of and not in addition
to, any other payment that would otherwise be due under Section 8.02(a),
8.02(b), 8.02(c) or 8.02(d).
(f) If this Agreement is terminated and prior to the
expiration of the period ending one (1) year from the date of such termination,
the Company (i) publicly or otherwise announces a letter of intent or other
agreement relating to entering into a Competing Transaction, or (ii) consummates
a Competing Transaction, the Company will within five (5) business days
following consummation of a Competing Transaction pay to Parent in cash by wire
transfer in immediately available funds to an account designated by Parent a
payment in the amount equal to Nine Million Dollars ($9,000,000) (the "Topping
Fee").
(g) The prevailing party in any legal action undertaken
to enforce this Agreement or any provision hereof shall be entitled to recover
from the other party the costs and expenses (including attorneys' and expert
witness fees) incurred in connection with such action.
(h) If any provision of this Section 8.02 is invalid in
part or in whole, it will be deemed to have been amended, whether as to time,
amount or otherwise, as and to the extent required for its validity under
applicable law and, as so amended, will be enforceable. The parties will execute
all documents necessary to evidence such amendment.
SECTION 8.03. AMENDMENT. This Agreement and the Offer may be
amended by the Company, Parent and the Purchaser at any time before or after any
approval of this Agreement by the shareholders of the Company but, after any the
purchase of shares pursuant to the Offer, no amendment shall be made which
decreases the Merger Consideration or which materially adversely affects the
rights of the Company's shareholders hereunder without the approval of such
shareholders. This Agreement and the Offer may not be amended except by an
instrument in writing signed on behalf of all the parties.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto may (i) extend the time for the performance of any of
the obligations or other acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein by any other
party or in any document, certificate or writing delivered pursuant hereto by
any other party or (iii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on the
part of any party to any such
39
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 3.02, the last sentence of Section 6.02 and Section 6.05 shall survive
the Effective Time indefinitely (except to the extent a shorter period of time
is explicitly specified therein).
SECTION 9.02. ENTIRE AGREEMENT; ASSIGNMENT.
(a) This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party; provided however that Parent, Hold Co. and/or the Purchaser
may, without the consent of the Company, (i) assign their rights under this
Agreement in whole or in part to any of their respective Affiliates, or (ii)
collaterally assign their rights under this Agreement to the lender of Purchaser
Group. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
SECTION 9.03. 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, each of which shall remain in full
force and effect.
SECTION 9.04. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or facsimile to
the respective parties as follows:
If to Parent or the Purchaser:
Vincor International Inc.
000 Xxxxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
ATTN: Xxxxxxxx Xxxxxxxxx
Fax: (000) 000-0000
40
With a copy to:
Xxxxx, Xxxx & Heyburn PLLC
000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000-0000
XXX
ATTN: Xxx Xxxxxxxxx Xxxxxx
Fax: (000) 000-0000
Xxxxxxx Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX X0X 0X0
Xxxxxx
ATTN: Xxxxx Xxxxxx
Fax: (000) 000-0000
If to the Company:
X.X. Xxxxxxxx, Inc.
00000 Xxxxxxx Xxxx 00X
Xxxxxxx, Xxxxxxxxxx 00000
XXX
ATTN: Xxxx Xxxxxxxx
Fax:
With a copy to:
Xxxxxxx Xxxxx & Xxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
XXX
ATTN: Xxxxx Xxxxxxx
Fax: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof or otherwise.
SECTION 9.06. DESCRIPTIVE HEADINGS. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
41
SECTION 9.07. COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, except with
respect to Sections 2.03(d), 3.01, 3.02 and 6.07 nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.09. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
ARTICLE X
DEFINITIONS
SECTION 10.01. CERTAIN DEFINITIONS. As used in this Agreement:
"1995 Plan" has the meaning given thereto in Section 1.04
hereof.
"Affiliate," as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning given thereto in the preamble
hereof.
"Applicable Securities Laws" shall mean U.S., Canadian,
California or other applicable state blue sky laws.
"Board" has the meaning given thereto in the recitals hereof.
"Board Recommendation" has the meaning given thereto in
Section 1.02(a) hereof.
"Business" means the production, marketing and sales of wines
and the farming of grapes, and management of vineyards.
42
"Certificates" has the meaning given thereto in Section 3.02
hereof.
"Closing" has the meaning given thereto in Section 2.02
hereof.
"Closing Date" has the meaning given thereto in Section 2.02
hereof.
"Code" means the Internal Revenue Code of 1986 or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"Commitment Letter" has the meaning given thereto in Section
5.05 hereof.
"Common Share" and "Common Shares" have the meaning given
thereto in the recitals hereof.
"Company" has the meaning given thereto in the first paragraph
hereof.
"Company Representatives" has the meaning given thereto in
Section 6.02 hereof.
"Competing Transaction" has the meaning given thereto in
Section 6.08(a) hereof.
"Confidentiality Agreement" has the meaning given thereto in
Section 6.02 hereof.
"Consent" has the meaning given thereto in Section 4.05(b)
hereof.
"Costs" has the meaning given thereto in Section 8.02 hereof.
"December Balance Sheet" has the meaning given thereto in
Section 4.06(b) hereof.
"Disclosure Schedules" shall mean all of the separate
schedules referred to in Article IV and Article V taken together.
"Dissenting Shares" has the meaning given thereto in Section
3.01 hereof.
"Dollars" or "$" shall mean United States dollars.
"Effective Time" has the meaning given thereto in Section 2.02
hereof.
"Employee Agreements" has the meaning given thereto in Section
6.11 hereof.
"ERISA" has the meaning given thereto in Section 4.18(a)
hereof.
"Exchange Act" has the meaning given thereto in Section
4.05(b) hereof.
43
"Exclusivity Agreement" has the meaning given thereto to in
Section 6.01(j).
"Expiration Date" has the meaning given thereto in Section
1.01.
"Force Majeure" shall mean rain, fire, earthquake, flood,
abnormal wind or rain, other abnormal weather condition or natural disaster,
riot, war, or civil strife beyond the reasonable control of the Company, the
Purchaser Group or their respective authorized agents; provided, however,
that as used herein, Force Majeure does not include an event caused by any
default, error, or omission by the Company or Purchaser Group, or any agent
of the same acting within the scope of such agents' authority.
"GAAP" has the meaning given thereto in Section 4.06(b)
hereof.
"GCL" has the same meaning given thereto in the recitals
hereof.
"Government Entity" has the meaning given thereto in Section
4.05(b) hereof.
"Hazardous Material" has the meaning given thereto in Section
4.21(a).
"Hold Co." has the meaning given thereto in the first
paragraph hereof.
"HSR Act" has the meaning given thereto in Section 4.05(b)
hereof.
"Indemnified Parties" has the meaning given thereto in Section
6.06(a) hereof.
"Intellectual Property" has the meaning given thereto in
Section 4.14 hereof.
"June Balance Sheet" has the meaning given thereto in Section
4.06(b).
"Key Shareholder" shall have the meaning given thereto in
Section 7.01(c).
"Knowledge" or "Company's Knowledge" and words of similar
import shall mean actual knowledge of a particular fact being known by any of
(i) the current serving directors of the Company, (ii) any of the Company's
officers, or (iii) any person succeeding to the position currently of any of the
persons indicated in clauses (i) and (ii) above, in each case after due
investigation of corporate records and after such other due inquiry as a
reasonable person would make under the circumstances.
"Leased Personal Property" has the meaning give thereto in
Section 4.11.
"Liens" means liens, security interests, options, rights of
first refusal, easements, mortgages, charges, pledges, deeds of trust,
rights-of-way, restrictions, encroachments, licenses, leases, permits, security
agreements, or any other encumbrances, restrictions or limitations on the use of
real or personal property, whether or not they constitute specific or floating
charges.
44
"March Balance Sheet" has the meaning given thereto in Section
4.06(b).
"Material Adverse Effect" means any development, condition or
circumstance having an effect on the assets, business operations, or financial
condition of the Company or Parent that is adverse to the Company or Parent
taken as a whole that exceeds Five Hundred Thousand Dollars ($500,000) in the
aggregate.
"Material Contract" means the contracts referred to on
Schedule 4.13.
"Merger" has the meaning given thereto in the recitals hereof.
"Merger Consideration" has the meaning given thereto in the
recitals hereof.
"Minimum Condition" has the meaning given thereto in Annex I
hereof.
"Multiemployer Plan" has the meaning given thereto in Section
4.18(j) hereof.
"Offer" has the meaning given thereto in the recitals hereof.
"Offer Documents" has the meaning given thereto in Section
1.01(c) hereof.
"Offer Price" has the meaning given thereto in the recitals
hereof.
"Offer Purchase Closing" has the meaning given thereto in
Section 1.01(d) hereof.
"Offer to Purchase" has the meaning given thereto in Section
1.01(c) hereof.
"Option" has the meaning given thereto in Section 1.04 hereof.
"Other Filings" has the meaning given thereto in Section 4.07
hereof.
"Parent" has the meaning given thereto in the first paragraph
hereof.
"Parent Representatives" has the meaning given thereto in
Section 6.02 hereof.
"Paying Agent" has the meaning given thereto in Section 3.02
hereof.
"Permitted Encumbrances" has the meaning given thereto in
Section 4.10 hereof.
"Permits" has the meaning given thereto in Section 4.15
hereof.
"Person" or "person" shall include individuals, corporations,
partnerships, limited liability company, trusts, other entities and groups
(which term shall include a "group" as such term is defined in Section 13(d)(3)
of the Exchange Act ).
45
"Purchaser" has the meaning given thereto in the first
paragraph hereof.
"Schedule 14D-9" has the meaning given thereto in Section
1.02(a).
"SEC" has the meaning given thereto in Section 1.01 hereof.
"SEC Reports" has the meaning given thereto in Section 4.06(a)
hereof.
"Subsidiary" or Subsidiaries" has the meaning given thereto in
Section 4.01 hereof.
"Support Agreements" means each of those certain Support
Agreements, dated the date hereof, by and between the Company and each of the
Key Shareholders, and such agreements collectively are referred to as the
"Support Agreements."
"Surviving Corporation" has the meaning given thereto in
Section 2.01 hereof.
"Taxes" mean any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss. 59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest
penalty, or addition thereto, whether disputed or not.
"Tax Returns" means any return, declaration, report, estimate,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
"Violation" has the meaning given thereto in Section 4.05(a)
hereof.
"Warrants" has the meaning given thereto in Section 1.04(b)
hereof.
"Wine Permits" has the meaning given thereto in Section 4.15
hereof.
* * * * * *
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
46
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
Vincor International Inc.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------------
Title: President & Chief Executive Officer
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------------
Title: Executive Vice President
------------------------------------
Vincor Holdings, Inc.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------------
Title: President & Chief Executive Officer
Toast Acquisition Company, Inc.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------------
Title: President & Chief Executive Officer
X.X. Xxxxxxxx, Inc.
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxx
------------------------------------
Title: Co-President and Co-Chief Executive
Officer
47
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provisions of the Offer, the Purchaser shall
not be required to accept for payment or pay for any tendered Common Shares,
unless (i) there are validly tendered and not properly withdrawn prior to the
Expiration Date that number of Common Shares which represent at least ninety
percent (90%) of the total number of outstanding Common Shares on a fully
diluted basis (excluding Options and Warrants tendered for pursuant to Section
1.04) on the date of purchase (the "Minimum Condition"); provided, however, that
notwithstanding any contrary provision in this Annex I or the Agreement, under
no circumstances may the Purchaser Group waive the Minimum Condition or
otherwise accept for payment any Common Shares, unless such Common Shares
represent more than fifty percent (50%) of the Common Shares. Furthermore,
notwithstanding any other provisions of the Offer, the Purchaser shall not be
required to accept for payment and may, subject to the terms of the Merger
Agreement, amend the Offer, postpone the acceptance for payment of or payment
for tendered Common Shares or terminate the Offer and not accept for payment any
Common Shares if at any time on or after the date of the Merger Agreement
(unless otherwise indicated below) and before the time of payment for any Common
Shares, any of the following events (each, an "Event") shall occur:
(a) (i) The waiting period pursuant to the provisions of
the HSR Act and any applicable foreign or supranational antitrust laws
applicable to the Offer or the Merger shall fail to expire or terminate; or (ii)
The Department of Justice, Federal Trade Commission or any foreign or
supranational agency or entity charged with enforcement of antitrust laws
applicable to the transactions contemplated initiates, challenges or seeks to
enjoin the consummation of the Offer or the Merger and such actions remains
pending; or
(b) (i) Any order or preliminary or permanent injunction
shall be entered in any action or proceeding before any court of competent
jurisdiction or any statute, rule, regulation, legislation, or order shall be
enacted, entered, enforced, promulgated, amended or issued by any United States
legislative body, court, government or governmental, administrative or
regulatory authority or agency (other than the waiting period provisions of the
HSR Act) which shall remain in effect and which shall have the effect of (x)
making illegal or restraining or prohibiting the making of the Offer, the
acceptance for payment of, or payment for, the Common Shares by Parent, the
Purchaser or any other affiliate of Parent, or the consummation of the Offer or
the Merger or (y) imposing material limitations on the ability of the Purchaser
effectively to acquire or hold or exercise full rights of ownership of the
Common Shares, including, without limitation, the right to vote the Common
Shares purchased by the Purchaser on all matters properly presented to the
shareholders of the Company; (ii) any proceeding brought by an administrative
agency or commission or other domestic Governmental Entity seeking any of the
foregoing shall be pending; or (iii) any action or proceeding shall be commenced
following the date of the Merger Agreement and be pending before any court of
competent jurisdiction which would have a Material Adverse Effect on the
Company; or
48
(c) The Company and Parent shall have reached an
agreement that the Offer or the Merger Agreement be terminated, or the Merger
Agreement shall have been terminated in accordance with its terms; or
(d) The Company shall have breached one or more of its
representations and warranties set forth in the Merger Agreement or failed to
perform any of its obligations, covenants or agreements under the Merger
Agreement and such breaches or failures to perform shall in the aggregate
materially and adversely affect the ability of Purchaser Group to own or control
the Company or the Successor Company, its equity securities and its assets; or
(e) On or after the date of the Merger Agreement, any
Material Adverse Effect on the Company shall have occurred or be occurring.
The Offer shall terminate if the Merger Agreement is terminated
pursuant to its terms. Pursuant to the Merger Agreement, the Purchaser Group has
agreed to use their respective reasonable best efforts to cause all conditions
to the Offer to be fulfilled.
The foregoing conditions are for the benefit of the Purchaser Group.
The Purchaser Group may assert the failure of such conditions regardless of the
circumstances giving rise to any such failure and the Purchaser Group may waive
any such conditions in whole or in part at any time and from time to time in
their reasonable discretion, in each case, subject to the terms of this Annex I
and the Merger Agreement. The failure by Purchaser Group at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
Agreement" shall be deemed to refer to the Agreement to which this Annex I is
appended.
49
ANNEX II
[SUPPORT AGREEMENTS -- SEE EXHIBITS (d)(4) AND (d)(5)]
50
ANNEX III
[EMPLOYMENT AGREEMENTS -- SEE EXHIBITS (d)(1) AND (d)(2)]
51