Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
by and among
DIAGEO NORTH AMERICA, INC.,
DOUBLE WINES, INC.
and
THE CHALONE WINE GROUP, LTD.
Dated as of December 18, 2004
TABLE OF CONTENTS
PAGE
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ARTICLE I.
THE MERGER
1.1 The Merger................................................................ 2
1.2 Closing................................................................... 2
1.3 Effective Time............................................................ 2
1.4 Effects of the Merger..................................................... 3
1.5 Articles of Incorporation................................................. 3
1.6 Bylaws.................................................................... 3
1.7 Officers and Directors of Surviving Corporation........................... 3
1.8 Effect on Capital Stock................................................... 3
1.9 Surrender and Payment..................................................... 4
1.10 Options; Stock Option Plans............................................... 6
1.11 Withholding Rights........................................................ 7
1.12 Employee Stock Purchase Plan.............................................. 7
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company............................. 7
2.2 Representations and Warranties of Parent.................................. 19
2.3 Representations and Warranties of Parent and Merger Sub................... 20
ARTICLE III.
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1 Covenants of the Company.................................................. 21
3.2 Advice of Changes; Government Filings..................................... 24
ARTICLE IV.
ADDITIONAL AGREEMENTS
4.1 Preparation of Proxy Statement; the Company Shareholders Meeting.......... 25
4.2 Access to Information..................................................... 26
4.3 Approvals and Consents; Cooperation....................................... 27
4.4 Acquisition Proposals..................................................... 28
4.5 Employee Benefits......................................................... 30
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4.6 Fees and Expenses......................................................... 31
4.7 Indemnification; Directors' and Officers' Insurance....................... 31
4.8 Wine Club................................................................. 32
4.9 Public Announcements...................................................... 32
4.10 Distributor Notice........................................................ 32
4.11 Intellectual Property Liens............................................... 32
4.12 Certain Transactions with Affiliates...................................... 32
4.13 Rothschild Termination Fee................................................ 33
4.14 Rothschild Voting Agreement............................................... 33
4.15 Financial Capability...................................................... 33
4.16 Further Assurances........................................................ 33
ARTICLE V.
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation to Effect the Merger................ 33
5.2 Additional Conditions to Obligations of Parent and Merger Sub............. 34
5.3 Additional Conditions to Obligations of the Company....................... 34
ARTICLE VI.
TERMINATION AND AMENDMENT
6.1 Termination............................................................... 35
6.2 Effect of Termination..................................................... 36
6.3 Amendment................................................................. 38
6.4 Extension; Waiver......................................................... 38
ARTICLE VII.
GENERAL PROVISIONS
7.1 Non-Survival of Representations, Warranties and Agreements; No Other
Representations and Warranties.......................................... 39
7.2 Notices................................................................... 39
7.3 Interpretation............................................................ 39
7.4 Counterparts.............................................................. 40
7.5 Entire Agreement; No Third Party Beneficiaries............................ 40
7.6 Governing Law; Jurisdiction............................................... 40
7.7 Severability.............................................................. 41
7.8 Assignment................................................................ 41
7.9 Enforcement............................................................... 41
7.10 Definitions............................................................... 41
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SCHEDULES
Schedule 4.8 Wine Club Dividend
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GLOSSARY OF DEFINED TERMS
Location of
Definition Defined Term
---------- ------------
Acquisition Agreement 4.4(a)
Acquisition Proposal 7.10(a)
Agreement Preamble
Agreement of Merger 1.3
Board of Directors 7.10(b)
Business Day 7.10(c)
Certificates 1.9(b)
CGCL Recitals
Closing 1.2
Closing Date 1.2
Code 2.1(h)
Company Preamble
Company Benefit Plans 2.1(m)(i)
Company Common Stock Recitals
Company Disclosure Schedule 2.1
Company Intellectual Property Rights 2.1(o)
Company Material Contracts 2.1(l)
Company Permits 2.1(f)
Company Recommendation 4.1(c)
Company Representatives 7.10(d)
Company SEC Reports 2.1(d)(i)
Company Shareholders Meeting 4.1(b)
Company Stock Option Plan 7.10(e)
Company Subsidiaries 2.1(a)
Company Voting Debt 2.1(b)(iii)
Confidentiality Agreement 4.2
Effect 7.10(i)
Effective Time 1.3
Environmental Laws 7.10(f)
ERISA 2.1(m)(i)
ESPP 1.12
ESPP Termination Date 1.12
Exchange Act 2.1(c)(iv)
Exchange Agent 1.9(a)
Expenses 4.6
GAAP 2.1(d)(i)
Governmental Entity 2.1(c)(iv)
HSR Act 2.1(c)(iv)
Indemnified Party 4.7
Intellectual Property 7.10(g)
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Location of
Definition Defined Term
---------- ------------
Knowledge 7.10(h)
Liens 2.1(b)(ii)
Material Adverse Effect 7.10(i)
Merger Recitals
Merger Consideration 1.8(d)
Merger Sub Preamble
Nasdaq 2.1(c)(iv)
Notice of Superior Proposal 4.4(b)
Option Merger Consideration 1.10(b)
Options 1.10
Organizational Documents 7.10(j)
Outside Date 6.1(b)
Parent Preamble
Parent Proposal Recitals
Permitted Liens 7.10(k)
Person 7.10(l)
Proxy Statement 2.1(e)
Registered 7.10(m)
Related Party 2.1(i)
Required Regulatory Approvals 5.1(d)
Rothschild Recitals
Rothschild Agreement Recitals
Rothschild Termination Fee 6.2(c)
SEC 2.1(d)(i)
Securities Act 2.1(c)(iv)
Shareholder Approval 4.4(a)
SOXA 2.1(d)(iii)
Special Committee 2.1(i)
Subsidiary 7.10(n)
Superior Proposal 7.10(o)
Surviving Corporation 1.1
Tax 7.10(p)
Taxes 7.10(p)
Tax Return 7.10(p)
Terminating Company Breach 6.1(f)
Terminating Parent Breach 6.1(g)
Termination Fee 6.2(b)
the other party 7.10(q)
Third Party 7.10(r)
Triple Wines Recitals
Violation 2.1(c)(iii)
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This AGREEMENT AND PLAN OF MERGER, dated as of December 18, 2004 (this
"Agreement"), by and among Diageo North America, Inc., a Connecticut corporation
("Parent"), Double Wines, Inc., a California corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and The Chalone Wine Group, Ltd., a
California corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Company entered into the Agreement and Plan of Merger,
dated as of October 30, 2004 (the "Rothschild Agreement"), among Domaines Barons
xx Xxxxxxxxxx (Lafite) ("Rothschild"), Triple Wines, Inc. ("Triple Wines") and
the Company, pursuant to which the Company, Rothschild and Triple Wines agreed
to enter into a transaction whereby each issued and outstanding share of common
stock, no par value per share, of the Company ("Company Common Stock"), other
than shares owned directly or indirectly by Rothschild or by the Company, would
be converted into the right to receive $11.75 in cash;
WHEREAS, after the execution of the Rothschild Agreement, Parent made a
bona fide written proposal (the "Parent Proposal") to the Board of Directors of
the Company to effect a merger, indirectly, whereby each issued and outstanding
share of Company Common Stock, other than shares owned directly or indirectly by
the Company or its subsidiaries, would convert into the right to receive $14.25
in cash;
WHEREAS, the Board of Directors of the Company has determined that the
Parent Proposal is a "Superior Proposal" (as defined in the Rothschild
Agreement);
WHEREAS, pursuant to and in accordance with Section 4.4(b) of the
Rothschild Agreement, on December 12, 2004 the Company gave notice to Rothschild
of the Company's receipt of the Parent Proposal and Rothschild did not propose
adjustments to the terms and conditions of the Rothschild Agreement in
accordance with Section 4.4(b) of the Rothschild Agreement to cause the Parent
Proposal to no longer be a Superior Proposal;
WHEREAS, the Company has terminated the Rothschild Agreement as of
December 18, 2004 pursuant to Section 6.1(d) thereof;
WHEREAS, upon the terms of and subject to the conditions of this
Agreement, the Company, Parent and Merger Sub will enter into a transaction to
effect the Parent Proposal;
WHEREAS, at a meeting duly called and held, and acting with full
disclosure of the material facts as to the Merger and after duly inquiring as to
the interest of certain of the Company's directors in the Merger and the
transactions contemplated by this Agreement, the Board of Directors (with
certain members abstaining) has (i) determined in good faith that this Agreement
and the transactions contemplated hereby, including the Merger, are in the best
interests of the Company's shareholders, (ii) approved and
adopted this Agreement and the transactions contemplated hereby, including the
Merger, in accordance with the requirements of the California General
Corporation Law ("CGCL"), and (iii) subject to the provisions of Sections 4.1
and 4.4(b), resolved to recommend approval and adoption of this Agreement and
the Merger by the shareholders of the Company;
WHEREAS, in order to effectuate the foregoing, Merger Sub, upon the
terms and subject to the conditions of this Agreement and in accordance with the
CGCL, will merge with and into the Company (the "Merger"); and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the CGCL, Merger Sub shall be merged
with and into the Company at the Effective Time (as defined below). Following
the Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") in accordance with the CGCL.
1.2 Closing. The closing of the Merger (the "Closing") will take place
as soon as practicable after satisfaction or waiver (as permitted by this
Agreement and applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article V
(the "Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Xxxxxx & Xxxxxxx,
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000, unless another place
is agreed to in writing by the parties hereto.
1.3 Effective Time. Upon the Closing, the parties shall file with the
Secretary of State of the State of California an agreement of merger or other
appropriate documents (in any such case, the "Agreement of Merger") executed in
accordance with the relevant provisions of the CGCL and shall make all other
filings, recordings or publications required under the CGCL in connection with
the Merger. The Merger shall become effective at such time as the Agreement of
Merger is duly filed with the Secretary of State of the State of California, or
at such other time as the parties may agree and specify in the Agreement of
Merger (the time the Merger becomes effective being the "Effective Time").
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1.4 Effects of the Merger. At and after the Effective Time, the Merger
will have the effects set forth in Section 1107 of the CGCL.
1.5 Articles of Incorporation. The articles of incorporation of Merger
Sub as in effect immediately prior to the Effective Time shall be the articles
of incorporation of the Company until thereafter changed or amended as provided
therein or by applicable law.
1.6 Bylaws. The bylaws of Merger Sub as in effect at the Effective Time
shall be the bylaws of the Company until thereafter changed or amended as
provided therein or by applicable law.
1.7 Officers and Directors of Surviving Corporation. The officers of
the Company shall be the officers of the Surviving Corporation, and the
directors of Merger Sub shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or otherwise ceasing to be an
officer or director, as applicable, or until their respective successors are
duly elected and qualified, as the case may be.
1.8 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, no par value per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common Stock
that is owned by the Company shall automatically be canceled and retired and
shall cease to exist, and no Merger Consideration shall be delivered in exchange
therefor.
(c) Conversion of Stock Held by Company Subsidiaries. Each share of
Company Common Stock that is owned by a wholly-owned Subsidiary of the Company
shall be converted into Surviving Corporation stock of equivalent value.
(d) Conversion of Company Common Stock. Subject to Section 1.9(i), each
issued and outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 1.8(b) and those converted in accordance
with Section 1.8(c)) shall be converted into the right to receive $14.25 in
cash, without interest (the "Merger Consideration"). As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of such certificates, the Merger Consideration.
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1.9 Surrender and Payment.
(a) Exchange Agent. Prior to the Effective Time, Parent shall appoint
an agent (the "Exchange Agent") for the purpose of exchanging certificates
representing shares of Company Common Stock for the Merger Consideration.
Immediately prior to the Effective Time, Parent shall deposit with the Exchange
Agent (i) the Merger Consideration to be paid in respect of the shares of
Company Common Stock and (ii) Option Merger Consideration to be paid with
respect to the Company's outstanding Options as provided for in Section 1.10.
For purposes of determining the Merger Consideration to be made available,
Parent shall assume that no holder of shares of Company Common Stock will
perfect its right to appraisal of such shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger (but in any event within three Business Days after
the Effective Time), the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates (the
"Certificates") which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock, other than shares to be canceled and
retired in accordance with Section 1.8(b), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as the Surviving
Corporation may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration (which Parent shall
cause the Exchange Agent to pay promptly), and the Certificate so surrendered
shall forthwith be canceled. If any portion of the Merger Consideration is to
paid to a Person other than the registered holder of the shares represented by
the certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. Until surrendered
as contemplated by this Section 1.9, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration.
(c) No Further Ownership Rights in Company Common Stock. All Merger
Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article I shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any
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dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article I, except as otherwise provided by law.
(d) Unclaimed Funds. Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 1.9(a) that remains
unclaimed by holders of the Certificates for one year after the Effective Time
of the Merger shall be delivered to Parent, upon demand, and any holders of
Certificates who have not theretofore complied with this Article I shall
thereafter look only to Parent for payment of their claim for Merger
Consideration.
(e) No Liability. None of Parent, Merger Sub, the Company or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Investment of Funds. The Exchange Agent shall invest any Merger
Consideration made available to the Exchange Agent pursuant to Section 1.9(a),
as directed by Parent, on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent.
(g) Lost Certificates. In the event that 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 Parent, the posting by such Person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
with respect to such Certificate to which such person is entitled pursuant
hereto.
(h) Merger Consideration. Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 1.9(a) to pay for shares of
Company Common Stock for which appraisal rights have been perfected shall be
returned to Parent upon demand.
(i) Dissenting Shares. Notwithstanding Section 1.8, shares of Company
Common Stock, outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in writing
and who has demanded appraisal for such shares in accordance with the CGCL,
shall not be converted into a right to receive the Merger Consideration, unless
such holder fails to perfect or withdraws or otherwise loses its right to
appraisal. If after the Effective Time
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such holder fails to perfect or withdraws or loses its right to appraisal, and
subject to Section 1308 of the CGCL, such shares shall be treated as if they had
been converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of shares of Company Common Stock, and
Parent shall have the right to participate in all negotiations and proceedings
with respect to such demands. The Company shall not, except with the prior
written consent of Parent or as may be required by applicable law, make any
payment with respect to, or settle or offer to settle, any such demands.
1.10 Options; Stock Option Plans. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any option to
purchase shares of Company Common Stock under the Company Stock Option Plan,
whether vested or not vested (each, an "Option" and collectively, the
"Options"), or any other Person, except as expressly provided herein:
(a) each Option outstanding immediately prior to the Effective Time
with an exercise price per share equal to or greater than the Merger
Consideration shall be canceled and the holder thereof shall have no right to
receive any consideration therefor; and
(b) each Option outstanding three (3) Business Days prior to the
Effective Time with an exercise price per share less than the Merger
Consideration shall become fully vested and exercisable as of the third Business
Day prior to the Effective Time and, if remaining outstanding as of the
Effective Time, shall be canceled immediately prior to the Effective Time in
exchange for the right to receive a payment in cash, without interest, equal to
the product (such product, the "Option Merger Consideration") of (i) the excess
of (x) the Merger Consideration over (y) the exercise price per share under such
Option multiplied by (ii) the number of shares of Company Common Stock
underlying each such Option, which cash payment shall be reduced by any
applicable withholding taxes. As soon as reasonably practicable after the
Effective Time of the Merger (but in any event within three Business Days after
the Effective Time), the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of an Option entitled to receive Option Merger Consideration
(i) a letter of transmittal in form and with such provisions which Parent may
reasonably request and (ii) instructions for use in effecting the surrender of
the Options in exchange for the Option Merger Consideration. As soon as
reasonably practicable following the Effective Time, but in no event more than
ten (10) Business Days thereafter, the Surviving Corporation shall cause the
Exchange Agent to mail to each holder of an Option entitled to receive Option
Merger Consideration, who properly completed and returned to the Exchange Agent
a letter of transmittal previously sent to such holder by the Exchange Agent,
the applicable Option Merger Consideration. As of the Effective Time, the
Company Stock Option Plan shall be terminated and no further Options shall be
granted thereunder.
(c) In connection with the execution and delivery of this Agreement,
the Company has received the consent of each Option holder identified on
Schedule
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1.10(c)(i) in substantially the same form as the form of consent set forth in
Schedule 1.10(c)(ii).
(d) Prior to the Effective Time, the Company shall take, and shall
cause to be taken, commercially reasonable actions to effect the cancellation of
all unexercised Options, including, without limitation, properly delivering to
each holder of an Option any notice(s) that may be required under the Company
Stock Option Plan and soliciting the consent of each holder of an Option issued
under the Company's 1997 Stock Option Plan in substantially the form set forth
on Schedule 1.10(c)(ii). Ten (10) Business Days prior to the Closing Date, the
Company shall provide Parent with a list containing the name of any holder of an
Option issued under the Company's 1997 Stock Option Plan who has not signed and
delivered the consent referred to in the immediately preceding sentence.
1.11 Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Article I such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign Tax law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock or the holder of an Option, as the
case may be, in respect of which the Surviving Corporation or Parent, as the
case may be, made such deduction and withholding.
1.12 Employee Stock Purchase Plan. The Company shall take all actions
necessary to provide that the Company's 2003 Employee Stock Purchase Plan (the
"ESPP") shall terminate on the close of business on the last Business Day
immediately prior to the Effective Time (the "ESPP Termination Date"), all
participants' rights under the ongoing offering shall terminate upon such ESPP
Termination Date, and all accumulated payroll deductions allocated to each
participant's account under the ESPP shall thereupon be used to purchase from
the Company whole shares of Company Common Stock at a price determined under the
terms of the ESPP immediately prior to the ESPP Termination Date, subject to the
terms and conditions of the ESPP. The Company shall give participants in the
ESPP at least 10 days' notice of such ESPP Termination Date in accordance with
the ESPP. At the Effective Time, any Company Common Stock so purchased will be
treated as provided in Section 1.8 of this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. Except as set forth
in the disclosure schedules delivered by the Company to Parent at or prior to
the execution of this Agreement (the "Company Disclosure Schedule"), each of
which exceptions, in
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order to be applicable to any particular representation or warranty, shall
specifically indicate the Section, or subsection, of this Section 2.1 to which
it relates (except to the extent that the applicability of such exception to
such Section or subsection is otherwise readily apparent), or as set forth in
the Company SEC Reports (as defined below), the Company represents and warrants
to Parent and Merger Sub as follows:
(a) Organization, Standing and Power. Each of the Company and each of
its Subsidiaries (the "Company Subsidiaries") has been duly incorporated and is
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and each Company Subsidiary is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify could not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on the Company. The copies of the Organizational
Documents of the Company and the Company Subsidiaries which were previously
furnished or made available to Parent are true, complete and correct copies of
such documents as in effect on the date of this Agreement.
(b) Capital Structure.
(i) As of the date of this Agreement, the authorized capital
stock of the Company consists of 25,000,000 shares of Company Common
Stock, of which 13,483,011 shares are issued and outstanding. All
issued and outstanding shares of the capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable. No class
of Company capital stock is entitled to preemptive rights. None of the
issued and outstanding shares of Company Common Stock have been issued
in violation of any preemptive rights of current or past holders of any
class of Company capital stock or are subject to any preemptive rights
of current or past Company shareholders granted by the Company. As of
the date of this Agreement, there are no outstanding options, stock
appreciation rights, phantom equity, warrants, indebtedness convertible
into capital stock or other rights to acquire capital stock from the
Company other than (i) Options representing in the aggregate the right
to purchase 1,350,202 shares of Company Common Stock under the Company
Stock Option Plan and (ii) up to 50,000 shares of Company Common Stock
available under the ESPP. The Company Disclosure Schedule sets forth
the name of each person holding outstanding Options, the number of
shares which may be purchased upon exercise of such Options, the
expiration date of such Options as of the date of this Agreement and
the exercise price per Share of such Options.
(ii) All of the issued and outstanding shares of capital stock
of the Company Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable and are owned by the Company, free and clear of
any liens, claims, encumbrances, restrictions, preemptive rights or any
other claims of any third party ("Liens"). Except for the capital stock
of the Company Subsidiaries, the
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Company does not own, directly or indirectly, any capital stock or
other ownership interest in any Person.
(iii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company having the right to vote on
any matters on which shareholders may vote ("Company Voting Debt") are
issued or outstanding.
(iv) Other than the Options and the ESPP, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any
Company Subsidiary is a party or by which any of them is bound
obligating the Company or any Company Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. As of
the date of this Agreement, there are no outstanding obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any Company
Subsidiary.
(c) Authority; No Conflicts.
(i) The Company has all requisite corporate power and
corporate authority to enter into this Agreement and, subject to the
adoption of this Agreement by the requisite vote of the holders of
Company Common Stock, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Company, subject in the case of the consummation of the Merger to the
approval of this Agreement and the principal terms of the Merger by the
shareholders of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(ii) At a meeting duly called and held, and with full
disclosure of the material facts as to the Merger and after having
inquired as to the interest of certain of the Company's directors in
the Merger and the transactions contemplated by this Agreement, the
Board of Directors (with certain members abstaining) has (1)
determined, in what the Board of Directors believes to be good faith,
that this Agreement and the transactions contemplated hereby, including
the Merger, are in the best interests of the Company's shareholders,
(2) approved and adopted this Agreement and the transactions
contemplated hereby, including the
-9-
Merger, in accordance with the requirements of the CGCL, and (3)
subject to the provisions of Section 4.1 and 4.4(b), resolved to
recommend approval and adoption of this Agreement and the Merger by the
shareholders of the Company.
(iii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation
of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on any assets (any such conflict,
violation, default, right of termination, amendment, cancellation or
acceleration, loss or creation, a "Violation") pursuant to: (A) any
provision of the Organizational Documents of the Company or the Company
Subsidiaries, (B) except as could not reasonably be expected to have a
Material Adverse Effect on the Company, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company,
the Company Subsidiaries or their respective properties or assets or
(C) except as could not reasonably be expected to have a Material
Adverse Effect on the Company and, subject to obtaining or making the
consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (v) below, any loan
or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession,
franchise or license applicable to the Company, the Company
Subsidiaries or their respective properties or assets.
(iv) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national,
state, municipal or local government, any instrumentality, subdivision,
court, administrative agency or commission or other authority thereof
(a "Governmental Entity") is required by or with respect to the Company
or the Company Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby, except for (x) those
required under or in relation to (A) the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) the
Securities Act of 1933, as amended (the "Securities Act"), (C) the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (D)
the CGCL with respect to the filing and recordation of appropriate
merger or other documents, (E) rules and regulations of the Nasdaq
National Market ("Nasdaq"), and (F) antitrust or other competition laws
of other jurisdictions, and (y) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain could not reasonably be expected to have a
Material Adverse Effect on the Company.
-10-
(d) Reports and Financial Statements.
(i) The Company has filed all required reports, schedules,
forms, statements and other documents required to be filed by it with
the Securities and Exchange Commission (the "SEC") since January 1,
2004 (collectively, including all exhibits thereto, the "Company SEC
Reports"). None of the Company SEC Reports, as of their respective
dates (or, if amended or superseded by a filing prior to the date of
this Agreement or of the Closing Date, then on the date of such
filing), 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 therein, in light of the circumstances under which
they were made, not misleading. Each of the financial statements
(including the related notes) included in the Company SEC Reports was
prepared from, and is in accordance with, the books and records of the
Company and fairly presents in all material respects the consolidated
financial position and consolidated results of operations and cash
flows of the Company and the Company Subsidiaries as of the respective
dates or for the respective periods set forth therein, all in
conformity with U.S. generally accepted accounting principles ("GAAP")
consistently applied during the periods involved except as otherwise
noted therein, and subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments that
have not been and are not expected to be material in amount. All of
such Company SEC Reports, as of their respective dates (or as of the
date of any amendment to the respective Company SEC Report), complied
as to form in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as set forth in the Company SEC Reports filed
prior to the date of this Agreement, and except for liabilities and
obligations incurred in the ordinary course of business and consistent
with past practice since December 31, 2003, neither the Company nor any
Company Subsidiary has any liabilities or obligations of any nature
required by GAAP to be set forth on a consolidated balance sheet of the
Company or any Company Subsidiary or in the notes thereto which,
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect on the Company. The Company has delivered to
Parent complete and correct copies of all documents governing all
material "off balance sheet arrangements" (as defined by item 303(a)(4)
of Regulation S-K promulgated by the SEC) in respect of the Company or
any of its Subsidiaries.
(iii) The Company has in place the "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act) required in order for the Chief Executive Officer and
Chief Financial Officer of the Company to engage in the review and
evaluation process mandated by Section 302 of the Xxxxxxxx-Xxxxx Act of
2002 ("SOXA"). The Company's "disclosure controls and procedures" are
reasonably designed to ensure that material
-11-
information (both financial and non-financial) relating to the Company
and its consolidated Subsidiaries required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC, and that such information
is accumulated and communicated to the Company's principal executive
and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive
Officer and Chief Financial Officer of the Company required by Section
302 of SOXA with respect to such reports.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the proxy
statement related to the meeting of the Company's shareholders to be
held in connection with the Merger and the transactions contemplated by
this Agreement (the "Proxy Statement"), and any amendments or
supplements thereto will, on the date the Proxy Statement is first
mailed to the Company's shareholders or at the time of the Company
Shareholders Meeting (as defined below), 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 therein, in
light of the circumstances under which they were made, not misleading.
The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
2.1(e), no representation or warranty is made by the Company with
respect to statements made or incorporated by reference in the Proxy
Statement or the Information Statement, as applicable, based on
information supplied by Parent or Merger Sub for inclusion or
incorporation by reference therein.
(f) Compliance with Applicable Laws; Regulatory Matters. The Company
and the Company Subsidiaries hold all permits, licenses, certificates,
franchises, registrations, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of their businesses,
taken as a whole (the "Company Permits"). The Company and the Company
Subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. The
businesses of the Company and the Company Subsidiaries are not being and have
not been conducted in violation of any law, ordinance, regulation, judgment,
decree, injunction, rule or order of any Governmental Entity, except for
violations which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company. As of the date of
this Agreement, no investigation by any Governmental Entity with respect to the
Company or any Company Subsidiary is
-12-
pending or, to the Knowledge of the Company, threatened, other than
investigations which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company.
(g) Litigation. There is no litigation, arbitration, claim, suit,
action, audit, investigation or proceeding pending or, to the Knowledge of the
Company, threatened against or affecting (i) the Company or any Company
Subsidiary or (ii) any present or, to the Knowledge of the Company, former
officer, director or employee of the Company or any Company Subsidiary, in their
capacity as a present or former officer, director or employee of the Company or
any Company Subsidiary or otherwise such that the Company or any Company
Subsidiary may be liable (whether by virtue of indemnification or otherwise),
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company, nor is there any judgment, award,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any Company Subsidiary or by which any
property, asset or operation of the Company or any Company Subsidiary is bound
or affected, which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Company.
(h) Taxes. (i) The Company and the Company Subsidiaries have duly and
timely filed (taking into account any extension of time within which to file)
all Tax Returns required to be filed by any of them and all such filed Tax
Returns are complete and accurate in all material respects; (ii) the Company and
the Company Subsidiaries have paid all Taxes that are due (whether or not shown
on any Tax Return) or that the Company or any Company Subsidiary is obligated to
withhold from amounts owing to any employee, creditor or third party, except
with respect to matters contested in good faith and for which adequate reserves
have been established under GAAP or for such amounts that, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company; (iii) whether pending or threatened in writing, there are
no audits, examinations, investigations or other proceedings in respect of Taxes
or Tax matters relating to the Company or the Company Subsidiaries which, if
determined adversely to the Company or the Company Subsidiaries, could
reasonably be expected to have a Material Adverse Effect on the Company; (iv)
there are no deficiencies or claims for any Taxes that have been proposed,
asserted or assessed against the Company or the Company Subsidiaries which, if
such deficiencies or claims were finally resolved against the Company or the
Company Subsidiaries, could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company; (v) there are no
Liens for Taxes upon the assets of the Company or the Company Subsidiaries,
other than Liens for current Taxes not yet due and payable and Liens for Taxes
that are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established under GAAP; (vi) neither of the Company
nor any Company Subsidiary has made an election under former Section 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code"); and (vii) neither
the Company nor any of the Company Subsidiaries is insolvent within the meaning
of Treas. Reg. Section
-13-
1.1502-19(b)(4).
(i) Absence of Certain Changes or Events. Since December 31, 2003, (A)
each of the Company and the Company Subsidiaries has conducted its business in
the ordinary course and has not incurred any material liability, except in the
ordinary course of their respective businesses; and (B) there has not been (i)
any change in the business, financial condition or results of operations of the
Company or the Company Subsidiaries that has had, or could reasonably be
expected to have, a Material Adverse Effect on the Company, (ii) any change in
any method of accounting or accounting principles or practice by the Company or
any of its Subsidiaries, except for any such change required by reason of a
concurrent change in GAAP or Regulation S-X under the Exchange Act, (iii) any
Tax election made or changed, any annual tax accounting period changed, any
method of tax accounting adopted or changed, any material amended Tax Returns or
claims for Tax refunds filed, any material closing agreement entered into, any
material Tax claim, audit or assessment settled, or any right to claim a
material Tax refund, offset or other reduction in Tax liability surrendered,
(iv) any material change in practices relating to pricing or royalties set or
charged by the Company to its customers or licensees except changes in the
ordinary course of business to pricing or royalties charged to an individual
customer or licensee, or any notification made to the Company of a material
change in pricing or royalties set or charged by licensors to the Company, (v)
any agreement, commitment, arrangement or plan entered into by the Company with
(A) any director or officer of the Company or (B) any "associates" or members of
the "immediate family" (as such terms are respectively defined in Rule 12b-2 and
Rule 16a-1 of the Exchange Act) of any director or officer of the Company (each
such Person described in clauses (A) or (B) above, a "Related Party"), or (vi)
any material payment, reimbursement, refund or other fund transfer by the
Company to any Related Party, other than the payment of salaries to officers
made in the ordinary course of business consistent with past practice pursuant
to agreements in place on the date hereof which have been provided to Parent or
payment to directors for service on the special committee of the Board of
Directors composed entirely of independent directors established for the purpose
of considering a transaction under the Rothschild Agreement (the "Special
Committee"). Since the enactment of the Xxxxxxxx-Xxxxx Act of 2002, neither the
Company nor any of the Company Subsidiaries has made any loans to any executive
officer (as defined in Rule 3b-7 under the Exchange Act) or director of the
Company or any of the Company Subsidiaries.
(j) Inventory. All of the bulk wine, packaging materials (including but
not limited to labels) and finished goods inventory relating to products
produced, manufactured, marketed, promoted, sold or distributed by the Company
and its affiliates has been produced and packaged in all material respects in
accordance with all applicable laws, regulations and orders. All of the
Company's and the Company Subsidiaries' vehicles, machinery and equipment
necessary for the operation of their businesses have been maintained in the
ordinary course of business and are in operable condition (normal
-14-
wear and tear excepted), except as could not be reasonably expected to have a
Material Adverse Effect on the Company.
(k) Real Property. Each of the Company and the Company Subsidiaries has
good and valid title to the real property owned by it, and valid and subsisting
leasehold estates in the real property leased by it, in each case subject to no
material lien or encumbrance, except Permitted Liens.
(l) Certain Agreements. All contracts listed as an exhibit to the
Company's Annual Report on Form 10-K under the rules and regulations of the SEC
relating to the business of the Company and the Company Subsidiaries (the
"Company Material Contracts") are valid and in full force and effect except to
the extent they have previously expired in accordance with their terms or as
could not otherwise reasonably be expected to have a Material Adverse Effect on
the Company, and neither the Company nor any Company Subsidiary has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time, or both, could reasonably be expected to constitute a
default under the provisions of, any such Company Material Contract, except for
defaults which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company. To the Knowledge of
the Company, no counterparty to any such Company Material Contract has violated
any provision of, or committed or failed to perform any act which, with or
without notice, lapse of time, or both, could reasonably be expected to
constitute a default or other breach under the provisions of, any such Company
Material Contract, except for defaults or breaches which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company.
(m) Employee Benefit Plans; Labor Matters.
(i) With respect to each employee benefit plan, program,
arrangement or contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and any bonus,
deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, change in control and severance
plan, program, arrangement and contract) to which the Company or any
Company Subsidiary is a party, which is maintained or contributed to by
the Company or any Company Subsidiary, or with respect to which the
Company or any Company Subsidiary could incur material liability under
Section 4069, 4201 or 4212(c) of ERISA (the "Company Benefit Plans"),
the Company has made available to Parent a true and complete copy of
each such Company Benefit Plan. The Company Benefit Plans are listed on
Schedule 2.1(m)(i). For the avoidance of doubt, Company Benefit Plans
include plans covering former employees and present and former
directors of the Company or any Company Subsidiary.
-15-
(ii) Each of the Company Benefit Plans that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue
Service, and the Company is not aware of any circumstances likely to
result in the revocation of any such favorable determination letter
that could reasonably be expected to have a Material Adverse Effect on
the Company.
(iii) With respect to the Company Benefit Plans, no event has
occurred and, to the Knowledge of the Company, there exists no
condition or set of circumstances, in connection with which the Company
or any Company Subsidiary could be subject to any liability under the
terms of such Company Benefit Plans, ERISA, the Code or any other
applicable law which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the
Company.
(iv) Neither of the Company nor any Company Subsidiary is a
party to any collective bargaining or other labor union contracts and
no collective bargaining agreement is being negotiated by the Company
or the Company Subsidiaries. There is no pending labor dispute, strike
or work stoppage against the Company or any Company Subsidiary which
may interfere with the respective business activities of the Company or
the Company Subsidiaries, except where such dispute, strike or work
stoppage could not reasonably be expected to have a Material Adverse
Effect on the Company. There is no pending charge or complaint against
the Company or any of the Company Subsidiaries by the National Labor
Relations Board or any comparable state agency, except where such
unfair labor practice, charge or complaint could not reasonably be
expected to have a Material Adverse Effect on the Company.
(v) As of the date hereof, there is no material pending or, to
the Knowledge of the Company threatened, litigation relating to the
Company Benefit Plans. Neither the Company nor any Company Subsidiary
has any obligations for retiree health and life benefits under any
Company Benefit Plan or collective bargaining agreement.
(vi) There has been no amendment to, announcement by the
Company or any Company Subsidiary relating to, or change in employee
participation or coverage under, any Company Benefit Plan which would
increase materially the expense of maintaining such plan above the
level of the expense incurred therefor for the most recent fiscal year.
Neither the execution of this Agreement, shareholder approval of this
Agreement nor the consummation of the transactions contemplated hereby
will (w) entitle any employees of the Company or any Company Subsidiary
to severance pay or any increase in severance pay upon any termination
of employment after the date hereof, (x) accelerate the time of payment
or vesting or result in any payment or funding (through a grantor trust
-16-
or otherwise) of compensation or benefits under, increase the amount
payable or result in any other material obligation pursuant to, any of
the Company Benefit Plans, (y) limit or restrict the right of the
Company or, after the consummation of the transactions contemplated
hereby, Parent to merge, amend or terminate any of the Company Benefit
Plans or (z) result in payments under any of the Company Benefit Plans
which would not be deductible under Section 162(m) or Section 280G of
the Code.
(vii) No consent of the holders of Options is required to
cancel any Options under the Company's 1988 Non-Discretionary Stock
Option Plan or the 1987 Stock Option Plan.
(n) Environmental Compliance and Conditions. The Company and the
Company Subsidiaries have all permits, licenses and other authorizations
required under Environmental Laws, except where the failure to hold such
licenses, permits and authorizations could not reasonably be expected to have a
Material Adverse Effect. The Company and each of the Company Subsidiaries are in
compliance with all terms and conditions of any and all such required permits,
licenses, and authorizations and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements and
obligations contained in any applicable Environmental Law, except where the
failure to so comply could not reasonably be expected to have a Material Adverse
Effect on the Company. Except as would not have a Material Adverse Effect:
(i) No written notice, notification, demand, request for
information, citation, summons or order has been received, no complaint
has been filed, no penalty has been assessed, and no investigation,
action, claim, suit, proceeding or review is pending or, to the
Knowledge of the Company, is threatened by any Governmental Entity or
other Person relating to or arising out of any Environmental Law; and
(ii) there are no liabilities of or relating to the Company or
any of the Company Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise,
arising under or relating to any Environmental Law, and to the
Knowledge of the Company, there are no facts, conditions, situations or
set of circumstances that could reasonably be expected to result in or
be the basis for any such liability.
For purposes of this Section, the terms "Company" and "Company
Subsidiaries" shall include any entity that is, in whole or in part, a
predecessor of the Company or any of its Subsidiaries.
(o) Intellectual Property. The Company and the Company Subsidiaries own
or license under valid and subsisting licenses all Intellectual Property which
is necessary or required for the operation of their businesses as currently
conducted (the "Company Intellectual Property Rights"). Schedule 2.1(o) sets
forth a true and complete list of all Registered Company Intellectual Property
Rights (other than licenses for commercial
-17-
"off-the-shelf" or "shrink-wrap" software). None of the Company Intellectual
Property Rights owned or, to the Knowledge of the Company, licensed by or to the
Company and the Company Subsidiaries have been adjudged invalid or unenforceable
in whole or part, and, to the Knowledge of the Company, all Intellectual
Property owned by the Company, excluding any pending applications for
Intellectual Property, is valid and enforceable. The consummation of the
transactions contemplated by this Agreement will not alter, impair or extinguish
in any material respect any of the Company's or the Company Subsidiaries' rights
in and to the Company Intellectual Property Rights. Except as set forth in
Schedule 2.1(o), and except for any infringements or misappropriations as could
not reasonably be expected to have a Material Adverse Effect on the Company,
neither the Company nor any Company Subsidiary has received any notice or claim
that it is, and to the Knowledge of the Company, neither the Company nor any
Company Subsidiary is, infringing or misappropriating the Intellectual Property
of any Person and the Company has no Knowledge of any infringement by any Person
of any Intellectual Property owned by the Company or the Company Subsidiaries
and there is no litigation or proceeding (before the PTO or otherwise) with
respect to the Company's Intellectual Property to which the Company or any
Company Subsidiary is a party.
(p) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except Xxxxxx Xxxxxx Partners LLC. The Company has
provided to Parent a true and correct copy of all engagement letters relating to
arrangements with Xxxxxx Xxxxxx Partners LLC.
(q) State Takeover Statutes. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute is applicable to the
Merger.
(r) Insurance. All material insurance coverages of the Company and the
Company Subsidiaries are listed in Schedule 2.1(r). Such coverage, or
substantially similar coverage, has been in force without interruption
throughout the ten-year period preceding the date hereof.
(s) Distribution, Sales and Marketing Agreements. The Company has made
available to Parent copies of all written agreements, contracts, licenses and
other commitments with distributors or brokers. Schedule 2.1(s) sets forth
reasonably accurate descriptions of certain terms (as described on such
Schedule) of any oral agreements, contracts, licenses and other commitments of
the Company or the Company Subsidiaries with distributors or brokers with
respect to the states and distributors or brokers listed therein.
(t) Grape Purchase Agreements. Schedule 2.1(t) sets forth a reasonably
complete and accurate list of all vineyards for which the Company and/or the
Company Subsidiaries have written or oral agreements to purchase grapes and the
approximate tons
-18-
of grapes that the Company and/or the Company Subsidiaries (i) purchased from
such vineyards in calendar year 2004 and (ii) reasonably expect to purchase from
such vineyards in calendar year 2005.
2.2 Representations and Warranties of Parent. Parent represents and
warrants to the Company as follows:
(a) Organization, Standing and Power. Parent has been duly organized
and is validly existing under the laws of its jurisdiction of organization.
Parent is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where the failure so
to qualify could not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect on Parent.
(b) Authority; No Conflicts.
(i) Parent has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent. This Agreement has
been duly executed and delivered by Parent and constitutes a valid and
binding agreement of Parent, enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to or affecting creditors generally, or by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the transactions
contemplated hereby will not, result in any Violation of: (A) any
provision of the Organizational Documents of Parent or (B) except as
could not reasonably be expected to have a Material Adverse Effect on
Parent and subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or its respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent in connection with the execution
and delivery of this Agreement by Parent or the consummation by Parent
of the transactions contemplated hereby, except for (A) the consents,
approvals, orders, authorizations, registrations, declarations and
filings required under or in relation
-19-
to clause (x) of Section 2.1(c)(iv) and (B) such consents, approvals,
orders, authorizations, registrations, declarations and filings the
failure of which to make or obtain could not reasonably be expected to
have a Material Adverse Effect on Parent or impair or delay the ability
of Parent to consummate the transactions contemplated hereby.
(c) Information Supplied.
(i) None of the information supplied or to be supplied by
Parent or Merger Sub for inclusion or incorporation by reference in the
Proxy Statement will, on the date the Proxy Statement is first mailed
to the Company's shareholders or at the time of the Company
Shareholders Meeting, 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 therein, in light of the
circumstances under which they were made, not misleading.
(ii) Notwithstanding the foregoing provisions of this Section
2.2(c), no representation or warranty is made by Parent or Merger Sub
with respect to statements made or incorporated by reference in the
Proxy Statement based on information supplied by the Company for
inclusion or incorporation by reference therein.
(d) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub, except UBS Investment Bank.
(e) Financing. Merger Sub will have, prior to the Effective Time,
sufficient funds to pay all Merger Consideration and to consummate the
transactions contemplated by this Agreement.
2.3 Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub represent and warrant to the Company as follows:
(a) Organization and Corporate Power. Merger Sub is a wholly owned
Subsidiary of Parent and a corporation duly incorporated, validly existing and
in good standing under the laws of California. The copies of the Organizational
Documents of Merger Sub which were previously furnished or made available to the
Company are true, complete and correct copies of such documents as in affect on
the date of this Agreement.
(b) Corporate Authorization. Merger Sub has all requisite corporate
power and corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger
-20-
Sub. This Agreement has been duly executed and delivered by Merger Sub and
constitutes a valid and binding agreement of Merger Sub, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors generally, or by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(c) Non-Contravention. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby do not and will not contravene or conflict with
the Organizational Documents of Merger Sub.
(d) No Business Activities. Merger Sub is not a party to any material
agreements and has not conducted any activities other than in connection with
the organization of Merger Sub, the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereby. Merger Sub has no
Subsidiaries.
ARTICLE III.
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement, including Section 3.1 of the
Company Disclosure Schedule or to the extent that Parent shall otherwise consent
in writing, which consent shall not be unreasonably withheld with respect to
matters set forth in Sections 3.1(h)(i), (ii), (iii) and (v)):
(a) Ordinary Course. The Company and the Company Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in all material respects and in compliance in all material respects with all
applicable laws and regulations, pay their debts and Taxes when due subject to
good faith disputes over such debts or Taxes, pay or perform other material
obligations when due, and shall use reasonable efforts to (i) preserve intact
their present business organizations, (ii) maintain their properties in good
operating condition, (iii) keep available the services of their present
officers, employees and independent contractors and (iv) preserve their
relationships with customers, suppliers and others having business dealings with
them. In addition, during such period, the Company shall manage its working
capital in the ordinary course of business, consistent with past business
practices or as otherwise mutually determined by Parent and the Company.
However, no action by the Company or any Company Subsidiary with respect to
matters specifically addressed by any other provision of this Section 3.1 shall
be deemed a breach of this Section 3.1(a) unless such action would constitute a
breach of one or more of such other provisions.
(b) Dividends; Changes in Share Capital. The Company shall not, and
shall not permit the Company Subsidiaries to, and shall not propose to, (i)
declare or pay any
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dividends on or make other distributions in respect of any of its capital stock,
other than as provided for by this Agreement, and other than the "wine dividend"
paid consistent with the Company's wine dividend program in place as of the date
of this Agreement, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock or (iii)
repurchase, redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. The Company shall not and shall cause the
Company Subsidiaries not to issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Company Voting Debt or any securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such shares or Company Voting
Debt, or enter into any agreement with respect to any of the foregoing, other
than (i) the issuance of Company Common Stock upon the exercise of Options
outstanding on the date hereof in accordance with the terms of the Company Stock
Option Plan as in effect on the date of this Agreement and (ii) the issuance of
Company Common Stock pursuant to the ESPP.
(d) Organizational Documents. Except to the extent required to comply
with their respective obligations hereunder, required by law or required by the
rules and regulations of Nasdaq, the Company and the Company Subsidiaries shall
not amend or propose to amend their respective Organizational Documents.
(e) Indebtedness; Payment of Creditors. The Company shall not, and
shall not permit the Company Subsidiaries to, (i) incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the Company
or any Company Subsidiary or guarantee any debt securities of other Persons
other than indebtedness of the Company or any Company Subsidiary to the Company
or any Company Subsidiary and other than in the ordinary course of business,
(ii) fail to pay any creditor any material amount owed to such creditor when due
unless disputed in good faith by appropriate proceedings consistent with past
practice, (iii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than by the Company or any Company
Subsidiary to or in the Company or any Company Subsidiary or (iv) pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than in the case of clauses (iii)
and (iv), loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the ordinary course of
business consistent with past practice.
(f) Benefit Plans. The Company shall not, and shall not permit the
Company Subsidiaries to (i) increase the compensation payable or to become
payable to any of its executive officers or employees, (ii) take any action with
respect to the grant or payment of any severance or termination or bonus or
other incentive arrangement (other than pursuant to those Company Benefit
Plans), other than, with respect to (i) and (ii) above, any such increases,
grants or payments made to persons who are not executive officers in
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the ordinary course of business and in accordance with past practice, (iii)
except as required by law, modify or amend any Company Benefit Plan or (iv)
terminate or cause the constructive termination of any employee identified on
Schedule 3.1(f) without the prior written consent of Parent, which consent shall
not be unreasonably withheld or delayed.
(g) Fundamental Transactions. Except as otherwise permitted by this
Agreement, the Company shall not, and shall not permit the Company Subsidiaries
to, merge or consolidate with any other Person or acquire a material amount of
stock or assets of any other Person or sell, lease, license or otherwise dispose
of any material Subsidiary or any material amount of assets, securities or
property except (i) pursuant to existing contracts or commitments or (ii) in the
ordinary course of business consistent with past practice. (h) Agreements and
Commitments; Related Party Transactions. The Company shall not, and shall not
permit the Company Subsidiaries to (i) amend or modify in any material respect
or consent to the termination of any material contract or the Company's or the
Company Subsidiaries' rights thereunder; (ii) enter into any material lease,
contract or agreement with regard to real property; (iii) enter into any
non-compete agreement or other material restriction on any of its businesses
following the Closing Date; (iv) hire, employ, contract or enter into any
agreement with new employees or independent contractors, which employees or
independent contractors have an aggregate annual salary of more than $125,000;
(v) cancel, terminate, or willfully take any action causing the cancellation or
termination of, any insurance policy naming it as a beneficiary or a loss payee,
including by the non-payment of premiums which are due and payable; (vi) enter
into any agreement, commitment, arrangement or plan with any Related Party;
(vii) initiate any new product promotions, product discounts or other material
price changes, other than in the ordinary course of business, consistent with
past practice; (viii) sell finished case goods to wholesalers, distributors and
retailers in quantities that would result in a material increase in the level of
stock of the Company's and the Company Subsidiaries' finished case goods
generally held by any such wholesalers, distributors and retailers in the
ordinary course of business; (ix) except in the ordinary course, fail to use its
commercially reasonable efforts to (A) enforce its and the Company Subsidiaries'
rights under any contract or agreement with any distributor or any other legally
enforceable rights, (B) encourage its and the Company Subsidiaries' distributors
to (1) avoid out-of-stocks, other than out-of-stocks due to a shortage of a
particular Company product, (2) maintain inventories at retail consistent with
past practice, (3) service retail accounts in the ordinary course consistent
with industry practice, (4) refrain from switching retail account advertising
programs except in the ordinary course, (5) ensure quality product at retail and
work cooperatively with the Company's and the Company Subsidiaries' field
personnel to ensure execution of distribution policies and business plans in the
ordinary course of business, (6) timely follow-up with customers in the ordinary
course regarding the distribution and sale of the Company's and the Company
Subsidiaries' products, (7) maintain wine-by-the-glass accounts and brand
designations on menu and drink lists in the ordinary course of
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business, and (8) maintain distribution of the Company's and the Company
Subsidiaries' products and refrain from switching brands except in the ordinary
course; (x) fail to maintain insurance coverage at least as favorable as each of
the coverages described on Schedule 2.1(s); (xi) incur or commit to any capital
expenditures or related series of capital expenditures in excess of $1 million
individually; or (xii) make any material payment, reimbursement, refund or other
fund transfer to any Related Party, other than the payment of salaries to
officers or employees made in the ordinary course of business consistent with
past practice, pursuant to agreements in place on the date hereof, or to
directors for service on the Special Committee.
(i) Tax Matters. The Company shall not, and shall not permit the
Company Subsidiaries to, (i) unless required by law, to the extent it may affect
or relate to the Company or any Company Subsidiary, make or change any Tax
election, change any annual Tax accounting period, adopt or change any method of
Tax accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
offset or other reduction in Tax liability, consent to any extension or waiver
of the limitations period applicable to any Tax claim or assessment; or (ii)
without the consent of Parent, which consent will not be unreasonably withheld,
make any material payment of, or in respect of, any Tax to any person or any
taxing authority, except to the extent such payment is in respect of a Tax that
is due or payable or has been properly estimated in accordance with applicable
law as applied in a manner consistent with past practice of the Company.
(j) Other Actions. The Company shall not, and shall not permit the
Company Subsidiaries to, enter into any agreement, or otherwise commit, to do
any of the foregoing.
3.2 Advice of Changes; Government Filings. Each party shall (a) confer
on a regular and frequent basis with the other and upon the reasonable request
of the other shall promptly meet in Northern California, (b) report (to the
extent permitted by law, regulation and any applicable confidentiality
agreement) to the other on operational matters and (c) promptly advise the other
orally and in writing of (i) any representation or warranty made by it contained
in this Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it (A) to comply with or satisfy in any respect any covenant,
condition or agreement required to be complied with or satisfied by it under
this Agreement that is qualified as to materiality or (B) to comply with or
satisfy in any material respect any covenant, condition or agreement required to
be complied with or satisfied by it under this Agreement that is not so
qualified as to materiality or (iii) any change, event or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect on such
party or materially adversely affect its ability to consummate the Merger in a
timely manner; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. The Company
and Parent shall file
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all reports required to be filed by each of them with the SEC (and all other
Governmental Entities) between the date of this Agreement and the Effective Time
and shall (to the extent permitted by law or regulation or any applicable
confidentiality agreement) deliver to the other party copies of all such reports
promptly after the same are filed. Subject to applicable laws relating to the
exchange of information, each of the Company and Parent shall have the right to
review in advance, and to the extent practicable each will consult with the
other, with respect to all the information relating to the other party and each
of their respective Subsidiaries, which appears in any filings, announcements or
publications made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party agrees that, to the
extent practicable, it will consult with the other party with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of matters relating to completion of the
transactions contemplated hereby.
ARTICLE IV.
ADDITIONAL AGREEMENTS
4.1 Preparation of Proxy Statement; the Company Shareholders Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy Statement. Each
of the Company and Parent shall use commercially reasonable efforts to cause the
Proxy Statement to be mailed to the Company's shareholders as promptly as
practicable.
(b) The Company shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Company Shareholders Meeting") for the purpose of obtaining
shareholder approval. In connection with such meeting, the Company shall (i)
promptly prepare and file with the SEC, use its commercially reasonable efforts
to have cleared by the SEC and thereafter mail to its shareholders as promptly
as practicable the Proxy Statement and all other proxy materials for such
meeting, (ii) use its commercially reasonable efforts (including postponing or
adjourning the Company Shareholders Meeting to obtain a quorum or to solicit
additional proxies) to obtain the necessary adoptions and approvals by its
shareholders of this Agreement and all the transactions contemplated hereby and
(iii) otherwise comply with all legal requirements applicable to such meeting.
The Proxy Statement shall contain the Company Recommendation (as hereinafter
defined).
(c) Subject to Section 4.4(b), the Company shall, through its Board of
Directors, recommend to its shareholders that they approve the transactions
contemplated by this Agreement (the "Company Recommendation"); provided,
however, that except in
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connection with an Acquisition Proposal, in which case the provisions of Section
4.4(b) shall apply, the Board of Directors may withdraw, modify or change the
Company Recommendation and shall be released of its obligations set forth above
in Section 4.1(b)(iii) if it (A) determines in good faith, based upon the advice
of outside counsel, that making the Company Recommendation, or the failure to so
withdraw, modify or change the Company Recommendation, could reasonably be
deemed to cause the members of the Board of Directors to breach their fiduciary
duties under applicable law, (B) otherwise complies with this Agreement and (C)
subject to compliance with applicable securities laws, gives Parent (x) notice
of its decision to invoke this Section 4.1(c), including the reasons for its
decision, and (y) a reasonable opportunity to discuss this decision with the
Board of Directors.
(d) Subject to Section 4.4(b) and notwithstanding anything to the
contrary contained in this Agreement, (i) the obligation of the Company to call,
give notice of, convene and hold the Company Shareholders Meeting and to hold a
vote of the Company's shareholders on this Agreement and the Merger at the
Company Shareholders Meeting shall not be limited or otherwise affected by the
commencement, disclosure, announcement or submission to it of any Acquisition
Proposal (whether or not it is a Superior Proposal), or by any withdrawal,
modification or change in the Company Recommendation and (ii) in any case in
which the Company withholds or withdraws the Company Recommendation pursuant to
Section 4.1(c), the Company shall submit this Agreement and the Merger to a vote
of its shareholders. The Company agrees that, except in accordance with Section
4.4, it shall not submit to the vote of its shareholders any Acquisition
Proposal (whether or not a Superior Proposal) or propose to do so.
(e) At Parent's option, this Agreement and the Merger may be approved
by an irrevocable written consent executed by the holders of the requisite
number of shares of Company Common Stock. Parent may deliver, or cause to be
delivered, such written consent to the Company only on or after the twentieth
(20th) calendar day from and after the date hereof (for avoidance of doubt, the
date of this Agreement shall be deemed to be the first day for the purposes of
determining such twentieth (20th) calendar day); provided, however, that (i) no
such written consent may provide for such consent to be effective prior to such
twentieth (20th) calendar day and (ii) no such written consent shall be
effective if this Agreement is terminated prior to such twentieth (20th) day. In
the event that Parent elects to obtain such a written consent in lieu of
obtaining shareholder approval at the Company Shareholders Meeting, the Company
shall prepare, file with the SEC and transmit to the holders of Company Common
Stock a preliminary information statement of the Company relating to the Merger
in accordance with Regulation 14C promulgated under the Exchange Act. At
Parent's reasonable request, confirmed by communications between the Company and
such shareholders, the Company shall prepare, file and transmit such information
statement in accordance with the foregoing sentence prior to the delivery of
such written consent to the Company.
4.2 Access to Information. Upon reasonable notice, the Company shall
(and shall cause its Subsidiaries, to the extent permitted by the Organizational
Documents or
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other pertinent agreements of such entity, to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
Parent reasonable access during normal business hours, during the period prior
to the Effective Time, to all its properties, books, contracts, commitments and
records and its officers, employees and representatives, and, during such
period, the Company shall (and shall cause its Subsidiaries, to the extent
permitted by the Organizational Documents or other pertinent agreements of such
entity, to) furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of Federal or
state securities laws, as applicable (other than reports or documents which such
party is not permitted to disclose under applicable law) and (b) consistent with
its legal obligations, all other information concerning its business, properties
and personnel as the other party may reasonably request; provided, however, the
Company may restrict the foregoing access to the extent that (i) a Governmental
Entity requires such party or any of its Subsidiaries to restrict access to any
properties or information reasonably related to any such contract on the basis
of applicable laws and regulations or (ii) any law, treaty, rule or regulation
of any Governmental Entity applicable to such party or any of its Subsidiaries
requires such party or any of its Subsidiaries to restrict access to any
properties or information. Such information shall be held in confidence to the
extent required by, and in accordance with, the provisions of the letter (the
"Confidentiality Agreement") dated July 22, 2004, between the Company and
Parent, which Confidentiality Agreement shall remain in full force and effect.
4.3 Approvals and Consents; Cooperation. Each of the Company and Parent
shall cooperate with each other and use (and shall cause their respective
Subsidiaries to use) its commercially reasonable efforts to take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable on their part under this Agreement and applicable laws to consummate
and make effective the Merger and the other transactions contemplated by this
Agreement as soon as practicable, including (i) preparing and filing as promptly
as practicable all documentation to effect all necessary applications, notices,
petitions, filings, tax ruling requests and other documents and to obtain as
promptly as practicable all consents, waivers, licenses, orders, registrations,
approvals, permits, tax rulings and authorizations necessary or advisable to be
obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement and (ii) taking reasonable steps as may be necessary to obtain all
such consents, waivers, licenses, registrations, permits, authorizations, tax
rulings, orders and approvals. Without limiting the generality of the foregoing,
each of the Company and Parent agrees to make all necessary filings in
connection with the Required Regulatory Approvals as promptly as practicable
after the date of this Agreement, and to use its reasonable efforts to furnish
or cause to be furnished, as promptly as practicable, all information and
documents requested with respect to such Required Regulatory Approvals and shall
otherwise cooperate with the applicable Governmental Entity in order to obtain
any Required Regulatory Approvals in as expeditious a manner as possible. Each
of the Company and Parent shall use its reasonable efforts to resolve such
objections, if any, as any
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Governmental Entity may assert with respect to this Agreement and the
transactions contemplated hereby in connection with the Required Regulatory
Approvals. In the event that a suit is instituted by a Person or Governmental
Entity challenging this Agreement and the transactions contemplated hereby as
violative of applicable antitrust or competition laws, each of the Company and
Parent shall use its reasonable efforts to resist or resolve such suit. The
Company and Parent each shall, upon request by the other, furnish the other with
all information concerning itself, its Subsidiaries, directors, officers and
shareholders and such other matters as may reasonably be necessary or advisable
in connection with the Proxy Statement and any other statement, filing, tax
ruling request, notice or application made by or on behalf of the Company,
Parent or any of their respective Subsidiaries to any third party and/or any
Governmental Entity in connection with the Merger or the other transactions
contemplated by this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, Parent shall not be required to agree or to cause
any of its affiliates to agree, and the Company shall not agree without Parent's
consent, to waive any substantial rights or to accept any substantial limitation
on its operations or to dispose of any significant assets in connection with
obtaining any consent or authorization under applicable antitrust or competition
laws.
4.4 Acquisition Proposals.
(a) At any time prior to obtaining the approval of Company shareholders
as provided in Section 4.1 ("Shareholder Approval"), neither the Company's Board
of Directors nor a special committee thereof may, directly or indirectly through
advisors, agents or other intermediaries, (i) initiate, solicit, encourage or
intentionally and knowingly facilitate any inquiries with respect to, or the
making of, any Acquisition Proposal, or engage in negotiations or discussions
with any Third Party that has made an Acquisition Proposal, or (ii) furnish to
any Third Party in connection with a potential Acquisition Proposal nonpublic
information relating to the Company or any of its Subsidiaries; provided,
however, that the Company may provide nonpublic information to a Third Party and
may engage in negotiations or discussions with a Third Party in connection with
a potential Acquisition Proposal if (1) such Third Party reasonably appears to
have, or to have the ability to obtain, adequate funding to effect a Superior
Proposal, (2) such Third Party enters into a confidentiality agreement with
terms no less favorable to the Company than the Confidentiality Agreement, (3)
the Board of Directors determines in good faith after consultation with outside
legal counsel and outside financial advisors that the failure to take such
action would be reasonably likely to constitute a breach of the Board of
Director's fiduciary duties under applicable law and (4) the Company
simultaneously provides to Parent (x) copies of such nonpublic information
provided to such Third Party and not previously provided to Parent (for
avoidance of doubt, it being understood that non-public information provided to
such Third Party in a different form or format as such information has been
provided to Parent shall be deemed, for purposes of this Section 4.4(a), to have
not been previously provided to Parent) and (y) a list of such nonpublic
information previously provided to Parent that has been provided to such Third
Party. Except as expressly permitted by Section 4.4(b),
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neither the Company's Board of Directors nor a special committee thereof shall
(i) approve or cause or permit the Company or any Company Subsidiary to enter
into any letter of intent, agreement in principle, definitive agreement or
similar agreement (other than a confidentiality agreement) constituting or
relating to, or which is intended to or is reasonably likely to lead to, an
Acquisition Proposal (an "Acquisition Agreement"), (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Agreement or Acquisition
Proposal or (iii) agree or resolve to take actions set forth in clauses (i) or
(ii) of this sentence. The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Third Party conducted heretofore with respect to any Acquisition Proposal.
The Company agrees that it will take the necessary steps to promptly inform the
officers, directors, employees and representatives of the Company and the
Company Subsidiaries of the obligation undertaken in the foregoing sentence, and
shall promptly request the return or destruction of all information and
materials provided to any Third Party prior to the date hereof by the Company,
the Company Subsidiaries or any of their representatives with respect to the
consideration or making of any Acquisition Proposal.
(b) Notwithstanding the foregoing, if, at any time prior to obtaining
Shareholder Approval, the Company receives a Superior Proposal, the Board of
Directors or a special committee thereof (or the Company at the direction of the
Board of Directors or a special committee thereof) may, during such period, in
response to such Superior Proposal, (i) approve or cause the Company to enter
into an Acquisition Agreement with respect to such Superior Proposal, (ii)
recommend such Superior Proposal to the Company's shareholders, (iii) withdraw,
modify or refrain from making its recommendation of the transactions
contemplated by this Agreement, and (iv) terminate this Agreement in accordance
with Section 6.1(h), in each case if the Board of Directors determines in good
faith after consultation with outside legal counsel and outside financial
advisors that such action or omission to act is necessary in order for the
Company's directors to comply with their respective fiduciary duties under
applicable law; provided, that the Company shall (x) provide Parent written
notice of the Company's receipt of a Superior Proposal (specifying the financial
and other material terms and conditions of such Superior Proposal) together with
the Company's intention to execute or enter into an Acquisition Agreement with
respect to such Superior Proposal (a "Notice of Superior Proposal") at least
five (5) Business Days prior to the taking of any such actions in subsections
(i) through (iv) above (it being understood that any amendment to the price or
material terms of a Superior Proposal shall require an additional Notice of
Superior Proposal and an additional three (3) Business Day period thereafter to
the extent permitted under applicable law) and Parent has not proposed
adjustments in the terms and conditions of this Agreement which would cause the
relevant Acquisition Proposal to no longer be a Superior Proposal and (y) pay to
Parent prior to or within two (2) Business Days following any such termination
of this Agreement, the Termination Fee and Rothschild Termination Fee.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.4, the Company promptly, and in any
event within twenty-four
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(24) hours, shall (i) advise Parent in writing of receipt by it (or any Company
Representatives) of any Acquisition Proposal and (ii) notify Parent after
receipt of any request for nonpublic information relating to the Company or any
of the Subsidiaries or for access to the Company's or any of the Subsidiaries'
properties, books or records by any Person that may be considering making, or
has made, an Acquisition Proposal, identifying such Person and the information
requested by such Person, and provide Parent access to any nonpublic information
that is given to such Person pursuant to Section 4.4(a). The Company shall
provide to Parent as promptly as practicable any applicable written agreement
that describes any of the terms or conditions of any Acquisition Proposal, and
shall otherwise keep Parent promptly informed of the status and terms of any
Acquisition Proposal, including by providing a copy of all material
documentation and correspondence relating thereto.
(d) Nothing contained within this Section 4.4 shall prevent the Board
of Directors or the Special Committee from complying with Rule 14e-2(a) under
the Exchange Act with regard to any Acquisition Proposal; provided, however,
that in complying with such rule, the Company shall honor the provisions of
Section 4.4(b).
4.5 Employee Benefits.
(a) Subject to subparagraph 4.5(c) below, for a period of two years
immediately following the Closing Date (or, if earlier, the last day of the
calendar year following the year in which the Closing occurs), Parent shall or
shall cause the Surviving Corporation to maintain in effect employee benefit
plans and arrangements which provide substantially equivalent employee benefits,
in the aggregate, as provided by the Company Benefit Plans (not taking into
account any such plans which are equity based), and the employees of the Company
who remain employees of the Surviving Corporation shall receive such benefits.
(b) For purposes of determining eligibility to participate, vesting and
accrual or entitlement to benefits (but not for benefit accrual under any
pension plan) where length of service is relevant under any employee benefit
plan or arrangement of Parent, the Surviving Corporation or any of their
respective affiliates, employees of the Company and the Company Subsidiaries as
of the Effective Time shall receive service credit for service with the Company
and the Company Subsidiaries to the same extent such service credit was granted
under the Company Benefit Plans, subject to offsets for previously accrued
benefits and no duplication of benefits.
(c) Parent shall cause the Surviving Corporation to assume and honor in
accordance with their terms all Company Benefit Plans, and to pay the employee
bonuses granted by the Compensation Committee of the Board of Directors in
accordance with Section 3.1 of the Company Disclosure Schedule.
(d) With respect to matters described in this Section 4.5 relating to
benefits or compensation to be provided after the Closing Date, the Company will
to the extent
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permitted by applicable Law provide Parent with copies of any broad-based
notices or other communication materials of a general nature prior to sending
them.
(e) Prior to the Closing, to the extent permitted by applicable Law and
the terms of the applicable plan or arrangement, the Company shall cause to be
amended the employee benefit plans and arrangements of it and the Company
Subsidiaries to the extent necessary to provide that no employees of Parent and
its subsidiaries shall commence to participate therein following the Effective
Time unless the Surviving Corporation or such subsidiary explicitly authorizes
such participation. In addition, prior to the Closing, to the extent permitted
by applicable Law and the terms of the applicable plan or arrangement, Parent
shall cause to be amended the employee benefit plans and arrangements of it and
its subsidiaries to the extent necessary to provide that no employees of the
Company and the Company Subsidiaries shall commence participation therein
following the Effective Time unless Parent or such subsidiary of Parent
explicitly authorizes such participation.
4.6 Fees and Expenses. Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
(a) if the Merger is consummated, the Surviving Corporation shall pay, or cause
to be paid, any and all property or transfer taxes imposed on the Company or the
Company Subsidiaries and any real property transfer tax resulting from the
Merger that is imposed on any holder of Company Common Stock, (b) the Expenses
incurred from and after the date hereof in connection with the printing, filing
and mailing to shareholders of the Proxy Statement shall be shared equally by
the Company and Parent unless the Agreement is terminated pursuant to Section
6.1(d) or (f) in which case the Company shall pay all such fees or unless this
Agreement is terminated pursuant to Section 6.1(g) in which case Parent shall
pay all such fees and (c) as provided in Section 6.2. As used in this Agreement,
"Expenses" includes all out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Proxy Statement and the solicitation of shareholder approvals and all other
matters related to the transaction contemplated hereby.
4.7 Indemnification; Directors' and Officers' Insurance. Parent and the
Surviving Corporation shall cause to be maintained in effect, with respect to
claims arising from facts or events that occurred on or before the Effective
Time, (i) for a period of six years after the Effective Time, the current
provisions regarding indemnification of current or former officers and directors
(each an "Indemnified Party") contained in the Organizational Documents of the
Company or the Company Subsidiaries and in any agreements between an Indemnified
Party and the Company or the Company Subsidiaries and (ii) for a period of six
years, the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by the Company, so long as the
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annual premium therefor does not exceed 150% of the last annual premium paid
prior to the date hereof (provided that Parent or the Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured); provided, that if such current policies expire,
are terminated or are cancelled during such six-year period, Parent and the
Surviving Corporation shall use commercially reasonable efforts to obtain as
much directors' and officers' liability insurance and fiduciary liability
insurance as can be obtained for the remainder of such period for a premium not
in excess (on an annualized basis) of 150% of the last annual premium paid prior
to the date hereof. This covenant is intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their respective
heirs and legal representatives. For a period of six years after the Effective
Time, Parent and the Surviving Corporation shall indemnify the Indemnified
Parties to the same extent as such Indemnified Parties are entitled to
indemnification pursuant to clause (i) of the first sentence of this Section
4.7.
4.8 Wine Club. Following the Effective Time, Parent shall cause the
Company to provide a one-time wine dividend as well as wine club benefits, to
the beneficial owners of the shares of Company Common Stock immediately prior to
the Effective Time as described on Schedule 4.8 hereto.
4.9 Public Announcements. The Company and Parent shall use reasonable
efforts to develop a joint communications plan and each party shall use
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
4.10 Distributor Notice. Prior to the Effective Time, the Company will
give notice to its distributors and brokers with respect to the distribution of
its products. Such notice shall be in a form mutually and reasonably acceptable
to the Company and Parent.
4.11 Intellectual Property Liens. Promptly after the date hereof and in
any event prior to the Closing Date, the Company shall, and shall cause the
Company Subsidiaries to, use commercially reasonable efforts to extinguish the
Liens set forth on Schedule 4.11.
4.12 Certain Transactions with Affiliates. Prior to the Effective Time,
the Company shall use commercially reasonable efforts to cause any oral
agreements, contracts, licenses and other commitments with any affiliate of the
Company or any Company Subsidiary to be converted, on substantially the same
terms, into written agreements, contracts, licenses or other commitments.
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4.13 Rothschild Termination Fee. Within two (2) Business Days after the
date hereof, Parent shall pay or cause to be paid to Rothschild on the Company's
behalf a cash fee of $2,475,000 in accordance with Section 6.2(b) of the
Rothschild Agreement.
4.14 Rothschild Voting Agreement. At a Company Shareholders Meeting
called pursuant to Section 4.1(b), the Company shall use commercially reasonable
efforts to enforce its rights under Section 6.2(c) of the Rothschild Agreement
in the form executed and delivered on October 30, 2004.
4.15 Financial Capability. From and after the date hereof until the
Merger Consideration and the Option Consideration is paid pursuant hereto,
Parent and Merger Sub shall continue to have the financial ability to perform
their respective obligations hereunder.
4.16 Further Assurances. In case at any time after the Effective Time
any further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Parent and Merger Sub shall take
any such reasonably necessary action.
ARTICLE V.
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approval. The Company shall have received the approval
of the principal terms of the Merger by the affirmative vote of a majority of
the outstanding shares of Company Common Stock. If such approval shall be in the
form of a written consent of holders of Company Common Stock, then such written
consent shall be subject to Section 4.1(e) and shall have become effective in
accordance with the CGCL and at least twenty (20) calendar days shall have
passed since the distribution of any information statement required in
connection with such written consent pursuant to Regulation 14C promulgated
under the Exchange Act.
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) No Injunctions or Restraints, Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
other Governmental Entity of competent jurisdiction shall be in effect and have
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger and no Governmental Entity shall have threatened to institute a
proceeding that the parties hereto reasonably determine is likely to result in
such an injunction or order; provided, however, that the provisions of this
Section 5.1(c) shall not be available to any party whose failure
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to fulfill its obligations pursuant to Section 4.3 shall have been the cause of,
or shall have resulted in, such order or injunction.
(d) Required Regulatory Approvals. All authorizations, consents, orders
and approvals of, and declarations and filings with, and all expirations of
waiting periods imposed by, any Governmental Entity which, if not obtained in
connection with the consummation of the transactions contemplated hereby, could
reasonably be expected to have a Material Adverse Effect on the Company
(collectively, "Required Regulatory Approvals") shall have been obtained, have
been declared or filed or have occurred, as the case may be, and all such
Required Regulatory Approvals shall be in full force and effect.
5.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent on or prior to the Closing Date of, the
following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement shall have been true and
correct when made and shall be true and correct on and as of the Closing Date as
if made on and as of such date (other than representations and warranties which
address matters only as of a certain date which shall be true and correct as of
such certain date), except where the failures of such representations and
warranties to be so true and correct could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company; provided, that for
purposes of this Section 5.2(a) any qualifications as to materiality or Material
Adverse Effect included in such representation and warranty shall be disregarded
for purposes of determining whether such representation or warranty has been
breached.
(b) Performance of Obligations of the Company. The Company shall have
performed or complied with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date that are qualified as
to materiality and shall have performed or complied in all material respects
with all other agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are not so qualified as to
materiality.
5.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger are subject to the satisfaction
of, or waiver by the Company on or prior to the Closing Date of, the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement shall have been
true and correct when made and shall be true and correct on and as of the
Closing Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct as of such certain date), except where the failures of such
representations and warranties to be so true and correct could
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not, in the aggregate, reasonably be expected to have a Material Adverse Effect
on the Company; provided, that for purposes of this Section 5.3(a) any
qualifications as to materiality or Material Adverse Effect included in such
representation and warranty shall be disregarded for purposes of determining
whether such representation or warranty has been breached.
(b) Performance of Obligations of Parent. Parent shall have performed
or complied with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are qualified as to
materiality and shall have performed or complied in all material respects with
all other agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified as to
materiality.
ARTICLE VI.
TERMINATION AND AMENDMENT
6.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, whether before or after approval of the
matters presented in connection with the Merger by the shareholders of the
Company or the Parent, as the case may be:
(a) By mutual written consent of Parent and the Company, by action of
their respective Boards of Directors;
(b) By either the Company or Parent if the Merger shall not have been
consummated by June 30, 2005 (the "Outside Date"); provided that the right to
terminate this Agreement under this Section 6.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or before such
date;
(c) By either the Company or Parent if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall have used their reasonable
efforts to resist, resolve or lift, as applicable, subject to the provisions of
Section 4.3) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable;
(d) By Parent if (i) the Board of Directors shall have withdrawn or
materially and adversely modified its recommendation of the Merger or this
Agreement or fails to re-confirm such recommendation if requested by Parent
within the ten (10) Business Days following such request or if the Board of
Directors resolves to take any of the foregoing actions; (ii) the Board of
Directors shall have recommended to the shareholders of the Company that they
approve an Acquisition Proposal other than the Merger contemplated by this
Agreement; or (iii) a tender offer or exchange offer that, if
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successful, would result in any Person or "group" becoming a "beneficial owner"
(such terms having the meaning in this Agreement as is ascribed under Regulation
13D under the Exchange Act) of 50% or more of the outstanding shares of Company
Common Stock is commenced (other than by Parent or an affiliate of Parent) and
the Board of Directors recommends that the shareholders of the Company tender
their shares in such tender or exchange offer or fails to recommend against or
takes a neutral position with respect to a tender or exchange offer related to
an Acquisition Proposal, or resolves to take any such actions, whether or not,
in each case, such action or failure to act is consistent with the terms hereof;
(e) By either Parent or the Company if the approval by the shareholders
of the Company required by the Company's Organizational Documents, law or this
Agreement for the consummation of the Merger or the other transactions
contemplated hereby shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of shareholders or at any
adjournment thereof or pursuant to a written consent;
(f) By Parent, (i) upon one or more breaches of any covenants or
agreements on the part of the Company set forth in this Agreement, except where
such breach or breaches could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect of the Company or (ii) if any representation or
warranty of the Company shall have become untrue or incorrect such that the
condition set forth in Section 5.2(a) would not be satisfied (each of such
breach or breaches described in clause (i) and (ii), a "Terminating Company
Breach"); provided, however, that, if such Terminating Company Breach is capable
of being cured by the Company prior to the Outside Date through the exercise of
its best efforts and for so long as the Company continues to exercise such best
efforts, Parent may not terminate this Agreement under this Section 6.1(f);
(g) By the Company, (i) upon one or more breaches of any covenants or
agreements on the part of Parent or Merger Sub set forth in this Agreement,
except where such breach or breaches could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect of the Company or (ii) if any
representation or warranty of Parent or Merger Sub shall have become untrue or
incorrect such that the condition set forth in Section 5.3(a) would not be
satisfied (each of such breach or breaches described in clause (i) and (ii),
"Terminating Parent Breach"); provided, however, that, if such Terminating
Parent Breach is capable of being cured by Parent prior to the Outside Date
through the exercise of best efforts, and so long as Parent continues to
exercise such best efforts, the Company may not terminate this Agreement under
this Section 6.1(g); or
(h) By the Company, if permitted by, and in compliance with, Section
4.4(b).
6.2 Effect of Termination.
(a) In the event of termination of this Agreement by either the Company
or Parent as provided in Section 6.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company or their respective officers or directors except (i) with respect to
Section 4.6, this Section 6.2 and Article VII
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and (ii) with respect to any liabilities or damages incurred or suffered by a
party as a result of the willful breach by the other party of any of its
covenants, representations and warranties, or other agreements set forth in this
Agreement.
(b) The Company shall pay Parent a cash fee of $7,800,000 (the
"Termination Fee") if this Agreement is terminated as follows:
(i) If Parent shall terminate this Agreement pursuant to
Section 6.1(d) or if the Company shall terminate this Agreement
pursuant to Section 6.1(h);
(ii) If (A) either party shall terminate this Agreement
pursuant to Section 6.1(e), (B) at any time after the date of this
Agreement and at or before the date of the Company Shareholders Meeting
(or the date a written consent in lieu of the Company Shareholders
Meeting becomes effective) an Acquisition Proposal shall have been
publicly announced or otherwise communicated, directly or indirectly,
to the Company or the Board of Directors, and (C) within twelve (12)
months after the date of such termination, the Company or any of its
Subsidiaries either (x) enters into any definitive agreement with
respect to any Acquisition Proposal, or (y) consummates any Acquisition
Proposal;
(iii) If (A) either party shall terminate this Agreement
pursuant to Section 6.1(b) or Parent terminates this Agreement pursuant
to Section 6.1(f), (B) at any time after the date of this Agreement and
before such termination an Acquisition Proposal shall have been
publicly announced or otherwise communicated, directly or indirectly,
to the Company or the Board of Directors, (C) following the occurrence
of the announcement or communication of such Acquisition Proposal, the
Company shall have intentionally breached (and not cured after notice
thereof) any of its representations, warranties, covenants or
agreements set forth in this Agreement such that a Terminating Company
Breach shall have occurred and (D) within twelve (12) months after the
date of such termination, the Company or any of its Subsidiaries either
(x) enters into any definitive agreement with respect to any
Acquisition Proposal, or (y) consummates any Acquisition Proposal;
(c) The Company shall reimburse or cause to be reimbursed to Parent a
cash amount of $2,475,000, representing amounts paid by Parent to Rothschild on
the Company's behalf in accordance with Section 6.2(b) of the Rothschild
Agreement, plus interest thereon at the prime lending rate prevailing at such
time, as published in the Wall Street Journal, from the date hereof until the
date of reimbursement pursuant to this Section 6.2(c) (the "Rothschild
Termination Fee") if the Company is required to pay Parent the Termination Fee
pursuant to Section 6.2(b).
(d) The Termination Fee and the Rothschild Termination Fee, if payable
under this Section 6.2, shall be payable by wire transfer of immediately
available funds no later than two Business Days after termination, if the
Termination Fee is payable
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pursuant to Section 6.2(b)(i), or after the date on which the Company or any of
its Subsidiaries enters into any definitive agreement with respect to, or
consummates, any Acquisition Proposal, if the Termination Fee is payable
pursuant to Sections 6.2(b)(ii) or 6.2(b)(iii). The Company acknowledges that
the agreements contained in this Section 6.2(d) are an integral part of the
transactions contemplated in this Agreement, and that, without these agreements,
the Parent and Merger Sub would not enter into this Agreement. If the Company
fails to pay all amounts due to Parent under this Section 6.2 on the dates
specified, then the Company shall pay all reasonable costs and expenses
(including reasonable legal fees and expenses) incurred by Parent in connection
with any action or proceeding (including the filing of any lawsuit) taken by it
to collect such unpaid amounts, together with interest on such unpaid amounts at
the prime lending rate prevailing at such time, as published in the Wall Street
Journal, from the date such amounts were required to be paid until the date
actually received by Parent.
6.3 Amendment. Notwithstanding Section 7.5(b), any provisions of this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of the
Company, but, after any such approval, no amendment shall be made which by law
or in accordance with the rules of Nasdaq requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
6.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. No delay on
the part of any party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party hereto of any right, power or privilege hereunder operate as a waiver
of any other right, power or privilege hereunder, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder. Unless otherwise provided, the rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
the parties hereto may otherwise have at law or in equity. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
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ARTICLE VII.
GENERAL PROVISIONS
7.1 Non-Survival of Representations, Warranties and Agreements; No
Other Representations and Warranties. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained herein
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VII. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement, none
of the Company, Parent or Merger Sub makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its officers, directors, employees, agents, financial
and legal advisors or other representatives, with respect to the execution and
delivery of this Agreement, the documents and the instruments referred to
herein, or the transactions contemplated hereby or thereby, notwithstanding the
delivery or disclosure to the other party or the other party's representatives
of any documentation or other information with respect to any one or more of the
foregoing.
7.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the date of dispatch if
delivered by a nationally recognized next-day courier service or (c) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Parent or Merger Sub, to Diageo North America, Inc., Six
Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx, 00000, Attention: Xxxx Xxxxx, Facsimile
No.: 000-000-0000, E-mail: xxxx.xxxxx@Xxxxxx.xxx with a copy to Xxxxxxxx &
Xxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, Attention: Xxxxx
Xxxxxx, Facsimile No.: 000-000-0000, E-mail: xxxxxxx@xxxxxxxx.xxx; and
(b) if to the Company, The Chalone Wine Group Ltd., 000 Xxxxxxx Xxxx,
Xxxx, XX 00000, Attention: Xx. Xxxxxx Xxxxxxxxx, President and Chief Executive
Officer, Facsimile No.: (000) 000-0000, with a copy to Xxxxxx & Xxxxxxx, 000
Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, XX 00000, Attention: Xxxxxxxxxxx X. Xxxxxxx,
Facsimile No.: (000) 000-0000, E-mail: xxxxxxxxxxx.xxxxxxx@xx.xxx.
7.3 Interpretation. When a reference is made in this Agreement to
Sections or Schedules, such reference shall be to a Section of or Schedule to
this Agreement unless otherwise indicated. The table of contents, glossary of
defined terms and headings
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contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
content requires otherwise. It is understood and agreed that neither the
specifications of any dollar amount in this Agreement nor the inclusion of any
specific item in the Schedules is intended to imply that such amounts or higher
or lower amounts, or the items so included or other items, are or are not
material, and neither party shall use the fact of setting of such amounts or the
fact of the inclusion of such item in the Schedules in any dispute or
controversy between the parties as to whether any obligation, item or matter is
or is not material for purposes hereof.
7.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
7.5 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement (including the Schedules) 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, other
than the Confidentiality Agreement, which shall survive the execution and
delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
Sections 4.7 and 4.8 (which are intended to be for the benefit of the Persons
covered thereby and may be enforced by such Persons).
7.6 Governing Law; Jurisdiction. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without regard
to the laws that might be applicable under conflicts of laws principles. The
parties hereto agree that any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought in any
federal court located in the Northern District of the State of California or any
California state court located in San Francisco,
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California, and each of the parties hereby irrevocably consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 7.2 shall be
deemed effective service of process on such party.
7.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. Any provision of this Agreement held invalid or
unenforceable only in part, degree or certain jurisdictions will remain in full
force and effect to the extent not held invalid or unenforceable. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.
7.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void. 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.
7.9 Enforcement. The parties 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. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
7.10 Definitions. As used in this Agreement:
(a) "Acquisition Proposal" means, other than the transactions involving
Parent and/or Merger Sub contemplated by this Agreement, any offer, proposal or
inquiry relating to, or any Third Party indication of interest in, (A) any
acquisition or purchase,
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direct or indirect, of 20% or more of the consolidated assets of the Company and
its Subsidiaries or over 20% of any class of equity or voting securities of the
Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute more than 20% of the consolidated assets of the Company,
(B) any tender offer (including a self-tender offer) or exchange offer that, if
consummated, would result in such Third Party's beneficially owning 20% or more
of any class of equity or voting securities of the Company or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute more
than 20% of the consolidated assets of the Company or (C) a merger,
consolidation, share exchange, business combination, sale of substantially all
the assets, reorganization, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 20% of the
consolidated assets of the Company; provided, however, that for purposes of
Sections 6.2(b) and 6.2(d), all references in this definition to 20% shall
instead be deemed to be to 35%.
(b) "Board of Directors" means the Board of Directors of any specified
Person and any properly serving and acting committees thereof.
(c) "Business Day" means any day on which banks are not required to
open or authorized to close in the City of New York.
(d) "Company Representatives" any of the Company's or the Company's
Subsidiaries' officers, directors, investment bankers, attorneys, accountants,
consultants or other agents or advisors.
(e) "Company Stock Option Plan" means The Chalone Wine Group, Ltd. 1997
Stock Option Plan, The Chalone Wine Group, Ltd. 1988 Non-Discretionary Stock
Option Plan and The Chalone Wine Group, Ltd. 1987 Stock Option Plan.
(f) "Environmental Laws" means any federal, state, provincial, local,
municipal or foreign statute, law, rule, regulation, ordinance, code, policy or
rule of common law and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or any chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
(g) "Intellectual Property" means United States and foreign trademarks,
service marks, trade names, trade dress, domain names, logos, business and
product names, slogans and other indicia of origin, including registrations and
applications to register or renew the registration of any of the foregoing, and
all material goodwill associated with and symbolized thereby; copyrights and
registrations, applications, or renewals thereof; inventions and discoveries,
whether patentable or not, and all United States and foreign letters patent
registrations, invention disclosures and patent applications, including all
reissues, continuations, divisions, continuations-in-part or renewals or
extensions thereof, material confidential information, trade secrets and
know-how; and all other intellectual property or proprietary rights.
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(h) "Knowledge" with respect to a Person means the actual knowledge,
after due inquiry, of the officers of such Person.
(i) "Material Adverse Effect" means, with respect to any entity, any
adverse change, circumstance or effect (an "Effect") that, individually or in
the aggregate with all other Effects, is or is reasonably likely to be
materially adverse to the business, operations, assets, liabilities, financial
condition or results of operations of such entity and its Subsidiaries taken as
a whole; provided, however, that in no event shall any of the following be
deemed to constitute a Material Adverse Effect: (A) any Effect affecting any of
the industries in which such entity operates generally or affecting the economy
generally (to the extent that such Effects do not disproportionately affect such
entity, taken as a whole with its Subsidiaries, as compared to other companies
in such industries); (B) any change in such entity's stock price or trading
volume; provided, however, that clause (B) shall not exclude any underlying
Effect which may have caused such change in stock price or trading volume; or
(C) any Effect resulting from the announcement or pendency of the Merger.
(j) "Organizational Documents" means, with respect to any entity, the
articles of incorporation, bylaws or other governing documents of such entity.
(k) "Permitted Liens" means (a) liens and encumbrances contained in the
Company SEC Reports (including the notes thereto), (b) liens and encumbrances
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto that do not materially detract from the value of, or materially
impair the use of, such property by the Company or any of the Company
Subsidiaries in the operation of their respective business, (c) liens and
encumbrances of carriers, warehousemen, mechanics, suppliers, materialmen or
repairmen arising in the ordinary course of business, or (d) interests of the
lessor to any leased property.
(l) "Person" means an individual, corporation, partnership, limited
liability company association, trust, unincorporated organization, entity or
group (as defined in the Exchange Act).
(m) "Registered" means issued by, registered with, renewed by or the
subject of a pending application before any Governmental Entity or Internet
domain name registrar.
(n) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting and
economic interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly
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owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries. For purposes of Article II,
Xxxx Valley Vineyards shall be considered as a Subsidiary of the Company.
(o) "Superior Proposal" means any bona fide written Acquisition
Proposal for at least a majority of the outstanding shares of Company Common
Stock on terms that a majority of the entire Board of Directors determines in
good faith, after considering the advice of a financial advisor of nationally
recognized reputation and its legal counsel, and taking into account all the
terms and conditions of the Acquisition Proposal, including any break-up fees,
expense reimbursement provisions and conditions to consummation, are more
favorable and provide greater value to all the Company's shareholders than as
provided hereunder, are reasonably capable of being completed on the terms
proposed and for which the Board of Directors has reasonably determined, based
on either a good faith review of the offeror's balance sheet or a commitment
letter from a reputable bank or other financial institution, that adequate
funding is available and that all government approvals required in connection
therewith will be granted.
(p) (i) "Tax" (including, with correlative meaning, the term "Taxes")
means all federal, state, local and foreign income, profits, franchise, gross
receipts, environmental, customs duty, capital stock, severance, stamp, payroll,
sales, employment, unemployment disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties, fines and additions to
tax imposed with respect to such amounts and any interest in respect of such
penalties and additions to tax, whether disputed or not, and (ii) "Tax Return"
means all returns and reports (including elections, claims, declarations,
disclosures, schedules, estimates, computations and information returns)
required to be supplied to a Tax authority in any jurisdiction relating to
Taxes.
(q) "the other party" means, with respect to the Company, Parent and
means, with respect to Parent, the Company.
(r) "Third Party" means any person other than Parent or any of its
affiliates.
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IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
DIAGEO NORTH AMERICA, INC.,
a Connecticut corporation
By: /s/ Xxxx Xxxxxxx
___________________________________
Name: Xxxx Xxxxxxx
Title: President and CEO
DOUBLE WINES, INC.,
a California corporation
By: /s/ Xxxxxxx Xxxxxx
___________________________________
Name: Xxxxxxx Xxxxxx
Title: Senior Vice President,
CFO and Treasurer
THE CHALONE WINE GROUP, LTD.,
a California corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
___________________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Title:President and Chief
Executive Officer
SCHEDULE 4.8
WINE CLUB DIVIDEND
Beneficial owners of shares of Company Common Stock immediately prior
to the Effective Date will be entitled for three months following the Closing to
enroll at no additional cost as members of a new Founders Club, as it may be
renamed by Parent or the Surviving Corporation from time to time, and the
shareholders will receive a one-time wine dividend of $1.00 per share. This
Founders Club membership and this one-time wine dividend will not be
transferable, and the wines purchased with this dividend cannot be re-sold.
This wine dividend can be used through the Founders Club to purchase
wines at a 50% discount on all wine purchases up to an amount equal to $1.00 per
share. So if a shareholder had 500 shares on the Closing Date and enrolled in
the Founders Club, the shareholder would receive a $500.00 wine dividend that it
could use to purchase $1,000.00 of wine at a 50% discount. This Founders Club
wine dividend will remain valid for one year from the Closing Date.
In addition to this wine dividend, subject to applicable law, this
Founders Club membership will give members 15 years access to the following
benefits:
1) The Annual Founders Celebration. This will be an annual party where
the Company will invite all Founders Club members to one of the Company's
wineries for a special and exclusive celebration where the Company will
introduce new vintages and new wines to the members. This party will operate in
a similar manner to Chalone's annual shareholders party.
2) VIP Tours. Founders Club members will be able to participate in
special VIP tours and tastings with special access at each of the Company's
wineries. As part of the Founders Club, the Company will have a Concierge so
that members can have one central place to conveniently schedule appointments at
all wineries.
3) Founders Club Discount. As has been the tradition, the Company will
give the Founders Club members special access to selections of its most
exclusive wines and allocated bottlings. This will be done in quarterly
communications the Company will send to all Founders Club members. Founders Club
members will also receive Founders Club discounted pricing on all these
offerings. The special one-time wine dividend can be used in connection with
these discounted prices. For example if the price of the wine selected by the
Founders Club member was $75 after the standard Founders Club discount, the
Founders Club member could use $37.50 of his or her one-time discount to
purchase this wine and have to pay only $37.50 in cash for the purchase.
4) Special Allocations. In addition, Founders Club members who purchase
at least $500.00 per year (net of the wine dividend) from the Founders Club
selections will qualify for special allocations of the Company's most limited
wines and unique sizes.
The Founders Club will be subject to commercially reasonable rules,
restrictions and modifications adopted by the Company for all Founders Club
members.
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