OPTIONHOLDER EARNOUT AGREEMENT
OPTIONHOLDER EARNOUT AGREEMENT (this "Agreement") is dated as of June
9, 2000, between Saratoga Beverage Group, Inc., a Delaware corporation (the
"Company"), and XXXX XXXXXXXX (the "Optionholder").
WHEREAS, the Optionholder holds vested and unvested options (the
"Options") to purchase 26,250 shares of common stock, par value $0.01 per share
(the "Common Stock") of the Company at $2.50 per share;
WHEREAS, in connection with a pending recapitalization of the
Company, the Company has agreed that it will repurchase the Options pursuant to
a formula set forth in the Stock Purchase Agreement and Plan of Merger, dated as
of January 5, 2000, as amended, among the Company and NCP-SBG Recapitalization
Corp., and NCP-SBG, L.P. (the "Recapitalization Agreement");
WHEREAS, in order to induce the parties to consummate the
transactions contemplated by the Recapitalization Agreement, the Company and the
Optionholder have agreed to enter into this Agreement, pursuant to which,
notwithstanding any obligation of the Company to repurchase or cancel the
Options, the Company and the Optionholder desire for the Options to fully vest
but remain outstanding pursuant to their terms and the terms and conditions of
this Agreement; and
WHEREAS, upon the exercise of the Options, the Company and the
Optionholder desire for the Optionholder to become a party to the Stockholders
Agreement, dated as of January 5, 2000 (as amended from time to time, the
"Stockholders Agreement"; capitalized terms used herein without definition will
have the meanings set forth in the Stockholders Agreement), which agreement sets
forth certain corporate governance provisions that attach to the ownership of
the Common Stock, in addition to the rights and obligations attaching to the
ownership of the Common Stock set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Option Rollover. (a) Rollover. Subject to the terms and conditions
hereof, at the Effective Time (as defined in the Recapitalization Agreement),
notwithstanding anything to the contrary in the Recapitalization Agreement, the
Options will not be cancelled and will rollover into Options of the
recapitalized Company. The Options will entitle the Optionholder to purchase
26,250 newly-issued shares of Common Stock (the "New Shares") at an exercise
price of $2.50 per share. The rights and obligations set forth in this Agreement
will also attach to the Options and the New Shares
acquired through the exercise of the Options. Options granted pursuant to the
Saratoga Spring Water Company 1993 Stock Option Plan (the "1993 Plan"), shall
remain subject to the same terms and conditions of the 1993 Plan and Options
granted pursuant to the Saratoga Beverage Group, Inc. 1998 Stock Option Plan
(the "1998 Plan", and together with the 1993 Plan, the "Plans") shall remain
subject to the same terms and conditions of the 1998 Plan, including without
limitation in each case, to the provisions relating to termination of employment
and the option term, except as modified hereby.
(b) Closing. The closing of the rollover of the Options will take
place at the offices of Debevoise & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX, at
10 a.m., New York time, contemporaneously with the Closing.
2. Legend. The Optionholder acknowledges that the certificate or
certificates representing the New Shares will bear a legend as set forth in the
Stockholders Agreement and that such legend will be modified to add reference to
this Agreement.
3. Purchase Right. (a) Immediately prior to the occurrence of the
first NCP Liquidity Event, the Company shall purchase from the Optionholder, and
the Optionholder shall sell to the Company, the Callable Shares and Options
owned by the Optionholder at a per share price of $0.01. The Company shall not
be required to purchase from the Optionholder, and the Optionholder shall not be
required to sell to the Company, any Callable Shares and Options owned by the
Optionholder upon the occurrence of any subsequent NCP Liquidity Event.
(b) The closing for the purchase and sale of the Callable Shares and
Options shall take place immediately prior to the closing of the NCP Liquidity
Event, at such place and such time as shall be designated by the Company. At
such closing, the Optionholder shall deliver to the Company, in exchange for the
payment by the Company of the purchase price in respect of each Callable Share
and Option owned by the Optionholder, the certificate or certificates
representing the Callable Shares and Options, as the case may be.
(c) "Callable Shares and Options" means the New Shares and any
remaining unexercised Options.
(d) An "NCP Liquidity Event" means any Change of Control, Exit Event
or Public Offering that upon consummation thereof would result in the North
Castle Partners II, L.P. (the "Fund") realizing an internal rate of return on
the portion of its indirect equity investment (the "IRR") in the Company that is
disposed of by the Fund or any partnership controlled by the Fund (a "Controlled
Partnership") or, in the event of a share and option exchange pursuant to
Section 6 (a "Share and Option Exchange"), the portion of its indirect equity
investment in the top tier holding company for investments by the Fund in the
refrigerated juice industry ("Holdco") that does not equal or exceed
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25% compounded annually. For purposes of the foregoing, the IRR shall be
measured from the date of such Controlled Partnership's investment in such
disposed-of portion of the equity in (i) the Company or, (ii) in the event of a
Share and Option Exchange, Holdco, which date shall be deemed to be the date on
which such Controlled Partnership invested in any company that is a constituent
part of Holdco, to the date such Controlled Partnership receives the proceeds of
the NCP Liquidity Event. The IRR shall be calculated, with respect to shares of
the Company or Holdco, as the case may be, by applying a first-in, first-out
convention. For purposes of this calculation, in the event of a Share and Option
Exchange in which M. H. Zeiglers and Sons, Inc. ("Zeiglers") becomes Holdco,
convertible subordinated debt of Zeiglers shall be deemed equity that was
invested immediately after the Controlled Partnership acquired common stock of
Zeiglers. The Fund's IRR shall be determined in good faith by the Fund at least
10 days in advance of such Change of Control, Exit Event or Public Offering,
provided that if a majority of the Rollover Stockholders disagree with such
determination, then the Fund's IRR shall be determined by an independent
investment bank or valuation firm (the "Valuation Firm") selected by the Company
and the Rollover Stockholders. If the Company and the Rollover Stockholders
cannot agree on the Valuation Firm within five days of the date of determination
of the Fund's IRR, then the Valuation Firm shall be chosen by the two valuation
firms selected by the Company and the Rollover Stockholders. The fees and
expenses of the Valuation Firm shall be borne equally by the Company and the
Rollover Stockholders. The Company and the Optionholder agree that the
determination of the Valuation Firm shall be final and binding.
4. Other Agreements. (a) Immediately prior to the exercise of any
Options, the Optionholder will agree to be bound by the terms of the
Stockholders Agreement and will deliver to the Company an executed counterpart
thereof. Thereafter, the Optionholder and the New Shares will be subject to the
rights and obligations of the Stockholders Agreement, provided that in the event
of a conflict between the provisions of such agreement and this Earnout
Agreement, the terms of this Earnout Agreement will control.
(b) The Optionholder may not sell, transfer, pledge, encumber or
otherwise dispose of any Covered Security except in accordance with the
Stockholders Agreement and provided that the transferee of such Covered Security
agrees in writing to be bound by this Earnout Agreement. Any sale, transfer,
pledge, encumbrance or other disposition of any Covered Security other than as
permitted by this Earnout Agreement shall be void ab initio and of no effect.
5. Extension of Exercise Period. Notwithstanding anything contained
in any option agreement evidencing the grant of Options or the Plans, (a) if the
Optionholder's employment is terminated with the Company and the option
agreement or Plan provides for a period from the Optionholder's date of
termination to exercise the Options, or (b) if the option agreement or Plan
provides that an Option will expire if unexercised at any
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date, then, in either case, the Optionholder shall have until the first
occurrence of a Change of Control, Exit Event or Public Offering, in each case
that is not an NCP Liquidity Event, to exercise the Options.
6. Share and Option Exchange. At the request of NCP-SBG, L.P., the
Optionholder will exchange the Optionholder's New Shares and Options for shares
of capital stock of an equivalent value of Holdco or options to acquire stock of
equivalent value of Holdco pursuant to terms and conditions substantially
similar to the terms and conditions of the Options. Upon any Share and Option
Exchange, Holdco shall succeed to the rights and obligations of the Company
hereunder and the shares and options issued by Holdco in the Share and Option
Exchange shall be subject to the same rights and restrictions as the New Shares
and the Options. The Company will endeavor to effect any Share Exchange in a
manner that is tax efficient for all of its stockholders.
7. Tax Withholding. Whenever any cash payment is to be made
hereunder, the Company shall have the power to withhold, or require the
Stockholder to remit to the Company, an amount sufficient to satisfy the
statutory minimum amount of all Federal, state, and local withholding tax
requirements relating to such transaction, and the Company may defer payment of
cash until such requirements are satisfied.
8. Agreement Effectiveness; Termination. This Agreement will become
effective upon the occurrence of the Closing under the Recapitalization
Agreement. Once effective, this Agreement may be terminated by either the
Optionholder or the Company by written notice to the other on the first
occurring Change of Control, Exit Event or Public Offering, in each case, that
does not give rise to an NCP Liquidity Event. Upon termination, this Agreement
will be of no further force or effect.
9. Miscellaneous. This Earnout Agreement will be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York, without giving effect to the conflict of laws
rules thereof to the extent any such rules would require or permit the
application of the laws of any other jurisdiction, except to the extent that the
corporate law of the state of incorporation of the Company specifically and
mandatorily applies.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Earnout Agreement as of the date first written above.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
Title: CEO
/s/ Xxxx Xxxxxxxx
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XXXX XXXXXXXX
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