OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
X.X. XXXXXXXX, INC.
AT
$7.00 NET PER SHARE
BY
TOAST ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
VINCOR HOLDINGS, INC.
AN AFFILIATE OF
VINCOR INTERNATIONAL INC.
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THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, OCTOBER 4, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
The Offer is being made to shareholders of X.X. Xxxxxxxx, Inc. (the
"Company") in connection with the Agreement and Plan of Merger dated as of
August 25, 2000 (the "Merger Agreement"), by and among Vincor International Inc.
("Parent"), Vincor Holdings, Inc. ("Hold Co."), Toast Acquisition Company, Inc.
("Purchaser") and the Company, which provides that, following the consummation
of the Offer, Purchaser will be merged with and into the Company (the "Merger")
and the Company will become a wholly owned subsidiary of Hold Co.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
THE MERGER AGREEMENT AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. THE
BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER THEIR SHARES.
This Offer is conditioned upon, among other things, (1) there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
number of shares of common stock (the "Shares") of the Company which constitutes
at least 90% of the outstanding Shares on a fully diluted basis (excluding
options and warrants tendered for cancellation) (the "Minimum Condition"), and
(2) the expiration or termination of any applicable waiting period under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The Offer is also subject to other terms and conditions contained in this
Offer to Purchase. The Offer is not conditioned upon Parent or Purchaser
obtaining financing.
Certain directors and shareholders holding approximately 33.2% of the
currently outstanding Shares and 29.5% of the Shares on a fully diluted basis
(before any options or warrants are tendered for cancellation) have agreed to
tender their Shares in the Offer.
----------------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of the shareholder's
shares should either:
(1) complete and sign the accompanying Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal
and deliver it and any other required documents to the Depositary and either
deliver the certificate(s) representing the shares to be tendered to the
Depositary along with the Letter of Transmittal or tender the shares
according to the procedure for book-entry transfer set forth in Section 3
hereof, or
(2) request the shareholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for the shareholder.
The procedures and documents required to tender shares are set forth in
Section 3.
Any shareholder whose shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact that broker,
dealer, commercial bank, trust company or other nominee if the shareholder
desires to tender those shares.
Any shareholder who desires to tender shares and whose stock certificates
are not immediately available, or who cannot comply with the procedure for
book-entry transfer on a timely basis, may tender those shares by following the
procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to MacKenzie Partners, Inc., the Information Agent, at its address and
telephone number set forth on the back cover of this Offer to Purchase.
Additional copies of this Offer to Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
A SUMMARY OF THE PRINCIPAL TERMS OF THE OFFER APPEARS ON PAGES 1 THROUGH 5. YOU
SHOULD READ THIS ENTIRE DOCUMENT BEFORE DECIDING WHETHER TO TENDER YOUR SHARES.
----------------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC. LOGO
September 7, 2000
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE OFFER AND THE MERGER................ 1
INTRODUCTION........................................................ 6
RECOMMENDATION OF THE BOARD OF DIRECTORS OF X.X. XXXXXXXX, INC...... 7
THE TENDER OFFER.................................................... 8
1. Terms of the Offer; Extension of Tender Period; Termination; 8
Amendment.................................................
2. Acceptance for Payment and Payment for Shares............... 9
3. Procedure for Tendering Shares.............................. 10
4. Withdrawal Rights........................................... 13
5. Certain Federal Income Tax Consequences of the Offer and the 13
Merger....................................................
6. Price Range of the Shares................................... 14
7. Certain Information Concerning the Company.................. 15
8. Certain Information Concerning the Purchaser Group.......... 16
9. Background of the Offer..................................... 17
10. Purpose of the Offer; the Merger Agreement.................. 19
11. Source and Amount of Funds.................................. 32
12. Certain Effects of the Offer................................ 34
13. Certain Conditions of the Offer............................. 34
14. Dividends and Distributions................................. 35
15. Certain Legal Matters; Regulatory Approvals................. 36
16. Fees and Expenses........................................... 38
17. Miscellaneous............................................... 38
Schedule I--Information Concerning the Directors and Officers of the Purchaser
Group
Appendix A--Plan of Merger
Appendix B--Sections 1300, 1301, 1302, 1303 and 1304 of the California
Corporations Code
QUESTIONS AND ANSWERS ABOUT THE OFFER AND THE MERGER
The following summary highlights certain important and material information
from this offer to purchase but does not purport to be complete. To fully
understand the offer described in this offer to purchase and for a more complete
description of the terms of the offer described in this document, you should
read carefully this entire offer to purchase, the documents incorporated by
reference herein, and the enclosed letter of transmittal. We have included
section references to direct you to more complete descriptions of the topics set
forth below.
Q: WHO IS OFFERING TO BUY MY SECURITIES?
A: We are Toast Acquisition Company, Inc., a newly formed California
corporation that has not conducted any business other than in connection with
this offer and the related merger agreement. We are offering to purchase all of
the outstanding shares of common stock of X.X. Xxxxxxxx, Inc. Our parent
corporation is Vincor International Inc., Canada's largest producer and marketer
of wines, wine kits, coolers and ciders, with leading brands in all segments of
the market in Canada. Vincor owns and operates wineries in British Columbia,
Ontario, Quebec and New Brunswick, and markets wines produced from grapes grown
in the Niagara Peninsula of Ontario, the Okanagan Valley of British Columbia and
other countries. Vincor is a public company in Canada whose common shares trade
on The Toronto Stock Exchange. For more information about us and our affiliates,
see "The Tender Offer--Certain Information Concerning the Purchaser Group." We
intend through this offer to ultimately acquire all of X.X. Xxxxxxxx'
outstanding common stock. For more information about us and our ownership of
X.X. Xxxxxxxx after consummation of the merger, see "Who Will Own X.X. Xxxxxxxx
After the Merger" and "The Tender Offer--Certain Information Concerning the
Purchaser Group."
Q: WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
A: We are making the offer for any and all shares of the common stock of X.X.
Xxxxxxxx, which are X.X. Xxxxxxxx' only outstanding shares of stock. See
"Introduction."
Q: HOW MUCH ARE YOU OFFERING TO PAY, WHAT IS THE FORM OF PAYMENT AND WILL I
HAVE TO PAY ANY FEES OR COMMISSIONS?
A: We are offering to pay $7.00 net per share in cash, without interest. If you
are the record owner of your shares and you tender your shares to us, you will
not have to pay any brokerage fees or similar expenses. If you own your shares
through a broker or other nominee, and your broker or nominee tenders your
shares on your behalf, your broker or nominee may charge you a fee for doing so.
You should consult your broker or nominee to determine whether any charges will
apply. See "Introduction" for more information regarding the terms of our offer.
Q: HOW DO I TENDER MY SHARES?
A: If you hold your shares "of record," you can tender your shares by sending
the enclosed letter of transmittal to LaSalle Bank, N.A., our depositary, at the
address listed on the enclosed letter of transmittal. If your broker, dealer,
bank, trust company or custodian holds your shares in "street name" for you, you
must direct your broker to tender your shares in accordance with the book-entry
or guaranteed delivery procedures set forth in this offer to purchase. See "The
Tender Offer--Procedure for Tendering Shares."
Q: WHAT DOES THE BOARD OF DIRECTORS OF X.X. XXXXXXXX THINK OF THE OFFER?
A: The board of directors of X.X. Xxxxxxxx recommends the offer and the merger.
A special committee of the board of directors, consisting of three directors,
two of whom were independent directors, independently evaluated the fairness of
the offer and the merger. Additionally, an investment
1
banker independently evaluated the fairness of the offer and the merger. The
special committee, with the assistance of the legal advisor and investment
banker engaged by X.X. Xxxxxxxx, participated in negotiating the terms of the
offer and the merger and recommended that the full board of directors of X.X.
Xxxxxxxx approve the offer and the merger agreement. At a meeting of the board
of directors on August 25, 2000, the board of directors, by unanimous vote of
all of the directors, based on, among other things, the unanimous recommendation
of the special committee, (i) determined that the merger is advisable and that
the terms of the offer and the merger are fair to, and in the best interests of,
X.X. Xxxxxxxx and its shareholders, (ii) approved the offer and approved and
adopted the merger agreement, and (iii) recommended that the shareholders of
X.X. Xxxxxxxx tender their shares. See "Introduction."
Q: DID X.X. XXXXXXXX RECEIVE ANY OPINIONS OR APPRAISALS REGARDING THE FAIRNESS
OF THE PER SHARE PRICE PAYABLE IN THE OFFER?
A: Yes. X.X. Xxxxxxxx received a written opinion, dated August 25, 2000, from
its investment banker, First Security Xxx Xxxxxx, to the effect that, as of that
date and based on and subject to the matters described in the opinion, the $7.00
per share cash consideration to be received by X.X. Xxxxxxxx' shareholders in
the offer and the merger is fair to you, from a financial point of view. See
"Recommendation Of The Company's Board Of Directors" for more information
regarding First Security Xxx Xxxxxx'x opinion and financial analysis. The
opinion letter is included as an appendix to X.X. Xxxxxxxx' Schedule 14D-9,
which accompanies this offer to purchase.
Q: DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
A: Yes. The Bank of Nova Scotia has issued a commitment letter to us, and as
long as the conditions to the offer described in Section 13 and other customary
conditions included in the commitment letter are satisfied, The Bank of Nova
Scotia will provide us with sufficient funds for us to purchase all tendered
shares and any shares to be acquired in the merger. See "The Tender Offer--
Source and Amount of Funds" for more information relating to the financing of
our offer.
Q: IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION ON WHETHER TO TENDER MY
SHARES?
A: We do not think our financial condition is relevant to your decision whether
to tender your shares because we are paying you in cash for your shares and the
offer is not conditioned on our ability to obtain financing. You may obtain
financial and other information that our parent corporation files with Canadian
securities authorities from the SEDAR website at xxxx://xxx.xxxxx.xxx. See "The
Tender Offer--Source and Amount of Funds" and "Certain Information Concerning
the Purchaser Group."
Q: HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES?
A: You may tender your shares until midnight, New York City time, on Wednesday,
October 4, 2000, which is the scheduled expiration date of the offering period,
unless we decide to extend the offering period if the conditions to our offer
are not met or if we provide for a subsequent offering period. We will purchase
all shares that are properly tendered and not withdrawn promptly following the
expiration date if the conditions to our offer have been met. See "The Tender
Offer--Terms of the Offer" for more information concerning our ability to extend
the expiration date. Further, if you cannot deliver everything that is required
to make a valid tender by that time, you may be able to use a guaranteed
delivery procedure, which is described later in this offer to purchase. See "The
Tender Offer--Procedure for Tendering Shares."
2
Q: CAN THE OFFER BE EXTENDED?
A: Yes. The merger agreement requires us to extend the offer for up to ten
business days if any of the conditions specified in Section 13 are not satisfied
or waived as of the date this offer expires. We may extend the offer for the
longer or shorter time periods as needed to satisfy the conditions in Section 13
or otherwise as required by law. See "The Tender Offer--Terms of the Offer."
Q: WILL THERE BE A SUBSEQUENT OFFERING PERIOD?
A: Following the satisfaction of all the conditions to the offer and the
acceptance of and payment for all the shares tendered during the offering
period, we may choose to provide a subsequent offering period. See "The Tender
Offer--Terms of the Offer."
Q: HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
A: We will announce any extension of the offer by press release no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date. See "The Tender Offer--Extension of Tender Period"
for more information about extension of the offer. If we provide a subsequent
offering period, we will publicly disclose our intention to do so by issuing a
press release no later than 9:00 a.m., New York City time, five business days
before the expiration date of the offering period.
Q: UNTIL WHAT TIME AND HOW CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
A: You can withdraw tendered shares at any time prior to midnight on the
expiration date of October 4, 2000, by sending a notice of withdrawal to LaSalle
Bank, our depositary. If we extend the expiration date, you can withdraw
tendered shares at any time before the new expiration date. Additionally, unless
we accept tendered shares for payment pursuant to the offer, you may also
withdraw tendered shares at any time after November 5, 2000. If we choose to
provide for a subsequent offering period, you will not have withdrawal rights
with respect to shares tendered in the subsequent offering period. See "The
Tender Offer--Withdrawal Rights" for more information about your rights to
withdraw tendered shares.
Q: WHAT ARE THE MOST SIGNIFICANT CONDITIONS OF THE OFFER?
A: We are not obligated to purchase any shares, even if validly tendered,
unless those shares represent at least 90% of X.X. Xxxxxxxx' outstanding shares
on a fully diluted basis, excluding options and warrants surrendered for
cancellation. As of August 25, 2000, 6,695,331 shares were outstanding. In
addition, options to purchase 664,844 shares and warrants to purchase a total of
1,515,314 shares were outstanding as of that date. We estimate that
approximately 6,025,798 shares must be validly tendered (and not validly
withdrawn) for 90% of the Shares to be tendered. Our estimate assumes that
before the offer expires, the holders of outstanding options and warrants will
tender their options and warrants for cancellation in exchange for cash equal to
$7.00 per share less the option or warrant exercise price per share.
Furthermore, we have no obligation to purchase any shares, even if validly
tendered, if, among other things, there has occurred any change, condition,
event or development that has a material adverse effect on X.X. Xxxxxxxx, X.X.
Xxxxxxxx has materially breached its obligations, covenants or agreements under
the merger agreement, or if there has occurred a breach of any material
representation or warranty of X.X. Xxxxxxxx contained in the merger agreement.
See "The Tender Offer--Conditions of the Offer."
Q: HAVE ANY SHAREHOLDERS AGREED TO TENDER THEIR SHARES?
A: Yes. All of the directors, including each of the Gigiuere family members,
the executive officers and some of the largest shareholders of X.X. Xxxxxxxx who
together own approximately 33.2% of its
3
currently outstanding shares, which represent approximately 29.5% of the shares
on a fully diluted basis, have agreed to tender their shares. The term "on a
fully diluted basis" means, as of any date, the number of shares outstanding
plus all shares X.X. Xxxxxxxx is then required to issue upon the exercise of
outstanding options and warrants, to the extent those options and warrants are
then exercisable. See "The Tender Offer--Purpose of the Offer; the Merger
Agreement."
Q: IF THE TENDER OFFER CONDITIONS ARE SATISFIED, WILL X.X. XXXXXXXX CONTINUE AS
A PUBLIC COMPANY?
A: No. If the merger takes place, X.X. Xxxxxxxx will no longer be publicly
owned. As a result, (i) X.X. Xxxxxxxx' shares will no longer be listed on The
Nasdaq National Market; (ii) there will not be a public trading market for X.X.
Xxxxxxxx' shares; and (iii) X.X. Xxxxxxxx will cease making filings with the
Securities and Exchange Commission and otherwise cease being required to comply
with its rules relating to publicly held companies. See "The Tender Offer--
Certain Effects of the Offer."
Q: IF YOU CONSUMMATE THE TENDER OFFER, WHAT ARE YOUR PLANS WITH RESPECT TO ALL
THE SHARES THAT ARE NOT TENDERED IN THE OFFER?
A: If the shares of common stock tendered constitute at least 90% of the then
outstanding shares on a fully diluted basis, we will promptly merge with X.X.
Xxxxxxxx. See "The Tender Offer--Certain Conditions of the Offer." Any
shareholders whose shares we do not purchase in the offer will receive $7.00 per
share in cash for each share of X.X. Xxxxxxxx common stock as a result of the
merger. See "The Tender Offer--Certain Effects of the Offer."
Q: IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
A: If the offer is consummated and we acquire more than 90% of the outstanding
shares on a fully diluted basis, we will promptly merge with and into X.X.
Xxxxxxxx. In the merger, shareholders who do not tender their shares in the
offer and who do not exercise their appraisal rights will receive the same
amount of cash per share in the merger that they would have received had they
tendered their shares. Therefore, if the merger takes place, the difference to
you between tendering your shares and not tendering your shares is that you will
be paid earlier if you tender your shares. See "Introduction" and "The Tender
Offer--Certain Effects of the Offer."
Q: IF I OBJECT TO THE PRICE BEING OFFERED, WILL I HAVE APPRAISAL RIGHTS?
A: Yes. If you elect not to tender your shares and properly comply with the
applicable provisions of the California General Corporation Law governing
appraisal rights, you will have the right to receive in cash the fair market
value of your shares as of August 25, 2000, the last trading day before the
first announcement of the terms of the merger. See "The Tender Offer--The Merger
Agreement--Rights of Dissenting Shareholders."
4
Q: WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
A: On September 6, 2000, the last trading day before we commenced our tender
offer, the last sale price was $6.81 per share. On August 25, 2000, the last
trading day before we announced the proposed offer to purchase shares for $7.00
per share, the last sale price of X.X. Xxxxxxxx' common stock reported on The
Nasdaq National Market was $4.75 per share. On August 14, 2000, the last trading
day before X.X. Xxxxxxxx announced it was conducting merger negotiations, the
last sale price was $2.97 per share. We advise you to obtain a recent quotation
for your shares in deciding whether to tender your shares. See "Tender
Offer--Price Range of the Shares."
Q: WHO WILL OWN X.X. XXXXXXXX AFTER THE MERGER?
A: After the merger, X.X. Xxxxxxxx will continue as an indirect, wholly owned
subsidiary of Vincor International Inc. See "The Tender Offer--Certain Effects
of the Offer."
Q: WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
A: If you have more questions about the tender offer, you should contact the
information agent, MacKenzie Partners, Inc., at (000) 000-0000 (collect) or
(000) 000-0000 (toll free). MacKenzie Partners, Inc. is acting as our
information agent for the offer. See the back cover of this offer to purchase.
5
To the Shareholders of X.X. Xxxxxxxx, Inc.:
INTRODUCTION
Toast Acquisition Company, Inc., a California corporation ("Purchaser"), a
wholly owned subsidiary of Vincor Holdings, Inc. a Delaware corporation ("Hold
Co."), an affiliate of Vincor International Inc., a corporation validly existing
under the laws of Canada ("Parent," and together with Purchaser and Hold Co.,
the "Purchaser Group"), hereby offers to purchase all of the outstanding shares
of common stock, no par value (the "Shares"), of X.X. Xxxxxxxx, Inc. (the
"Company"), at a purchase price of $7.00 per Share (the "Offer Price"), net to
the seller in cash, in accordance with the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Letter of Transmittal
(which, as amended or supplemented from time to time, collectively constitute
the "Offer").
The Offer is being made in connection with an Agreement and Plan of Merger
(the "Merger Agreement") dated as of August 25, 2000, by and among the Purchaser
Group and the Company. The Merger Agreement requires Purchaser to offer to
purchase all of the outstanding Shares pursuant to the Offer on the terms and
subject to the conditions set forth in this Offer to Purchase. If Shares
representing at least 90% of the outstanding Shares on a fully diluted basis
(excluding options and warrants tendered for cancellation) are validly tendered
in the Offer and purchased by Purchaser, and the other conditions to the Merger
are satisfied or waived, Purchaser will merge with and into the Company. In the
Merger, any Shares not purchased in the Offer (other than Shares held by the
Purchaser Group, the Company or any of their respective subsidiaries and Shares
as to which appraisal rights are properly exercised under California law) will
be converted by operation of law into the right to receive cash in the amount of
$7.00 per Share (the "Merger Consideration"). For more information concerning
the terms of the Merger Agreement, see Section 10.
THE BOARD OF DIRECTORS OF X.X. XXXXXXXX, INC. HAS UNANIMOUSLY DETERMINED
THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER AGREEMENT. THE BOARD OF DIRECTORS ALSO RECOMMENDS THAT SHAREHOLDERS OF
THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES. THE BOARD HAS
RECEIVED AN OPINION FROM FIRST SECURITY XXX XXXXXX, ITS FINANCIAL ADVISOR, THAT
THE MERGER CONSIDERATION IS FAIR TO THE SHAREHOLDERS OF X.X. XXXXXXXX, INC. FROM
A FINANCIAL POINT OF VIEW. SEE "RECOMMENDATION OF THE COMPANY'S BOARD OF
DIRECTORS."
Holders of Shares registered in their own name who tender those Shares
directly to LaSalle Bank, N.A. (the "Depositary") will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 7 of the
Letter of Transmittal, transfer taxes on the transfer and sale of Shares
pursuant to the Offer. Shareholders who hold their Shares through a broker or
bank should consult the broker or bank as to whether it charges any service
fees. Purchaser will pay all fees and expenses of the Depositary and MacKenzie
Partners, Inc. (the "Information Agent") incurred in connection with the Offer.
See Section 16.
The Offer is being made in accordance with the terms of the Merger
Agreement. The purpose of the Offer, the Merger, and the Merger Agreement is to
enable Parent to obtain control of, and to indirectly own the entire equity
interest in, the Company. On August 25, 2000, the last trading day before the
announcement of the proposed Merger, the closing market price of the Shares was
$4.75. On August 14, 2000, the last trading day before X.X. Xxxxxxxx announced
it was conducting merger negotiations, the closing market price of the Shares
was $2.97. The Offer provides an opportunity for existing shareholders of the
Company to sell Shares at a premium over recent trading prices. See Section 6.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not properly withdrawn before the Offer expires a number of Shares
which constitutes at least 90% of the outstanding Shares on a fully diluted
basis (excluding options and warrants tendered for cancellation)
6
(the "Minimum Condition"), and the expiration or termination of any applicable
waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"). The Offer is also subject to other terms and
conditions contained in this Offer to Purchase. See Introduction and Sections 1
and 13.
Subject to certain exceptions set forth below, Purchaser expressly reserves
the right to waive any one or more of the conditions to the Offer. See Sections
1 and 13.
As of August 25, 2000, 6,695,331 Shares were outstanding. In addition,
options covering a total of 664,844 Shares and warrants to purchase a total of
1,515,314 Shares were outstanding as of that date. Purchaser estimates that
approximately 6,025,798 Shares must be validly tendered (and not validly
withdrawn) to satisfy the Minimum Condition. This estimate assumes that all of
the outstanding options and warrants will be tendered for cancellation before
the Offer expires.
Certain directors and shareholders who own 2,219,614 Shares and options to
purchase 387,060 Shares, or 33.2% of the currently outstanding Shares
representing 29.5% of the Shares on a fully diluted basis before any tender of
options or warrants for cancellation, have agreed with the Company to tender
their outstanding Shares and tender their options for cancellation in accordance
with the terms and conditions of the Offer. The term "on a fully diluted basis"
means, as of any date, the number of Shares outstanding plus all Shares that the
Company is then required to issue upon the exercise of outstanding options and
warrants, to the extent those options and warrants are then exercisable. See
Section 10.
The Purchaser Group estimates that approximately $95 million of financing
will be required to consummate the Offer and Merger, to refinance certain
obligations of the Company, and to pay estimated financing and transaction fees
and expenses. The Purchaser Group plans to obtain the necessary funds under the
credit facility described below.
Parent has received from The Bank of Nova Scotia ("BNS") a written financing
commitment for a $95.0 million acquisition facility.
For more information concerning the financing of the Offer and the Merger
and related transactions, see Section 11.
* * * * * *
SHAREHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL
CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF X.X. XXXXXXXX, INC.
The Company's Board of Directors has unanimously determined that the Offer
and the Merger are fair to and in the best interests of the Company and its
shareholders and has unanimously approved the Offer and the Merger Agreement and
recommends that the shareholders of the Company accept the Offer and tender all
of their Shares (the "Board Recommendation"). The purpose of the Offer, the
Merger, and the Merger Agreement is to enable Parent to obtain control of, and
to indirectly own the entire equity interest in, the Company. The Offer allows
the Company's shareholders to receive cash at a premium over recent trading
prices for the Shares. See Sections 6, 9 and 10.
The Company's financial advisor, First Security Xxx Xxxxxx ("FSVK"), has
delivered to the Company's Board of Directors its written opinion dated August
25, 2000 to the effect that, as of such date and based upon and subject to
certain matters stated in its opinion, the $7.00 per Share cash consideration to
be received by the holders of Shares (other than the Company, the Purchaser
Group and their respective subsidiaries) pursuant to the Offer and the Merger
was fair to such holders from a financial point of view. A copy of the FSVK
opinion letter is contained in the Company's Solicitation/ Recommendation
Statement on Schedule 14D-9 (the "Company's Schedule 14D-9"), which is being
distributed to the Company's shareholders with this Offer to Purchase. The
Company's shareholders are urged to read the opinion letter in its entirety.
7
THE TENDER OFFER
1. TERMS OF THE OFFER; EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered and not properly withdrawn on or before the Expiration Date (as
hereinafter defined) at a price of $7.00 per Share, net to the seller in cash.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Wednesday, October 4, 2000, unless Purchaser extends the period during which the
Offer is open, in which event the term "Expiration Date" will mean the latest
time and date at which the Offer, as so extended by Purchaser, shall expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition and the expiration or termination of any waiting period under
the HSR Act. The Offer is also subject to certain other conditions set forth in
Section 13. Purchaser expressly reserves the right, in its sole discretion, to
waive, in whole or in part, any or all of the conditions of the Offer; provided,
that Purchaser may waive the Minimum Condition only if more than 50% of the
Shares are tendered in the Offer and if BNS amends or waives the conditions of
its Commitment Letter.
Subject to the terms of the Merger Agreement, Purchaser may extend the
Offer. The Merger Agreement requires Purchaser to extend the Offer for up to ten
(10) business days if any of the conditions specified in Section 13 are not
satisfied or waived as of the Expiration Date. Purchaser may extend the Offer
for longer or shorter time periods as needed to satisfy the conditions specified
in Section 13 or otherwise as required by law. During any such extension, all
Shares previously tendered and not properly withdrawn will remain subject to the
Offer subject to the rights of a tendering shareholder to withdraw such
shareholder's Shares. Under no circumstances will interest be paid on the
purchase price for tendered Shares, whether or not the Offer is extended.
Purchaser also expressly reserves the right, subject to applicable laws
(including applicable regulations of the Securities and Exchange Commission (the
"Commission")) at any time or from time to time, to (i) delay acceptance for
payment of, or payment for any Shares in order to comply, in whole or in part,
with any applicable law, government regulation or any other condition contained
in Sections 13 and 15, (ii) terminate the Offer (whether or not any Shares have
theretofore been accepted for payment) if any of the conditions referred to in
Section 13 have not been satisfied or upon the occurrence of any of the events
specified in Section 13, (iii) waive any condition (except as described in the
following paragraph), or (iv) subject to certain exceptions set forth below,
amend the Offer in any respect; in each case by giving oral or written notice of
such delay, termination, waiver or amendment to the Depositary. Purchaser
acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires Purchaser to
pay the consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer and (ii) Purchaser may not delay
acceptance for payment of, or payment for, any Shares upon the occurrence of any
of the conditions specified in Section 13 without extending the period of time
during which the Offer is open.
Without the prior written consent of the Company, Purchaser may not decrease
the Offer Price or change the form of consideration payable in the Offer,
decrease the number of Shares Purchaser seeks to purchase in the Offer, change
the conditions to the Offer set forth in Section 13, impose additional
conditions to the Offer, or amend any other term of the Offer in any manner
adverse to the holders of Shares. Purchaser may waive any condition to the Offer
without the consent of the Company; provided, that Purchaser may waive the
Minimum Condition only if more than 50% of the Shares are tendered in the Offer
and if BNS amends or waives the conditions of its Commitment Letter.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, and such announcement
in the case of an extension will be made no later than 9:00 a.m., New York City
time, on the next business day after the previously
8
scheduled Expiration Date in accordance with the public announcement
requirements of Rules 14d-4(c) and 14d-6(d) under the Exchange Act. Without
limiting the obligation of Purchaser under such rules or the manner in which
Purchaser may choose to make any public announcement, Purchaser currently
intends to make any such announcement by issuing a release to the Dow Xxxxx News
Service and making any appropriate filing with the Commission.
If Purchaser makes a material change in the terms of the Offer or if
Purchaser waives a material condition of the Offer, Purchaser will extend the
Offer to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange
Act. The minimum period during which an offer must remain open following
material changes in the terms of the Offer, other than a change in price or a
change in the percentages of securities sought, will depend on the facts and
circumstances, including the materiality, of the changes. With respect to a
change in price or, subject to certain limitations, a change in the percentage
of securities sought, a minimum ten (10) business day period from the day of
such change is generally required to allow for adequate dissemination to
shareholders. Accordingly, if before the Expiration Date, Purchaser decreases
the number of Shares being sought or increases or decreases the consideration
offered pursuant to the Offer and if the Offer is scheduled to expire at any
time earlier than the period ending on the tenth (10th) business day from the
date of that notice of the increase or decrease is first published, sent or
given to shareholders, the Offer will be extended at least until the expiration
of the ten (10) business day period. Any extension of the Offer will not
constitute a waiver by Purchaser of any of the conditions set forth in
Section 13.
Pursuant to Rule 14d-11 under the Exchange Act, Purchaser may, subject to
certain conditions, include a subsequent offering period following the
expiration of the Offer on the Expiration Date (the "Subsequent Offering
Period"). Rule 14d-11 provides that Purchaser may include a Subsequent Offering
Period so long as, among other things, (i) the Offer remained open for a minimum
of 20 business days and has expired, (ii) the Offer was for all outstanding
Shares, (iii) Purchaser accepts and promptly pays for all Shares tendered during
the Offer, (iv) Purchaser announces the results of the Offer, including the
approximate number and percentage of Shares deposited, no later than 9:00 a.m.,
New York City time, on the next business day after the Expiration Date and
immediately begins the Subsequent Offering Period, (v) Purchaser immediately
accepts and promptly pays for Shares as they are tendered in the Subsequent
Offering Period and (vi) Purchaser pays the Offer Price for all Shares tendered
during the Subsequent Offering Period. Purchaser can include a Subsequent
Offering Period if it satisfies the conditions above and announces its intention
to include a Subsequent Offering Period by issuing a press release no later than
9:00 a.m., New York City time, five (5) business days before the expiration of
the then applicable offering period.
A Subsequent Offering Period, if one is included, is not an extension of the
Offer. A Subsequent Offering Period would be an additional period of time,
following the expiration of the Offer, in which shareholders may tender Shares
not tendered during the Offer. Purchaser does not currently intend to include a
Subsequent Offering Period in the Offer, although it reserves the right to do so
in its sole discretion.
During a Subsequent Offering Period, tendering shareholders will not have
withdrawal rights, and Purchaser must promptly purchase and pay for any Shares
tendered at the same price paid in the Offer.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and will pay for all Shares
validly tendered and not properly withdrawn on or prior to any Expiration Date
as soon as practicable after such Expiration Date. In addition, Purchaser
reserves the right, in its sole discretion and subject to applicable law, to
delay acceptance for payment of or payment for Shares in order to comply, in
whole or in part, with any applicable law, government regulation or any other
9
condition contained herein. Any such delays will be accomplished in compliance
with Rule 14e-1(c) under the Exchange Act (relating to bidder's obligation to
pay for or return tendered securities promptly after the termination or
withdrawal of bidder's offer). See Sections 13 and 15.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment and thereby purchased tendered Shares if, as and when Purchaser gives
oral or written notice to the Depositary of its acceptance of such Shares for
payment pursuant to the Offer. Payment for Shares accepted for payment pursuant
to the Offer will be made by deposit by Purchaser of the purchase price to be
paid by it with the Depositary, which Depositary will act as agent for the
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering shareholders. See Instruction 11 of the
Letter of Transmittal. Under no circumstances will interest be paid by Purchaser
on the consideration paid for the Shares pursuant to the Offer, regardless of
any delay in making payment. Purchaser shall pay all stock transfer taxes, if
any, payable on the transfer of Shares purchased by it pursuant to the Offer,
except as set forth in Instruction 7 of the Letter of Transmittal.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of a
certificate(s) for such Shares or a timely confirmation of a book-entry transfer
of such Shares into the Depositary's account at a Book-Entry Transfer Facility
(as defined in Section 3), a Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined in Section 3) in connection with a book-entry
delivery of Shares, and any other documents required by the Letter of
Transmittal. For a description of the procedure for tendering Shares pursuant to
the Offer, see Section 3.
If any tendered Shares are not accepted for payment for any reason or if
certificate(s) are submitted for more Shares than are tendered, certificates
evidencing unpurchased or untendered Shares will be returned without expense to
the tendering shareholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3, such Shares will be credited
to an account maintained at such Book-Entry Transfer Facility) as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
If Purchaser increases the consideration offered to shareholders pursuant to
the Offer, such increased consideration will be paid to all shareholders whose
Shares are purchased pursuant to the Offer, whether or not such Shares were
tendered or accepted for payment prior to such increase in consideration.
Purchaser reserves the right to assign, in whole or from time to time in
part, to Parent or another direct or indirect subsidiary of Parent, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such assignment will not relieve Purchaser of its obligations under the
Offer nor will any such assignment prejudice in any way the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
VALID TENDER OF SHARES. Except as set forth below, in order for Shares to
be validly tendered pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry delivery of Shares as described below, and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. In addition, either (i) certificates evidencing tendered Shares must
be received by the Depositary at any such address or such Shares must be
tendered pursuant to the procedure for book-entry transfer (and a confirmation
of receipt of such delivery must be received by the Depositary), in each case on
or before the Expiration Date or (ii) the guaranteed delivery
10
procedures set forth below must be complied with. The term "Agent's Message"
means a message transmitted by The Depository Trust Company (the "Book-Entry
Transfer Facility") to and received by the Depositary and forming a part of a
book-entry transfer confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares that are the subject of the
Book-Entry Confirmation, that the participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that Purchaser may enforce
such agreement against the participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two (2) business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of any Book-Entry
Transfer Facility may make book-entry delivery of Shares by causing a Book-Entry
Transfer Facility to transfer the Shares into the Depositary's account in
accordance with that Book-Entry Transfer Facility's procedures for transfer.
Although delivery of Shares may be accomplished through book-entry transfer at a
Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer, and any other required documents, must, in any case, be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
Delivery of Documents to a Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures does not constitute delivery to
the Depositary.
SIGNATURE GUARANTEES. Except as otherwise provided below, signatures on
Letters of Transmittal must be guaranteed by a financial institution (including
most banks, savings and loan associations and brokerage houses) that is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, or the Stock Exchange Medallion
Program (each of the foregoing constituting an "Eligible Institution").
Signatures on Letters of Transmittal need not be guaranteed if (i) the Letter of
Transmittal is signed by the registered holder of Shares tendered and that
holder has not completed either the box entitled "Special Delivery Instructions"
or the box entitled "Special Payment Instructions" on the Letter of Transmittal,
or (ii) the Shares are tendered for the account of an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal.
If the certificates representing Shares are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made or certificates for Shares not accepted for payment or not tendered are
to be returned to a person other than the registered holder, then the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on the certificates, with the signatures on the certificates or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and the shareholder's certificates are not immediately available, or
time will not permit the certificates and all other required documents to reach
the Depositary on or prior to the Expiration Date, or the shareholder cannot
complete the procedure for book-entry transfer on a timely basis, the
shareholder may nevertheless tender the Shares if the following guaranteed
delivery procedures are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary as provided below on or before the Expiration Date; and
11
(iii) the certificates (or a book-entry transfer confirmation)
representing all tendered Shares, in proper form for transfer, in each case
together with the Letter of Transmittal (or a facsimile thereof) properly
completed and duly executed, with any required signature guarantees (or, in
the case of a book-entry transfer, an Agent's Message) and any other
documents required by the Letter of Transmittal are received by the
Depositary within three (3) trading days after the date of execution of the
Notice of Guaranteed Delivery. A "trading day" is any day on which The
Nasdaq National Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION
AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY SHALL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax
withholding on payments made to shareholders with respect to the price of Shares
purchased pursuant to the Offer, each shareholder must provide the Depositary
with the shareholder's correct taxpayer identification number ("TIN") and
certify that the shareholder is not subject to backup United States federal
income tax withholding by completing the substitute Form W-9 included in the
Letter of Transmittal. See Instruction 10 of the Letter of Transmittal. If the
shareholder is a nonresident alien or foreign entity not subject to back-up
withholding, the shareholder must give the Depositary a completed Form W-8
Certificate of Foreign Status prior to receipt of any payments.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal, a tendering
shareholder irrevocably appoints designees of Purchaser as the shareholder's
proxies in the manner set forth in the Letter of Transmittal to the full extent
of the shareholder's rights with respect to the Shares tendered by the
shareholder and accepted for payment by Purchaser (and with respect to any and
all other Shares or other securities issued or issuable in respect of the
tendered Shares on or after the date of this Offer to Purchase). All such
proxies will be irrevocable and coupled with an interest in the tendered Shares.
The appointment will be effective when, and only to the extent that, Purchaser
accepts the Shares for payment. Upon acceptance for payment, all prior proxies
and consents granted by the shareholder with respect to the tendered Shares and
other securities will be revoked without further action, and no subsequent
proxies may be given nor subsequent written consents executed (and, if given or
executed, those proxies or consents will not be deemed effective). The designees
of Purchaser will be empowered to exercise all voting and other rights of the
tendering shareholder as they, in their sole discretion, may deem proper at any
annual, special or adjourned meeting of the Company's shareholders, by written
consent or otherwise. Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Purchaser's payment for
the Shares, Purchaser must be able to exercise full voting rights with respect
to the Shares, including voting at any meeting of shareholders scheduled or
acting by written consent without a meeting.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination will be final and binding. Purchaser reserves the absolute right
to reject any and all tenders of Shares determined by it not to be in proper
form or the acceptance for payment of which may, in the opinion of Purchaser's
counsel, be unlawful. Purchaser reserves the absolute right to waive any defect
or irregularity in any tender of Shares of any particular shareholder.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the Instructions thereto) will be final and
binding. None of the Purchaser Group, any of their affiliates or
12
assigns, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time on
or before the Expiration Date. Thereafter, tenders are irrevocable, except that
they may be withdrawn after the Expiration Date unless accepted for payment
before that date as provided in this Offer to Purchase. If Purchaser extends the
Offer, is delayed in accepting for payment or paying for Shares or is unable to
accept for payment or pay for Shares pursuant to the Offer for any reason, then,
without prejudice to Purchaser's rights under the Offer, the Depositary may, on
behalf of Purchaser, retain all Shares tendered, and those Shares may not be
withdrawn except to the extent that tendering shareholders are entitled to
withdrawal rights as set forth in this Section 4. Any such delay in acceptance
for payment will be accomplished by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary, and the signatures on the notice of withdrawal must
be guaranteed by an Eligible Institution unless such Shares have been tendered
for the account of an Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in Section 3, the
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn shall thereafter be
deemed not validly tendered for purposes of the Offer. However, withdrawn Shares
may be retendered at any time before the Expiration Date by again following one
of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal shall be determined by Purchaser in its sole discretion,
which determination shall be final and binding. None of the Purchaser Group, any
of their affiliates or assigns, the Depositary, the Information Agent or any
other person shall be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER
The following is a summary of the principal United States federal income tax
considerations of the Offer and the Merger to holders whose Shares are purchased
pursuant to the Offer or the Merger (including any cash amounts received by
dissenting shareholders pursuant to the exercise of appraisal rights). The
discussion is for general information only and does not purport to consider all
aspects of United States federal income taxation that may be relevant to holders
of Shares. The discussion is based on current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing, proposed and temporary
regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change. The discussion
applies only to holders of Shares in whose hands Shares are capital assets
within the meaning of Section 1221 of the Code, and may not apply to Shares
received pursuant to the exercise of employee stock options or otherwise as
compensation, or to certain types of holders of Shares (such as insurance
companies, tax-exempt organizations and broker-dealers) who may be subject to
special rules under the United States federal income tax laws. This discussion
does not discuss the United States federal income tax consequences to a holder
of Shares who, for United States federal income tax purposes, is a non-resident
alien
13
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, nor does it consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD
CONSULT THE HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO THE HOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND
THE MERGER TO THE HOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including any cash amounts received by dissenting shareholders pursuant to the
exercise of appraisal rights) shall be a taxable transaction for United States
federal income tax purposes and also may be a taxable transaction under
applicable state, local and other income tax law. In general, for United States
federal income tax purposes, a tendering shareholder will recognize gain or loss
equal to the difference between (i) the holder's adjusted tax basis in the
Shares tendered pursuant to the Offer or the Merger and (ii) the amount of cash
received by the shareholder pursuant to the Offer or the Merger. Gain or loss
must be determined separately for each block of Shares (i.e., Shares acquired at
the same cost in a single transaction) sold pursuant to the Offer or the Merger.
Assuming that Shares are held as a capital asset, the gain or loss will be a
capital gain or loss. The capital gain or loss will be a long-term capital gain
or loss if the Shares have been held for more than one year on the date of sale
of the Shares or the effective date of the Merger, as the case may be.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a holder of Shares (i) is a
corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (ii) provides a correct TIN to the payor, certifies as
to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A holder who does not
provide a correct TIN may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding does not constitute an
additional tax and will be creditable against the holder's United States federal
income tax liability. Each holder of Shares should consult with his or her tax
advisor to determine qualification for exemption from backup withholding and the
procedure for obtaining the exemption. Holders tendering their Shares in the
Offer may avoid backup withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. See Section 3.
6. PRICE RANGE OF THE SHARES
The Shares are listed and traded on The Nasdaq National Market under the
symbol RHPS. The following table sets forth the high and low closing prices per
Share reported for the Shares for the periods indicated.
QUARTER ENDED: HIGH LOW
-------------- -------- --------
2000
Third (through September 6, 2000)....................... $6.88 $2.75
Second.................................................. 3.00 2.50
First................................................... 3.13 2.50
1999
Fourth.................................................. $3.00 $2.50
Third................................................... 3.25 2.81
Second.................................................. 3.44 3.00
First................................................... 3.25 2.63
1998
Fourth.................................................. $3.38 $2.50
Third................................................... 4.00 3.00
Second.................................................. 3.88 2.88
First................................................... 3.56 2.50
14
On August 25, 2000, the last full trading day before announcement of the
execution of the Merger Agreement and Purchaser's intention to commence the
Offer, the closing sale price of the Shares reported on The Nasdaq National
Market was $4.75 per Share. On September 6, 2000, the last full trading day
before the commencement of the Offer, the closing sale price was $6.81 per
Share. On August 14, 2000, the last full trading day before X.X. Xxxxxxxx
announced it was conducting merger negotiations, the closing sale price was
$2.97 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
GENERAL. The Company is a California corporation with its principal office
located at 00000 Xxxxxx Xxxx 00X, Xxxxxxx, Xxxxxxxxxx 00000. The Company
produces and sells premium varietal table wines. The Company's vineyard, winery
and corporate headquarters are located in the Xxxxxxxx Hills Viticultural
Region, approximately 30 miles northeast of the Napa Valley wine region. The
winery specializes in the production of Chardonnay and Syrah, a Mediterranean
varietal, and produces both premium and super premium wines. The Company's sales
totaled $26.5 million for the year ended December 31, 1999.
AVAILABLE INFORMATION. The Company's common stock is registered under the
Exchange Act and, accordingly, the Company is subject to the informational
filing requirements of the Exchange Act. In accordance therewith, the Company
files periodic reports, proxy statements and other information with the
Commission under the Exchange Act relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy statements
certain information, as of particular dates, concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company. Such reports, proxy statements and other
information may be inspected at the Commission's office at 000 Xxxxx Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000, and also should be available for inspection and
copying at the regional offices of the Commission located at 000 Xxxx Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000; and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies may be obtained by mail from the
Public Reference Section of the Commission, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx,
X.X. 00000, at prescribed rates. The Commission also maintains a website on the
Internet at xxxx://xxx.xxx.xxx, which site contains registration statements,
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the Company.
FORWARD-LOOKING FINANCIAL INFORMATION. Before entering into the Merger
Agreement, Xxxxxxxxx conducted a due diligence review of the Company and in
connection with that review received certain non-public information from the
Company. The non-public information included, among other things, financial
information stating the Company's growth targets (the "Growth Targets") for the
fiscal years ending December 31, 2000 to 2004. The Growth Targets were prepared
by the Company's management based on numerous assumptions, including among
others, the estimated 2000 financial results and targets for sales, revenue, net
gross profit, operating expenses, depreciation, depletion and amortization and
capital expenditure requirements. Set forth below is a summary of income
statement and cash flow items stated in the Growth Targets for fiscal years
ending December 31, 2000 to 2004. None of the assumptions in the Growth Targets
give effect to the Offer, the Merger or the financing thereof or the potential
combined operations of Parent and the Company after consummation of such
transactions.
15
The Company has advised the Purchaser Group that it does not as a matter of
course disclose projections as to future revenues or earnings, and the goals
listed in the Growth Targets were not intended to forecast likely or anticipated
operating revenues. The goals listed in the Financial Plan were not prepared
with a view to public disclosure or compliance with published guidelines of the
Commission or the American Institute of Certified Public Accountants for
projections. The forecasted information is included herein solely because such
information was furnished to the Purchaser Group or their financial advisors.
Accordingly, the inclusion of the Growth Targets in this Offer should not be
regarded as an indication that the Purchaser Group, the Company or their
respective financial advisors or their respective officers and directors
consider such information to be accurate or reliable, and none of such persons
assumes any responsibility for the accuracy therefor. The Growth Targets were
prepared for internal use and are subjective in many respects and thus
susceptible to various interpretations and periodic revision based upon actual
experience and business development. In addition, because the estimates and
assumptions underlying the Growth Targets are inherently subject to significant
economic and competitive uncertainties and contingencies that are difficult or
impossible to predict accurately and are beyond the control of the Company
and/or the Purchaser Group, there can be no assurance that the Growth Targets
will be realized. Accordingly, it is expected that there will be differences
between actual results and the targets, and actual results may be materially
higher or lower than those set forth below.
X.X. XXXXXXXX, INC.
GROWTH TARGETS
($ IN THOUSANDS)
PROJECTED FOR FISCAL YEAR ENDING DECEMBER 31,
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
Revenue........................................ $30,238 $37,729 $42,686 $50,956 $59,566
Cost of sales.................................. 13,048 15,514 17,685 19,972 22,613
Income from operations......................... 6,546 9,266 10,367 14,383 18,191
Net income before income tax................... 3,721 6,311 7,388 11,610 15,893
Selected cash flow items:
Depreciation and amortization................ 3,834 3,349 3,762 4,187 4,609
Purchases of plant, property and equipment... 5,499 4,473 6,096 4,971 5,316
8. CERTAIN INFORMATION CONCERNING THE PURCHASER GROUP
GENERAL. Purchaser is a California corporation with its principal offices
located at 000 Xxxxxxxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0.
Purchaser recently was organized for the purpose of effecting the Offer and the
Merger, and has not carried on any activities except in connection with the
Offer and the Merger. All the outstanding capital stock of Purchaser is owned by
Hold Co.
Hold Co. is a Delaware corporation with its principal offices located at
000 Xxxxxxxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0. Hold Co.
recently was organized to be a holding company for Parent's United States
operations, and has not carried on any activities except in connection with the
Offer and the Merger. As of the date of this Offer to Purchase, all the
outstanding capital stock of Hold Co. was owned by Parent.
Parent, is a corporation incorporated under the laws of Canada with its
principal offices located at 000 Xxxxxxxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx,
Xxxxxx X0X 0X0. Parent is Canada's leading producer and marketer of wines, wine
kits, coolers and ciders, with leading brands in all segments of the market in
Canada. Parent owns and operates wineries in British Columbia, Ontario, Quebec
and
16
New Brunswick, and markets wines produced from grapes grown in the Niagara
Peninsula of Ontario, the Okanagan Valley of British Columbia and other
countries. Parent generated net sales of CDN $268.2 million for its fiscal year
ended March 31, 2000.
Parent's common stock is listed on The Toronto Stock Exchange under the
symbol "VN." Parent files annual reports and other periodic information forms
with the provincial securities commissions in Canada. Canadian securities
authorities maintain a website on the Internet at xxxx://xxx.xxxxx.xxx, which
contains reports, proxy statements and information regarding companies that file
electronically with Canadian securities authorities, including Parent.
The name, business address, present principal occupation or employment,
five-year employment history and citizenship of each director and executive
officer of each member of the Purchaser Group are set forth in Schedule I.
Except as described in this Offer to Purchase (and except for two Shares
owned by Parent), (i) none of the Purchaser Group or, to the best knowledge of
the Purchaser Group, any of the persons listed in Schedule I or any associate or
majority owned subsidiary of any such persons, beneficially owns or has a right
to acquire any equity security of the Company and (ii) none of the Purchaser
Group or, to the best knowledge of the Purchaser Group, any of the other persons
referred to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any equity
security of the Company during the past 60 days.
Except as described in this Offer to Purchase, (i) none of the Purchaser
Group, or, to the best knowledge of the Purchaser Group, any of the persons
listed in Schedule I has any contract, arrangement, understanding or
relationship (whether or not legally enforceable) with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer of
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies; (ii) there have been no contacts, negotiations or
transactions between the Purchaser Group, or any of their respective
subsidiaries or, to the best knowledge of the Purchaser Group, any of the
persons listed on Schedule I on the one hand, and the Company or any of its
directors, officers or affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
election of directors, a sale or other transfer of a material amount of assets
or concerning any other transactions with the Company that are required to be
disclosed pursuant to the rules and regulations of the Commission.
9. BACKGROUND OF THE OFFER
Parent is Canada's largest producer and marketer of wines. Parent is the
result of a series of acquisitions combining wine businesses established as
early as 1876. Parent has adopted a strategy to expand internationally,
including through acquisitions. One of the areas targeted by Parent for the
analysis of acquisition opportunities is the United States.
In April 1999, Parent engaged Xxxxxx & Company LLC ("Xxxxxx"), a San
Francisco-based investment banking advisor to branded consumer companies, to
assist Parent in identifying potential winery acquisitions in the United States.
On or around April 7, 2000, Xxxx X. Xxxxxx, Managing Director of Xxxxxx,
contacted Xxxx Xxxxxxxx, Co-President and Co-Chief Executive Officer of the
Company and Chairman of its Board of Directors, to express Parent's interest in
pursuing discussions regarding a possible business combination between the
Company by Parent.
On May 2, 2000, Xxxxxx X. Xxxxxx, Xxxxxx's President and Chief Executive
Officer, and Xxxxxxxx Xxxxxxxxx, Parent's Executive Vice President, Corporate
Development, traveled to Esparto, California to hold preliminary discussions
with the Company's senior management about a possible transaction. Following
these discussions, the Company and Parent entered into a confidentiality
agreement. In a
17
May 26, 2000 letter to Xxxx Xxxxxxxx, Xx. Xxxxxx outlined several conceptual
issues as the basis for a proposal.
On May 29 and 30, 2000, members of the Company's senior management visited
Parent's corporate offices outside Toronto and its wineries in Niagara for an
introduction to Parent's business. On June 11 and 12, 2000, the Company's senior
management visited Parent's vineyard properties in the Okanangan Valley of
British Columbia for meetings with Messrs. Xxxxxx, Xxxxxxxxx and Xxxxxx. The
parties discussed a variety of issues, including the need for Parent to retain
key executives of the Company if a transaction, which would be Parent's first
acquisition in the United States, were completed.
During these discussions, the Giguieres advised Parent of their personal
plans to develop vineyards. Parent insisted that any grapes grown by the
Giguieres be sold to the Company. In furtherance of these objectives, and
Parent's objective to increase its supply of premium grapes, the parties
negotiated the Grape Purchase Agreement.
In the interim, on June 6 and 7, 2000, Xx. Xxxxxxxxx commenced Xxxxxx's
preliminary due diligence on the Company during a two-day visit to the Company's
offices, the first of which was also attended by Xx. Xxxxxx.
In a telephone conference on June 19, 2000, members of the senior management
teams of Parent and the Company and Xx. Xxxxxx discussed several issues in
connection with a possible transaction, including potential employment and
compensation arrangements for Xxxx and Xxxx Xxxxxxxx.
On June 28, 2000, the senior management teams of Parent and the Company,
together with representatives of Xxxxxx and First Security Xxx Xxxxxx ("FSVK"),
the Company's financial advisor, held a conference call to follow up on the
discussions of June 19. The parties continued their discussions in a telephone
conference on July 3, 2000.
On July 8, 2000, representatives of Parent, the Company, Xxxxxx and FSVK met
in St. Helena, California to discuss the general financial terms of the proposed
acquisition. At the conclusion of the meeting, Xxxxxx proposed a purchase price
of $7.00 per Share, plus $7.00 per Share less the exercise price for all
outstanding warrants and options to purchase Shares.
On July 15, 2000, Xxxxxx delivered a proposed expression of interest to the
Company, setting out the basic terms of a tender offer by Parent. On July 18,
2000, representatives of Parent engaged in a further due diligence review of the
Company and its assets and properties. Shortly thereafter, the parties' legal
and financial advisors began negotiations by telephone regarding the terms of a
letter of interest between the Company and Parent. On July 21, 2000, Xxxx
Xxxxxxxx countersigned the letter of interest on behalf of the Company. At that
time, the members of the Xxxxxxxx family and other shareholders agreed in
writing not to solicit, negotiate or discuss a business combination proposal
relating to the Company with any person other than Parent until September 30,
2000.
The parties and their legal and financial advisors met on July 25 and 26,
2000, in San Francisco, California to negotiate the terms of a Merger Agreement
and the related transaction agreements. On July 30, 2000, Xx. Xxxxxx and Xxxx
Xxxxxxxx spoke briefly by telephone regarding the terms of the proposed
employment agreements.
In meetings held in San Francisco on August 4, 2000, directors Xxxxxxx Xxxx
and Xxxxxx Xxxxx, the independent members of the Company's Special Committee,
with the rest of the Board of Directors of the Company and the Company's legal
and financial advisors present, met with Xxxxxx's senior management and advisors
to negotiate open issues. Xxxx and Xxxx Xxxxxxxx were represented by their
personal legal counsel for all matters relating to their proposed employment
agreements and compensation arrangements. The Special Committee also requested
more information regarding the anticipated source and terms of Parent's
financing for the transaction.
18
During the next three weeks, senior officers of Parent and the Company and
their legal and financial advisors negotiated the terms of the Merger Agreement
and the related transaction documents. On August 10, 2000, Xxxx Xxxxxxxx
delivered a letter to Xxxxxx Xxxxxx indicating that the Company's officers and
advisors would discontinue working on transaction documents until Purchaser
received financing assurances from its lender.
In response to unusually high trading volumes in its stock, on August 15,
2000, the Company issued a press release stating that it was engaged in
discussions with an unnamed party for an acquisition for all of its outstanding
shares for cash and that it had agreed to an exclusive negotiating period
through August 25, 2000. On the same day, Xxxxxx's board of directors reviewed
the proposed terms of the transaction documents and financing arrangements and
authorized Xxxxxx's senior executives to negotiate and enter into transaction
documents on behalf of Parent.
On August 18, 2000, Xxxxxx received a preliminary commitment from BNS for an
acquisition loan facility in connection with the proposed transaction.
At a meeting on August 25, 2000, the Special Committee conveyed its
unanimous recommendation that the Company's Board of Directors approve the
Merger Agreement and the transactions contemplated thereby. Thereafter, the
Company's Board unanimously determined that the Offer is fair to, and in the
best interests of, the Company and its shareholders, approved the Merger
Agreement and the transactions contemplated thereby (including the Offer) and
recommended that the Company's shareholders tender their Shares pursuant to the
Offer.
The parties signed the Merger Agreement and the related transaction
documents on the evening of August 25, 2000. Parent and the Company each issued
a press release announcing the transaction before the beginning of trading on
Monday, August 28, 2000.
After further negotiations regarding the terms of the commitment, on
August 30, 2000, Xxxxxx signed a financing commitment letter dated August 28,
2000 with BNS for a $95 million acquisition loan facility.
10. PURPOSE OF THE OFFER; THE MERGER AGREEMENT
The Offer is being made pursuant to the Merger Agreement. The purpose of the
Offer, the Merger and the Merger Agreement is to enable Parent to obtain control
of, and to indirectly own the entire equity interest in, the Company. The
following is a summary of the Merger Agreement and other related transaction
agreements and is qualified in its entirety by reference to the full text of
these agreements, copies of which have been included as exhibits to the Schedule
TO filed by Parent, Hold Co. and Purchaser with the Commission in connection
with the Offer.
THE MERGER AGREEMENT
THE OFFER. The Merger Agreement requires that no later than ten (10)
business days after the public announcement of the terms of the Merger
Agreement, (i) Purchaser must file Purchaser's Tender Offer Statement on
Schedule TO with the Commission and commence the Offer in accordance with the
requirements of Regulations 14D and 14E promulgated under the Exchange Act and
(ii) the Company must file with the Commission the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer, which accompanies this Offer to Purchase and contains the recommendation
of the Company's Board of Directors that holders of Shares accept the Offer. The
Purchaser Group and the Company have each agreed to use their respective
reasonable best efforts to cause all the Offer Conditions to be fulfilled and to
avoid the occurrence of any event or to cure any event that may prevent the
Offer Conditions from being fulfilled.
The obligation of Purchaser to accept for payment and pay for any Shares
tendered pursuant to the Offer is subject only to the conditions to the Offer
set forth in Section 13 (the "Offer Conditions").
19
Without the prior written consent of the Company, Purchaser may not decrease the
Offer Price or change the form of consideration payable in the Offer, decrease
the number of Shares Purchaser seeks to purchase in the Offer, change the Offer
Conditions, impose additional conditions to the Offer, or amend any other term
of the Offer in any manner adverse to the holders of Shares. Purchaser may waive
any condition to the Offer without the consent of the Company; provided, that
Purchaser may waive the Minimum Condition only if more than 50% of the Shares
are tendered in the Offer and if BNS amends or waives the conditions of its
Commitment Letter.
Subject to the satisfaction of all the Offer Conditions as of any Expiration
Date, Purchaser will accept for payment and pay for all Shares validly tendered
and not withdrawn pursuant to the Offer as soon as practicable after the
Expiration Date.
BOARD REPRESENTATION. Promptly upon the purchase by Purchaser of Shares
pursuant to the Offer and from time to time thereafter, Purchaser will be
entitled to designate at least a number of directors, rounded up to the next
whole number, on the Company's Board of Directors equal to the product of
(i) the total number of directors on the Company's Board of Directors and
(ii) Parent's and its affiliates' percentage of beneficial ownership of the
outstanding Shares. The Company must either increase the size of the Company's
Board of Directors or secure the resignation of the necessary number of
directors to enable Purchaser's designees to be elected to the Company's Board
of Directors, and will cause such designees to be elected to the Company's Board
of Directors.
COMPANY STOCK OPTIONS. The Merger Agreement provides that promptly after
the commencement of the Offer, the Company must offer to cancel any and all of
the outstanding options to purchase Shares (each such option to purchase one
Share being referred to as an "Option") granted under the Company's 1995 Stock
Option Plan (the "Option Plan") for cash consideration as follows. Each holder
of an Option (whether or not vested or exercisable) will be offered the right to
have 100% of his or her Options canceled by the Company in consideration of a
payment by the Company for each Option in an amount equal to the excess of the
Offer Price over the applicable exercise price of such Option (subject to tax
withholding). Cancellation of and payment of the consideration for the Options
will be conditioned upon the purchase of Shares by Purchaser pursuant to the
Offer. If that condition is met, the Options will be canceled and the
consideration therefor will be paid as promptly as possible following the
purchase of Shares by Purchaser upon expiration of the Offer.
WARRANTS. The Merger Agreement provides that promptly after the
commencement of the Offer, the Company must offer to cancel any or all of the
outstanding warrants to purchase Shares (collectively, the "Warrants") for cash
consideration as follows. Each holder of Warrants will be offered the right to
have 100% of its Warrants canceled by the Company in consideration of a payment
by the Company to the holder for each Warrant in an amount equal to the excess
of the Offer Price over the applicable exercise price of the Warrant (subject to
tax withholding). Cancellation of the Warrants and payment of the consideration
therefor will be conditioned upon the purchase of Shares by Purchaser pursuant
to the Offer. If that condition is met, the Warrants will be cancelled and the
consideration therefor will be paid as promptly as possible following the
purchase of Shares by Purchaser upon expiration of the Offer.
THE MERGER. The Merger Agreement provides that at the Effective Time (as
defined below) and upon the terms and subject to the conditions of the Merger
Agreement and California law, Purchaser will merge with and into the Company,
the separate corporate existence of Purchaser will cease, and the Company will
continue as the surviving corporation, succeeding to and assuming all the rights
and obligations of Purchaser in accordance with California law.
As soon as practicable after the satisfaction or waiver of the conditions to
the Merger, the parties must file a certificate of ownership with the Secretary
of State of the State of California and must
20
make all other filings or recordings required under California law. The Merger
will become effective upon the filing of the certificate of ownership (the
"Effective Time").
At the Effective Time, (i) each Share not purchased by Purchaser in the
Offer (other than Shares held by shareholders who properly exercise appraisal
rights under California law and Shares owned by the Purchaser Group, the Company
or any of their respective subsidiaries) will be converted by operation of law
into the right to receive $7.00 in cash, payable to the holder, without
interest, upon surrender of the certificate formerly representing that Share,
(ii) each Share owned by the Purchaser Group, the Company or any of their
respective subsidiaries will be canceled without payment, and (iii) each share
of the common stock of Purchaser outstanding immediately before the Effective
Time will be converted into one share of common stock of the Company, as the
surviving corporation of the Merger.
If Purchaser acquires at least 90% of the Shares upon completion of the
Offer, then under the California General Corporation Law (the "GCL"), Purchaser
will be able to consummate the Merger as a "short-form merger" without a vote of
the Company's shareholders. The Merger Agreement also provides that if more than
50% but fewer than 90% of the Shares are tendered in the Offer, Purchaser may
waive the Minimum Condition and purchase the tendered Shares; provided, however
that any such waiver would require BNS to amend or waive the conditions to the
Commitment Letter. If Purchaser waives the Minimum Condition and purchases the
tendered shares, the GCL would allow Purchaser to consummate the Merger only
with the approval of holders of a majority of the Shares and a determination by
the California Commissioner of Corporations that the terms and conditions of the
Merger are fair, after a public hearing. A waiver of the Minimum Condition would
constitute a material change in the terms of the Offer, in which case Purchaser
would extend the Offer to the extent required by Rules 14d-4(e) and
14d-6(d) under the Exchange Act. See "Terms of the Offer; Extension of the
Tender Period; Termination; Amendment."
Promptly after the Effective Time, the Depositary will mail each record
holder of Shares (other than Shares held by shareholders who properly exercise
appraisal rights under California law and Shares held by the Purchaser Group,
the Company or any of their respective subsidiaries) as of the Effective Time a
letter of transmittal and instructions for effecting the surrender of
certificates that represented Shares prior to the Effective Time for the Merger
Consideration. Upon surrender of the certificate(s) representing a holder's
Shares, together with a completed and validly executed letter of transmittal,
such holder will be entitled to receive the Merger Consideration in respect
thereof. Until so surrendered or exchanged, each certificate will represent only
the right to receive the Merger Consideration.
RIGHTS OF DISSENTING SHAREHOLDERS. If Purchaser acquires more than 90% of
the Shares (on a fully diluted basis) in the offer and consummates a short-form
merger into the Company, shareholders who have not tendered their Shares will
have certain rights under the GCL to dissent from the Merger and demand
appraisal of, and to receive payment of, the fair market value of their Shares
as of August 25, 2000.
Purchaser's Board of Directors has adopted and approved, subject to the
Company's acquiring ownership of 90% of the outstanding Shares upon consummation
of the Offer, a plan of merger for a short-form merger of Purchaser into the
Company. The plan of merger describes the securities, cash or other
consideration to be paid for each Share of the Company not owned by Purchaser. A
copy of the plan of merger is attached as Appendix A to this Offer to Purchase.
The Merger will become effective on or after October 5, 2000.
Pursuant to Section 1110 of the GCL, shareholders who do not tender their
Shares in the Offer will have the option of accepting the Merger Consideration
of $7.00 per Share in cash or of becoming a "dissenting shareholder" and being
paid in cash the fair market value of their Shares.
21
Based on the closing trading price of the Shares reported on The Nasdaq
National Market on August 25, 2000, the last trading day before the public
announcement of the terms of the Merger Agreement and the Offer, Purchaser
believes the fair market value of the dissenting shares would be $4.75 per
Share.
Sections 1300, 1301, 1302, 1303 and 1304 of the GCL are attached as
Appendix B to this Offer to Purchase.
A brief description of the procedure to dissent from the Merger and demand
payment in cash for your Shares is as follows:
(1) You must make a written demand that X.X. Xxxxxxxx purchase your Shares,
which must be received by the Company or its transfer agent within thirty (30)
days after the mailing of this Offer to Purchase on September 7, 2000. The
demand must state the number of Shares you hold of record, which you demand
X.X. Xxxxxxxx purchase and must include a statement of the price which you claim
is the fair market value of the Shares. You must deliver your Share certificate
to the Company or its transfer agent within the same thirty (30) day period, in
order that the certificate may be stamped as representing dissenting Shares and
returned to you. The Company's transfer agent is Registrar & Transfer Company,
00 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (telephone 000-000-0000).
If you hold your Shares through a broker or bank, the record holder must submit
the demand on your behalf.
(2) If we do not agree that you have properly exercised the right to
dissent, or if you and we do not agree on the fair market value per Share, you
must file suit in the Superior Court of Yolo County, California for a
determination of whether you properly exercised your rights, the fair market
value of the Shares, or both. In certain cases, the Company can be required to
pay the shareholder's attorney and appraiser fees. The suit must be filed within
6 months after this Offer to Purchase was mailed.
(3) If we agree on a price or if a price is fixed by a court, you must
surrender your Share certificate in order to receive payment of the price.
If, after the Effective Time of the Merger, any shareholder fails to follow
the procedure to dissent from the Merger or withdraws or loses his or her right
to appraisal, the shareholder's Shares will be treated as if they had been
converted as of the Effective Time into the right to receive the Merger
Consideration without interest.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the Company, including
representations by the Company as to:
(i) organization, qualification and similar corporate matters of the
Company,
(ii) capitalization of the Company,
(iii) the authorization, execution, delivery, performance and enforceability
of the Merger Agreement,
(iv) the non-contravention of the Merger Agreement and related transactions
with any provision of the Company's articles of incorporation or
bylaws, material contract, order, law or regulation to which the
Company is a party or by which it is bound or obligated,
(v) required consents and approvals of governmental or regulatory
authorities and third parties,
22
(vi) the filing of required Commission reports and the absence of untrue
statements of material facts or omissions of material facts in such
reports,
(vii) the absence of changes or events which have had a material adverse
effect on the Company,
(viii) the absence of any untrue statement of a material fact or omission of
any material fact required to be stated in any recommendation statement
of the Company's Board of Directors or document related to the Offer,
(ix) material transactions outside the ordinary course of the Company's
business consistent with past practice,
(x) matters concerning the Company's inventory, grape vines and irrigation
system,
(xi) real property ownership and the possession and enforceability of real
property leases,
(xii) ownership of personal property and operating condition of machinery and
equipment,
(xiii) the filing of tax returns and the payment of taxes,
(xiv) contracts, agreements, indentures, leases, mortgages, licenses, plans,
arrangements, understandings, commitments and other instruments,
(xv) possession of necessary rights and licenses in intellectual property,
(xvi) possession and validity of permits necessary to carry on the Company's
business as presently conducted,
(xvii) claims and litigation,
(xviii) employee benefit matters,
(xix) insurance policies,
(xx) compliance with laws, rules, statutes, orders, ordinances or
regulations, and material notes, bonds, mortgages, indentures,
contracts, agreements, leases, licenses, permits, franchise or other
instruments or obligations of the Company,
(xxi) the absence of environmental claims and compliance with all
environmental laws and regulations,
(xxii) transactions between the Company, its affiliates and related parties,
(xxiii) the payment of broker's fees,
(xxiv) labor matters,
(xxv) immigration matters,
(xxvi) water rights, and
(xxvii) significant customers and suppliers.
All of the representations and warranties are qualified by materiality
requirements.
The Merger Agreement contains various customary representations and
warranties of the Purchaser Group, including representations by the Purchaser
Group as to:
(i) organization, qualification and similar corporate matters of each member
of the Purchaser Group,
(ii) the authorization, execution, delivery, performance and enforceability
of the Merger Agreement,
23
(iii) the non-contravention of the Merger Agreement and related transactions
with any provision of the certificate of incorporation or by-laws of
each member of the Purchaser Group, or any material contract, order,
law or regulation to which any member of the Purchaser Group is a party
or by which it is bound or obligated,
(iv) required consents and approvals of governmental or regulatory
authorities or third parties,
(v) the absence of untrue statements of material facts or omissions of
material facts in any documents related to the Offer and in information
provided to the Company in connection with the Schedule TO,
(vi) Purchaser's receipt and the continued effectiveness of the Commitment
Letter from BNS to provide the funds necessary to satisfy Purchaser's
obligations under the Merger Agreement, and
(vii) the payment of broker's fees.
CONDUCT OF BUSINESS OF THE COMPANY. During the term of the Merger Agreement
until the purchase of Shares by Purchaser, the Company must conduct its
operations in the ordinary course of business consistent with past practice, and
must use all reasonable efforts to preserve its business organization, to keep
available the services of its present officers and key employees and to preserve
the goodwill of those having business relationships with it.
Accordingly, before the purchase of Shares by Purchaser, the Company may
not, without the prior written consent of Parent, engage or agree to engage in
an enumerated list of transactions. The types of transactions requiring Parent's
prior approval, subject to certain threshold amounts or levels in certain cases,
include actions by the Company to:
(i) amend its Articles of Incorporation or by-laws or comparable
organizational documents,
(ii) issue, reissue, pledge, or sell, (or authorize any of the foregoing)
any stock of any class or any other securities,
(iii) declare, set aside or pay any dividend or other distribution in respect
of any class or series of its capital stock,
(iv) split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any
Shares or any other capital stock,
(v) make any loans, advances or capital contributions to, or investments in,
any other person,
(vi) fail to (a) maintain its real property in a manner consistent with past
practice, (b) pay when due all taxes, water and sewer rents,
assessments and insurance premiums affecting its real property and
(c) timely comply with the terms and provisions of all of its leases,
contracts and agreements relating to or affecting the real property and
the use and operation thereof,
(vii) enter into, establish, adopt, amend or renew any material employment,
consulting, severance or similar agreement or arrangement with any
director, officer or employee, grant any salary or wage increase or
establish, adopt, amend, or increase benefits under, any pension,
retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, welfare benefit contract, plan or
arrangement,
(viii) enter into any labor or collective bargaining agreement, memorandum of
understanding, grievance settlement or any other agreement or
commitment to or relating to any labor union,
(ix) take any action that if taken after March 31, 1999, but prior to the
date of the Merger Agreement would have caused the representations and
warranties of the Company to be untrue, or
24
(x) waive, modify, amend or terminate certain confidentiality, standstill or
other similar agreements to which the Company is a party.
ACCESS TO INFORMATION. The Company must give the Purchaser Group and their
representatives full access to the offices, facilities, books and records of the
Company and must furnish such information as the Purchaser Group may reasonably
request.
REASONABLE EFFORTS; NOTICE OF CERTAIN DEVELOPMENTS. Each of the parties
must use its reasonable efforts to take all actions and do all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by the Offer and the Merger Agreement. Each of the parties must
promptly inform the other party of any event or circumstance that is discovered
at any time before the Effective Time that should be set forth in an amendment
to the Schedule TO or Schedule 14D-9.
CONSENTS. The Purchaser Group and the Company will use their reasonable
best efforts to file the premerger notification report, and all other documents
to be filed in connection therewith, required by the HSR Act and the Premerger
Notification Rules promulgated thereunder with the United States Federal Trade
Commission ("FTC") and the United States Department of Justice ("DOJ") as soon
as practicable following the date of the Merger Agreement, but in any event
within five (5) days following the date of the Merger Agreement. Each party will
respond promptly to any request for additional information that may be issued by
either FTC or DOJ and will use commercially reasonable efforts to assure that
the waiting period required by the HSR Act has expired or been terminated prior
to the date that is twenty (20) days following the commencement of the Offer.
The Purchaser Group and the Company shall use commercially reasonable
efforts to obtain as promptly as practicable all consents of any governmental
entity or any other person required in connection with, and waivers of any
violations that may be caused by, the consummation of the transactions
contemplated by the Merger Agreement.
Each party to the Merger Agreement must promptly inform the others of any
material communication from the SEC, Ontario Securities Commission, The Toronto
Stock Exchange, The Nasdaq Stock Market, FTC, DOJ or any other domestic or
foreign government or governmental or multinational authority regarding any of
the transactions contemplated by the Merger Agreement. If any party to the
Merger Agreement or any affiliate thereof receives a request for additional
information or documentary material from any such government or authority with
respect to the transactions contemplated by the Merger Agreement, then that
party will endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other parties, an
appropriate response in compliance with such request. Parent will advise the
Company promptly in respect of any understandings, undertakings or agreements
(oral or written) which Parent proposes to make or enter into with the FTC, the
DOJ, or any other domestic or foreign government or governmental or
multinational authority in connection with the transactions contemplated by the
Merger Agreement.
PUBLIC ANNOUNCEMENTS. None of the parties must issue any press release or
otherwise make any public statements with respect to the transactions
contemplated by the Merger Agreement without the consent of the other parties
except as required by applicable law or by any rule or regulation of The Nasdaq
National Market or The Toronto Stock Exchange. The parties will consult with
each other and provide opportunity for review of any public statements for which
consent is not required.
INDEMNIFICATION. For a period not less than six (6) years from the
Effective Time, (i) all existing rights of directors and officers to
indemnification as provided in the Articles of Incorporation or by-laws of the
Company or in an agreement with the Company will remain in full force, and (ii)
in accordance with such rights, Parent will indemnify and hold harmless the
directors and officers of the Company from and against any action, proceeding or
investigation arising out of events occurring prior
25
to, and including, the Effective Time and will pay all reasonable expenses
(including legal and the cost of any investigation and preparation) incurred in
connection therewith.
Parent will cause the Company to maintain in effect for six years after the
Effective Time, for the benefit of all current and former directors and officers
of the Company the current directors' and officers' liability insurance policies
maintained by the Company; provided, however, that (i) the Company will not be
required to incur any annual premium in excess of 200% of the last annual
premium paid before the date of the Merger Agreement for all current directors'
and officers' liability insurance policies maintained by the Company and if the
Company cannot obtain the required insurance it must obtain as much comparable
insurance as possible for an annual premium equal to this maximum amount and
(ii) the Company may substitute policies that are not less advantageous.
NOTIFICATION OF CERTAIN MATTERS. The Company must give prompt notice to
Parent, and Parent must give prompt notice to the Company, as the case may be,
of (i) the occurrence or non-occurrence of any event that would be reasonably
likely to demonstrate that any representation or warranty contained in the
Merger Agreement was or is untrue or inaccurate or reasonably likely to cause
any material covenant, condition or agreement not to be satisfied in all
material respects and (ii) any failure of the Purchaser Group or the Company, as
the case may be, to comply with or satisfy any covenant, condition or agreement
under the Merger Agreement in any material respect.
NO SOLICITATION. The Merger Agreement limits the ability of the Company to,
and prevents the Company from authorizing, supporting or encouraging any of its
directors, officers, employees, agents or representatives to:
(i) solicit, initiate, encourage, facilitate or furnish or disclose
non-public information in furtherance of, any inquiries or the making of
any proposal with respect to any recapitalization, merger, consolidation
or other business combination involving the Company, or acquisition of
any capital stock (other than upon exercise of the Options and Warrants
which are outstanding as of the date of the Merger Agreement) or any
portion of the assets (except for acquisition of assets in the ordinary
course of business consistent with past practice) of the Company, or any
combination of the foregoing (a "Competing Transaction"),
(ii) negotiate or otherwise engage in discussions with any person (other
than Parent, Purchaser or their respective directors, officers,
employees, agents and representatives) for the purpose of facilitating
any Competing Transaction, or
(iii) enter into any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by the Merger Agreement.
The Company must use its best efforts to ensure that no directors, officers,
employees, agents or representatives, directly or indirectly, undertake any such
actions, and, if the Board of Directors learns of any such action, the Company
must take reasonable steps to cause the party undertaking such action to cease
the action immediately. If before the purchase of the Shares by Purchaser
pursuant to the Offer, a party makes a bona fide hostile proposal regarding a
Competing Transaction which was not solicited by the Company after the date of
the Merger Agreement and which does not violate any exclusivity agreement that
is accompanied by evidence of such party's ability to finance the Competing
Transaction if and so long as the Board of Directors after consultation with its
counsel determines in good faith that failing to consider and cooperate with
such other party regarding such Competing Transaction would constitute a breach
of the fiduciary duties of the Board of Directors to the Company's shareholders
under applicable law, the Company may furnish information to, and negotiate or
otherwise engage in discussions with that party. The Company must use its
reasonable best efforts to cause its directors, officers, employees, agents and
representatives immediately to cease all existing activities, discussions and
negotiations with any parties conducted before the date of the Merger
26
Agreement with respect to any Competing Transaction. Neither the Board of
Directors nor any committee thereof may (A) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to the Purchaser Group, the
Board Recommendation, or (B) approve or recommend, or propose publicly to
approve or recommend, any Competing Transaction. The foregoing notwithstanding,
if before the purchase of Shares by Purchaser pursuant to the Offer, the Board
of Directors determines in good faith, after consultation with its counsel that
failure to take either of these actions with respect to the Competing
Transaction will result in breach of the fiduciary duties of the Board of
Directors to the Company's shareholders under applicable law, the Board of
Directors may (subject to this and the following sentences) withdraw or modify
the Board Recommendation, provided that it gives Parent three business days
prior written notice of its intention to do so. The Company must immediately
advise Parent in writing of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations, or proposals relating to a Competing
Transaction, which becomes known to the Board of Directors during the term of
the Merger Agreement. The Company must keep Parent fully apprised of the status
and terms of any proposal relating to a Competing Transaction on a current
basis.
If, before the purchase of Shares by Purchaser pursuant to the Offer, the
Board of Directors determines in good faith, after consultation with its
financial and legal advisors, that any written proposal from a third party for a
Competing Transaction received after the date hereof that was not solicited by
the Company in violation of the Merger Agreement (and that does not violate or
breach any exclusivity agreement executed by such party with respect to the
Company prior to the date of the Merger Agreement) is more favorable to the
shareholders of the Company from a financial point of view than the transactions
contemplated by the Merger Agreement (including any adjustment to the terms and
conditions of such transaction proposed in writing by the Company in response to
such Competing Transaction) and is in the best interest of the shareholders of
the Company, the Company may terminate the Merger Agreement at any time prior to
the purchase of the Shares by Purchaser and enter into a letter of intent,
agreement-in-principle, acquisition agreement or other similar agreement with
respect to such Competing Transaction provided that the Company provides written
notice of such contemplated termination to Parent at least three (3) full
business days prior to the effectiveness of such termination and, the Company
delivers to Parent within five (5) full business days following such termination
(A) by check or wire transfer of same day funds, (i) an amount equal to Parent's
costs incurred in connection with the Merger Agreement, and (ii) a termination
fee of $1.0 million and (B) a written acknowledgment from the Company and the
other party to the Competing Transaction that the Company and such other party
have irrevocably waived any right to contest such payments.
COOPERATION. The Company must provide reasonable cooperation to Purchaser
to facilitate Purchaser's efforts to obtain the financing contemplated by the
Commitment Letter and must provide all information reasonably requested by
Purchaser. Additionally, the Company must allow any direct or indirect wholly
owned subsidiary of Parent to satisfy the obligations of the Purchaser Group
under the Merger Agreement.
CONDITIONS. The obligations of the Purchaser Group and the Company to
consummate the Merger are subject to the satisfaction or waiver of the following
conditions:
- PURCHASE OF SHARES. Purchaser must have accepted for payment and paid for
Shares pursuant to the Offer in accordance with the terms of the Merger
Agreement, provided that the condition will be deemed satisfied as to the
Purchaser Group if Purchaser fails to accept for payment or pay for Shares
pursuant to the Offer in violation of the terms of the Offer. All
conditions to the Offer, which are set forth in Annex I to the Merger
Agreement, are summarized in Section 13.
- NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY.
(i) No order or preliminary or permanent injunction can have been entered in
any action or proceeding before any court of competent jurisdiction, and
no statute, rule, regulation,
27
legislation, or order can have been enacted, entered, enforced,
promulgated, amended or issued by any United States legislative body,
court, government or governmental, administrative or regulatory
authority or agency (other than the waiting period provisions of the HSR
Act) which remains in effect and which has the effect of (x) making
illegal or restraining or prohibiting the making of the Offer, the
acceptance for payment of, or payment for, the Shares by the Purchaser
Group or any affiliate of Parent, or the consummation of the Offer or
the Merger or (y) imposing limitations on the ability of Purchaser
effectively to acquire or hold or exercise full rights of ownership of
the Shares, including, without limitation, the right to vote the Shares
on all matters properly presented to the shareholders of the Company,
(ii) No proceeding brought by an administrative agency or commission or
other domestic governmental entity seeking any of the foregoing can be
pending, and
(iii) No action or proceeding can be commenced following the date of the
Merger Agreement and be pending before any court of competent
jurisdiction.
TERMINATION. The Merger Agreement provides that at any time before the
Effective Time the Merger Agreement may be terminated and the Merger may be
abandoned:
(i) by the mutual written consent of Parent and the Company,
(ii) by the Company if Purchaser fails to commence the Offer in accordance
with the Merger Agreement or fails to purchase validly tendered Shares
in violation of the terms of the Offer or the Merger Agreement,
(iii) by Parent or the Company if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased, provided that
neither Parent nor the Company may terminate the Merger Agreement if
such party materially breached the Merger Agreement, or in the case of
Parent, if the Purchaser Group materially violated the terms of the
Offer,
(iv) by Parent or the Company to the extent that performance is prohibited,
enjoined or restrained by any final, non-appealable judgment, order,
decree, injunction or ruling, provided the party seeking to terminate
the Merger Agreement has used its reasonable efforts to remove or lift
the same,
(v) by Parent or the Company if any of the conditions to the Offer set forth
in Section 13 shall be impossible to satisfy by the end of the thirtieth
(30th) business day following commencement of the Offer unless such
circumstance results from the failure of the terminating party to
perform its obligations under the Merger Agreement, provided that the
Company may not terminate the Merger Agreement if Parent waives in
writing the relevant condition (and such waiver is permitted),
(vi) by Parent if, prior to the purchase of Shares by Purchaser, the
Company's Board of Directors withdraws or modifies in a manner adverse
to Parent, or refrains from making the Board Recommendation, or
publicly discloses its intention to change such recommendation, or
fails to reaffirm the Board Recommendation within five (5) days of
receipt from the Purchaser Group of a request to so reaffirm the Board
Recommendation except due to the Purchaser Group's material breach of
the Merger Agreement or material violation of the terms of the Offer,
(vii) by the Company prior to the purchase of Shares pursuant to the Offer,
if the Board after consultation with its financial and legal advisors
determines in good faith that a written proposal (which meets certain
criteria set forth in the Merger Agreement) from a third party for a
Competing Transaction is more favorable to the shareholders of the
Company than the transactions contemplated by the Merger Agreement and
that failing to consider the
28
Competing Transaction would constitute a breach of the Board's
fiduciary duties to the shareholders of the Company,
(viii) by the Company in the event of any material breach of the covenants
and/or representations and warranties of the Purchaser Group contained
in the Merger Agreement,
(ix) by Parent in the event of any material breach of the covenants and/or
representations and warranties of the Company contained in the Merger
Agreement,
(x) by Xxxxxx, if any Key Stockholder (as defined below) materially breaches
any of his, her or its obligations under his, her or its Support
Agreement prior to the Effective Time, or
(xi) by the Company, if Xxxxxx's financing commitment from BNS or otherwise
is terminated prior to October 9, 2000.
EFFECT OF TERMINATION; FEES AND EXPENSES. Purchaser must terminate the
Offer as soon as practicable following the termination of the Merger Agreement
for any reason. If the Merger Agreement is terminated as a result of (i) the
Company's Board of Directors withdrawing its recommendation, (ii) the Company's
Board of Directors entering into a Competing Transaction, or (iii) in certain
circumstances, a material breach of the Company's representations, warranties or
covenants, the Company must pay Parent in cash an amount equal to the aggregate
amount of its reasonable documented expenses and a termination fee of $1.0
million. If the Merger Agreement is terminated as a result of a breach of any
Key Stockholder's obligations under a Support Agreement to tender their Shares
in the Offer or as a result of termination of the Parent's financing commitment
from BNS prior to October 9, 2000, in lieu of the above fees, the Company or the
Parent, as the case may be, must pay the non-breaching party in cash an amount
equal to the aggregate amount of its reasonable documented expenses and a
termination fee of $1.5 million.
If the Merger Agreement is terminated as a result of a material breach of
the Purchaser Group's representations, warranties or covenants (in certain
circumstances), Parent must pay the Company in cash an amount equal to the
aggregate amount of its reasonable documented expenses and a termination fee of
$1.0 million.
If the Merger Agreement is terminated for any reason, and within one year
from the date of termination the Company (i) announces a letter of intent or
other agreement relating to a Competing Transaction or (ii) consummates a
Competing Transaction, the Company must, upon consummation of a Competing
Transaction, pay Parent in cash an amount equal to $9.0 million.
AMENDMENT. The Merger Agreement may be amended in a writing signed on
behalf of each of the parties; however, after the commencement of the Offer, no
amendment may be made to decrease the Merger Consideration or which materially
adversely affects the rights of the shareholders without approval of such
shareholders.
EXTENSION; WAIVER. At any time before the Effective Time, the parties to
the Merger Agreement may (i) extend the time for the performance of any of the
obligations or other acts of any other party, (ii) waive any inaccuracies in the
representations and warranties of any other party or (iii) waive compliance by
any other party with any of the agreements or conditions contained in the Merger
Agreement; provided, that Purchaser may waive the Minimum Condition only if more
than 50% of the Shares are tendered in the Offer and if BNS amends or waives the
conditions of its Commitment Letter.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties in the Merger Agreement will not survive beyond the Effective Time.
The covenants and agreements in the Merger Agreement will survive in accordance
with their respective terms.
29
PLANS FOR THE COMPANY. It is expected that, initially following the Offer
and the Merger, the business and operations of the Company will, except as set
forth in this Offer to Purchase, be continued by the Company substantially as
they are currently being conducted. Parent currently has no immediate plans to
change the Company's management. Following consummation of the Merger, however,
Parent intends to conduct a review of the Company and its assets, its corporate
structure, operations, properties, management and personnel and consider what,
if any, changes would be desirable in light of the circumstances which then
exist. Changes could include the acquisition or disposition of assets or other
changes in the Company's capitalization, dividend policy, corporate structure,
business, certificate of incorporation, bylaws, board of directors or
management.
GOVERNING LAW. The Merger Agreement and the other transaction agreements
are governed by and construed in accordance with the laws of the State of
California, without regard to the conflicts of laws provisions thereof.
THE SUPPORT AGREEMENTS
As a condition to entering into the Merger Agreement and making the Offer,
the Purchaser Group has required that each of Xxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxx
Xxxxxxxx, RHP Vineyards, Inc, X.X. Xxxxxxxx Vineyard, Inc., Xxx Xxxx, Xxxxxx
Xxxxx and Xxxxx Xxxxxx (the "Key Stockholders") enter into a Support Agreement
(the "Support Agreements"). As of August 25, 2000, the Key Stockholders owned
approximately 2,219,614 Shares and 387,060 options to purchase Shares in the
aggregate, representing 33.2% of the Shares then outstanding and 29.5% of the
Shares on a fully diluted basis before any options or warrants have been
tendered for cancellation.
Pursuant to the Support Agreements, each Key Stockholder has agreed:
- to tender and not withdraw, pursuant to and in accordance with the terms
of the Offer, all of the Shares owned by such Key Stockholder (the "Owned
Shares"), and
- not to vote the Owned Shares in favor of any Competing Transaction during
the time the Support Agreement is in effect.
The Support Agreements provide that, with certain exceptions, each Key
Stockholder will not:
(i) transfer, or consent to any transfer of, any or all of the Owned Shares
or any interest therein,
(ii) enter into any contract, option or other agreement or understanding
with respect to any transfer of any or all of the Owned Shares or any
interest therein,
(iii) grant any proxy, power-of-attorney or other authorization in or with
respect to the Owned Shares,
(iv) deposit the Owned Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Owned Shares, or
(v) otherwise restrict, limit or interfere with the performance of the Key
Stockholder's obligations contemplated by the Support Agreement and the
Merger Agreement.
The Support Agreements provide that each Key Stockholder must not, and must
not permit or authorize any of his affiliates to, directly or indirectly,
solicit, participate in or initiate discussions or negotiations with, or provide
or disclose any information to, any Person (other than the Purchaser Group or
any of their affiliates or representatives) concerning any Competing Transaction
or enter into any agreement, arrangement or understanding requiring the Company
to abandon, terminate or fail to consummate the Merger. Each Key Stockholder
also agrees to promptly cease any existing activities, discussions or
negotiations with any parties with respect to any Competing Transaction and to
waive any rights of appraisal or rights to dissent from the Merger.
30
Each Support Agreement and all rights and obligations of the parties
thereunder shall terminate upon the earlier of the (i) Effective Time, (ii)
termination of the Merger Agreement, (iii) termination or withdrawal of the
Offer by the Purchaser Group, (iv) receipt of written notice of termination of
the Support Agreement by Parent to the Key Stockholder and (v) Purchaser's
purchase of the Owned Shares pursuant to the Offer.
The Support Agreements of Xxxx and Xxxx Xxxxxxxx provide that if the Merger
Agreement is terminated for any reason and within two years from the date of
such termination the Company (i) announces an agreement relating to a Competing
Transaction or (ii) consummates a Competing Transaction, to the extent that the
per Share consideration for such Competing Transaction exceeds the Offer Price,
the Key Stockholder will pay to Parent 50% of such excess multiplied by the
number of Owned Shares sold by the Key Stockholder in the Competing Transaction.
The Support Agreements of Xxxx and Xxxx Xxxxxxxx contain the same type of
restrictive covenants as are described below in the last paragraph under
"Employment Agreements."
EMPLOYMENT AGREEMENTS
As a condition to the Merger Agreement and the Offer, Xxxx Xxxxxxxx and Xxxx
Xxxxxxxx (the "Key Employees") have each entered into an Employment Agreement
(the "Employment Agreements") with the Company. Pursuant to the Employment
Agreements, Xxxx Xxxxxxxx will continue to hold the offices of President and
Chief Executive Officer of the Company and Xxxx Xxxxxxxx will continue to hold
the offices of Co-President and Co-Chief Executive Officer of the Company. Each
Employment Agreement has an initial term of five years, and automatically renews
for one-year periods unless the Key Employee or the Company gives notice.
Each Key Employee will receive the following compensation under his
Employment Agreement:
(i) a base salary of $186,000 for Xxxx Xxxxxxxx and $175,000 for Xxxx
Xxxxxxxx, adjusted annually based on the Consumer Price Index,
(ii) a long-term retention bonus of $1.0 million, payable in 5 annual
installments of $200,000 on each 12 month anniversary of the Employment
Agreement (provided the Key Employee is then actively employed by the
Company),
(iii) 100,000 shares of restricted stock of Parent, payable in 5 annual
installments of 20,000 shares on each 12 month anniversary of the
Employment Agreement,
(iv) 20% of the Annual Bonus payable under the Management Incentive Plan
(the "MIP"),
(v) 20% of the Long-Term Bonus payable under the MIP,
(vi) with respect to Xxxx Xxxxxxxx, housing as currently provided by the
Company or a housing allowance of $14,000 per year,
(vii) participation in the Company's employee benefit plans,
(viii) use of a company car, and
(ix) customary expense reimbursement, 4 weeks of vacation time and director
and officer liability insurance.
Each Employment Agreement terminates upon the Key Employee's death or
permanent disability, or upon notice of termination by either party, with or
without cause. Compensation and benefits under the Employment Agreements may or
may not continue to be payable, depending on the reason for termination.
31
Each Key Employee has agreed to keep the Company's proprietary information
confidential during and subsequent to his employment with the Company. Each Key
Employee has agreed that, for a period of 5 years from Purchaser's purchase of
the Shares, such Key Employee will not (subject to certain exceptions) (i)
compete with the Company in certain segments of the wine business or cultivate
certain varieties of grapes in certain geographic areas of California, or (ii)
use any of the Company's major suppliers or distributors. Additionally,
following the termination of any Key Employee, for the longer of the remaining
term of the Employment Agreement or 3 years from the termination of such Key
Employee, such Key Employee will not approach or solicit any employee of the
Company with a view to hiring such employee.
MANAGEMENT INCENTIVE PLAN
The Company has agreed to implement the Management Incentive Plan, which is
designed to reward senior managers of the Company for outstanding performance
resulting in increased earnings. The MIP provides for two types of bonuses: an
annual bonus based on the Company's EBITDA (as defined in the MIP) for that year
(the "Annual Bonus") and a long-term bonus based on the Company's EBITDA for a
five-year period (the "Long-Term Bonus"). The Annual Bonus will be paid if
EBITDA for that year equals or exceeds 90% of a specified target, and will be
adjusted based on the actual percentage over 90% that is achieved. The Annual
Bonus plan terminates after the fiscal year ended March 31, 2005. The Long-Term
Bonus will be paid if EBITDA for the five-year period ended March 31, 2005 (less
any Annual Bonuses actually paid), exceeds a specified target, and will be equal
to 20% of the excess over such specified target. The specified targets for each
Annual Bonus and the Long-Term Bonus are subject to adjustment based on
acquisition and related costs, capital expenditures and working capital. Each
Annual Bonus and the Long-Term Bonus will be split among senior managers based
on the determination of the Board of Directors and as may be specified in any
senior manager's employment agreement.
GRAPE PURCHASE AGREEMENT
As a condition to the Merger Agreement and the Offer, the Company has
entered into a Grape Purchase Agreement with an affiliate of the Xxxxxxxx family
(the "Grower"), pursuant to which the Grower will sell grapes to the Company.
The parties' obligations under the Grape Purchase Agreement are contingent upon
the Company and the Grower (a) locating and approving the Grower's acquisition
of up to 275 plantable vineyard acres of land within two years of the date of
the Grape Purchase Agreement, and (b) agreeing on a vineyard development plan.
The Grower will grow grape varieties mutually agreeable to the parties, and the
Company will purchase all of the grapes grown by the Grower on such property at
prices to be determined by a market-based formula. The Grape Purchase Agreement
contains customary quality standard provisions. The initial term of the Grape
Purchase Agreement is 15 years, and it may be extended for 5 additional years by
the Company. If the Grower proposes to sell or transfer any or all of such
property to a third party (other than an affiliate), the Grower must first give
the Company the right to purchase such property on the same terms as were given
to the third party.
11. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned on any financing arrangements.
Parent estimates that approximately $95 million will be required to acquire
all of the Shares pursuant to the Offer and the Merger, refinance certain
obligations of the Company and pay related fees and expenses. Parent plans to
obtain funds for these purposes from borrowings under an acquisition loan
facility (the "Acquisition Loan Facility"). The borrower is expected to be a new
general partnership to be formed and owned by Parent and one of its wholly owned
subsidiaries ("Borrower"), which will become the Parent of Hold Co. and will use
the loan proceeds to fund Hold Co. and
32
Purchaser. Parent has received a commitment letter dated August 28, 2000 (the
"Commitment Letter") from BNS to provide the Acquisition Loan Facility. The
commitments and agreements of BNS under the Commitment Letter are subject to the
Minimum Condition, the other conditions to the Offer described in Section 13,
and other customary conditions. The Commitment Letter has been accepted and the
related commitment fees that are presently due have been paid by Parent.
The Acquisition Loan Facility will consist of a $95 million non-revolving
term loan that will mature 180 days from the closing date. Loans under the
Acquisition Loan Facility will be replaced by a $95 million term loan (the
"Senior Term Loan") under a senior secured credit facility to be provided by BNS
(the "Senior Credit Facility") and described in further detail below. Parent has
received and accepted a commitment letter dated September 5, 2000 from BNS to
provide the Senior Credit Facility, which satisfied a condition to BNS'
commitment to provide the Acquisition Loan Facility.
Loans under the Acquisition Loan Facility may be prepaid at any time without
penalty, provided, however, that breakage costs, if any, will be for the account
of Borrower. The Acquisition Loan Facility will provide for mandatory
prepayments with 75% of excess cash flow, with proceeds from the issuance of
additional debt or equity and with proceeds from asset sales.
Loans under the Acquisition Loan Facility will bear interest, at Borrower's
option, at the following rates: (1) the one, two, three or six month London
Interbank Offered Rate plus 3.25% per annum; or (2) the greater of BNS's U.S.
base rate and BNS's U.S. federal funds rate plus 1/2 of 1% plus 2.25% per annum.
The Acquisition Loan Facility will contain customary affirmative and
negative covenants, including, without limitation, restrictions on the ability
of Parent, Borrower, Hold Co. and Purchaser to incur additional indebtedness,
pay certain dividends and make certain other restricted payments, create liens,
sell assets, make loans or investments, enter into transactions with affiliates,
amend material contracts, merge, consolidate and maintain certain financial
ratios and meet other financial tests. The Acquisition Loan Facility will
contain customary events of default and will be supported by guaranties (the
"Guaranties") from Parent and from certain of its subsidiaries (the
"Guarantors"). The obligations under the Acquisition Loan Facility and under the
Guaranties will be secured by a security interest in all of the present and
future property, assets and undertaking of Parent, Borrower and the Guarantors.
The Senior Credit Facility will consist of: (a) a non-revolving term credit
facility to be used to partially refinance Parent's existing facilities with
BNS; (b) a revolving term facility to be provided to Parent for general
corporate and working capital purposes; and (c) the Senior Term Loan. The Senior
Term Loan will mature six years following the repayment of the Acquisition Loan
Facility and will amortize on a quarterly basis in increasing amounts over time.
Subject to any prepayments as described below, 40% of the original principal
amount of the Senior Term Loan will be due and payable on the maturity date.
Loans under the Senior Term Loan may be prepaid at any time without penalty,
provided, however, that breakage costs, if any, will be for the account of
Borrower. The Senior Term Loan will provide for certain mandatory prepayments
with 75% of excess cash flow, with proceeds from the issuance of additional debt
or equity and with proceeds from asset sales.
The Senior Term Loan will bear interest, at Borrower's option, at the
following rates: (1) the one, two, three or six month London Interbank Offered
Rate plus an applicable margin ranging from 1.75% to 3.25% determined based upon
Borrower's ratio from time to time of senior debt to earnings without deduction
for interest, taxes, depreciation and amortization ("EBITDA"); or (2) the
greater of BNS's U.S. base rate and BNS's U.S. federal funds rate plus 1/2 of 1%
plus an applicable margin ranging from 0.75% to 2.25% per annum, determined
based upon Xxxxxxxx's ratio from time to time of senior debt to EBITDA.
The Senior Credit Facility will contain customary affirmative and negative
covenants, including, without limitation, restrictions on the ability of Parent,
Borrower, Hold Co. and Purchaser to incur
33
additional indebtedness, pay certain dividends and make certain other restricted
payments, create liens, sell assets, make loans or investments, enter into
transactions with affiliates, amend material contracts, merge, consolidate and
maintain certain financial ratios and meet other financial tests. The Senior
Credit Facility will contain customary events of default and will be supported
by guaranties (the "Senior Guaranties") from certain of Parent's subsidiaries
(the "Senior Guarantors"). The obligations under the Senior Credit Facility and
under the Senior Guaranties will be secured by a security interest in all of the
present and future property, assets and undertaking of Parent, Borrower and the
Senior Guarantors.
12. CERTAIN EFFECTS OF THE OFFER
If Purchaser acquires at least 90% of the Shares upon consummation of the
Offer, Purchaser will have the ability to approve the Merger and adopt the
Merger Agreement without any action by the remaining shareholders of the
Company. In such a case, Purchaser intends to so approve the Merger and adopt
the Merger Agreement without any action by the remaining shareholders of the
Company.
If Purchaser waives the Minimum Condition (which it can do only if BNS
waives or amends the conditions to the Commitment Letter), and acquires more
than 50% but less than 90% of the Shares upon consummation of the Offer,
Purchaser may consummate the Merger only with the approval of holders of a
majority of the Shares and after a determination by the California Commissioner
of Corporations that the terms and conditions of the Merger are fair, after a
public hearing.
In the Merger, each remaining Share (other than Shares held by shareholders
who properly exercise appraisal rights under California law and Shares held by
the Purchaser Group, the Company or any of their respective subsidiaries) will
be canceled and converted into the right to receive $7.00 per Share in cash.
Following the Merger, the Company will be a wholly owned subsidiary of Hold Co.
and an indirect wholly owned subsidiary of Parent.
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer and
from time to time thereafter, Purchaser will be entitled to designate at least a
number of directors, rounded up to the next whole number, on the Company's Board
of Directors equal to the product of (i) the total number of directors on the
Company's Board of Directors and (ii) Parent's and its affiliates' percentage of
beneficial ownership of the outstanding Shares. The Company will either increase
the size of the Company's Board of Directors or secure the resignation of the
necessary number of directors to enable Purchaser's designees to be elected to
the Company's Board of Directors, and must cause Purchaser's designees to be
elected to the Company's Board of Directors.
As a result of the purchase of Shares by Purchaser in the Offer and the
consummation of the Merger, Hold Co. will become the sole shareholder of the
Company, and the Shares will no longer meet the standards for continued listing
on The Nasdaq National Market. In addition, the Purchaser Group intends to
terminate the registration on the Shares under the Exchange Act upon the
consummation of the Merger.
The Shares are currently "margin securities," as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Following the
consummation of the Offer, it is anticipated that the Shares will no longer
constitute "margin securities" for purposes of the margin regulations of the
Federal Reserve Board and will no longer be able to be used as collateral for
loans made by brokers.
13. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the obligation of
Purchaser to accept for payment or pay for any Shares tendered pursuant to the
Offer will be subject to (i) the Minimum Condition, (ii) the waiting period
pursuant to the provisions of the HSR Act and any applicable foreign
34
or supranational antitrust laws applicable to the Offer or the Merger expiring
or terminating, and (iii) the occurrence of none of the following events at any
time before payment for any Shares:
(a) The DOJ, the FTC or any foreign or supranational agency or entity
charged with enforcement of antitrust laws applicable to the
transactions contemplated initiates, challenges or seeks to enjoin
the consummation of the Offer or the Merger and such actions remain
pending, or
(b) (i) Any order or preliminary or permanent injunction shall be
entered in any action or proceeding before any court of competent
jurisdiction or any statute, rule, regulation, legislation, or order
shall be enacted, entered, enforced, promulgated, amended or issued
by any United States legislative body, court, government or
governmental, administrative or regulatory authority or agency
(other than the waiting period provisions of the HSR Act) which
shall remain in effect and which shall have the effect of (x) making
illegal or restraining or prohibiting the making of the Offer, the
acceptance for payment of, or payment for, the Shares by Parent,
Purchaser or any other affiliate of Parent, or the consummation of
the Offer or the Merger or (y) imposing material limitations on the
ability of Purchaser effectively to acquire or hold or exercise full
rights of ownership of the Shares, including, without limitation,
the right to vote the Shares purchased by Purchaser on all matters
properly presented to the shareholders of the Company; (ii) any
proceeding brought by an administrative agency or commission or
other domestic governmental entity seeking any of the foregoing
shall be pending; or (iii) any action or proceeding shall be
commenced following the date of the Merger Agreement and be pending
before any court of competent jurisdiction which would have a
material adverse effect on the Company, or
(c) The Company and Parent shall have reached an agreement that the
Offer or the Merger Agreement be terminated, or the Merger Agreement
shall have been terminated in accordance with its terms, or
(d) The Company shall have breached one or more of its representations
and warranties set forth in the Merger Agreement or failed to
perform any of its obligations, covenants or agreements under the
Merger Agreement and such breaches or failures to perform shall in
the aggregate have a value in excess of $250,000, or
(e) On or after the date of the Merger Agreement, any Material Adverse
Effect on the Company shall have occurred or be occurring.
The Offer will terminate if the Merger Agreement is terminated pursuant to
its terms. The Purchaser Group has agreed in the Merger Agreement to use its
reasonable best efforts to cause all conditions to the Offer to be fulfilled.
The foregoing conditions are for the benefit of the Purchaser Group, may be
asserted by the Purchaser Group regardless of the circumstances giving rise to
any such conditions and may be waived by the Purchaser Group in whole or in part
at any time and from time to time; provided, that Purchaser may waive the
Minimum Condition only if more than 50% of the Shares are tendered in the Offer
and if BNS amends or waives the conditions of its Commitment Letter. The failure
by the Purchaser Group at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right and each such right will be deemed an
ongoing right which may be asserted at any time and from time to time.
14. DIVIDENDS AND DISTRIBUTIONS
The Merger Agreement provides that before the Effective Time, the Company
may not declare, set aside or pay any dividend or other distribution (whether in
cash, securities or property or any combination thereof) in respect of any class
or series of its capital stock or split, combine, subdivide,
35
reclassify or redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any Shares or any other capital stock of the
Company.
If in violation of the Merger Agreement, the Company should (a) split,
combine or otherwise change the Shares or its capitalization, (b) acquire
currently outstanding securities or otherwise cause a reduction in the number of
outstanding securities or (c) issue or sell additional securities, shares of any
other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, then subject to the provisions of Section 15
below, Purchaser, in its sole discretion, reserves the right to make such
adjustments as it deems appropriate in the Offer Price and other terms of the
Offer, including, without limitation, the number or type of securities offered
to be purchased.
If, during the term of the Merger Agreement, the Company should declare or
pay any cash dividend on the Shares or other distribution on the Shares, or
issue with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities or any
securities convertible into, or rights, warrants or options, conditional or
otherwise, to acquire, any of the foregoing, payable or distributable to
shareholders of record on a date before the transfer of the Shares purchased
pursuant to the Offer to Purchaser or its nominee or transferee on the Company's
stock transfer records, then, subject to the provisions of Section 15 below,
(a) the amount per Share paid pursuant to the Offer may, in the sole discretion
of Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (b) the whole of any such non-cash dividend, distribution or
issuance to be received by the tendering shareholders will (i) be received and
held by the tendering shareholders for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering shareholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer, or (ii) at the direction of Purchaser, be exercised
for the benefit of Purchaser, in which case the proceeds of such exercise will
promptly be remitted to Purchaser. Pending such remittance and subject to
applicable law, Purchaser will be entitled to all rights and privileges as owner
of any such non-cash dividend, distribution, issuance or proceeds and may
withhold the entire Offer Price or deduct from the amount per Share paid
pursuant to the Offer the amount or value thereof, as determined by Purchaser in
its sole discretion.
The Merger Agreement prohibits the Company from taking any of the actions
described in the two preceding paragraphs and nothing in this Offer to Purchase
will constitute a waiver by the Purchaser Group of any of its rights under the
Merger Agreement or a limitation of remedies available to the Purchaser Group
for any breach of the Merger Agreement, including termination thereof.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as described below, Purchaser is not aware of any
governmental license or regulatory permit that appears to be material to the
business of the Company taken as a whole, that might be adversely affected by
Purchaser's acquisition of the Shares as contemplated in this Offer to Purchase
or of any approval or other action by any governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required for
the acquisition or ownership of the Shares by Purchaser as contemplated herein.
Should any such approval or other action be required, the Purchaser Group
currently contemplates that such approval or other action will be sought. Except
as otherwise expressly described in this Section 15, Purchaser does not
presently intend to delay the acceptance for payment of or payment for Shares
tendered pursuant to the Offer pending the outcome of any such matter. See
Section 13 for certain conditions to the Offer.
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division of the
DOJ (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. The purchase of Shares by Purchaser pursuant
to the Offer is subject to such requirements.
36
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares under the Offer may be consummated following the expiration of an initial
15 calendar day waiting period following the filing by Parent of a Notification
and Report Form with respect to the Offer, unless Xxxxxx receives a request for
additional information or documentary material from the Antitrust Division or
the FTC or unless early termination of the waiting period is granted. Parent
made such filing on August 30, 2000, such that the initial waiting period will
expire at 11:59 p.m., New York City time, on September 14, 2000. If, within
their initial 15 calendar day waiting period, either the Antitrust Division or
the FTC requests additional information or documentary material from Parent
concerning the Offer, the waiting period will be extended and would expire at
11:59 p.m., New York City time, on the tenth calendar day after the date of
substantial compliance by Parent with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, the waiting period may be extended only by court order
or with the consent of Parent. Although the Company is required to file certain
information and documentary material with the Antitrust division and the FTC in
connection with the Offer, neither the Company's failure to make such filings
nor a request to the Company from the Antitrust Division or the FTC for
additional information or documentary material will extend the waiting period.
In practice, complying with a request for additional information or documentary
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while such negotiations continue.
A request will be made pursuant to the HSR Act for early termination of the
waiting period applicable to the Offer at the time of filing by Parent of the
Notification and Report Form. There can be no assurance, however, that the 15
calendar day HSR Act waiting period will be terminated early. Shares will not be
accepted for payment or paid for pursuant to the Offer until the expiration or
earlier termination of the applicable waiting period under the HSR Act. See
Section 13. Any extension of the waiting period will not give rise to any
withdrawal rights not otherwise provided for by applicable law. See Section 4.
If Purchaser's acquisition of Shares is delayed pursuant to a request by the
Antitrust Division or the FTC for additional information or documentary material
pursuant to the HSR Act, the Offer may, but need not, be extended.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after Purchaser's
purchase of Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by Purchaser or the divestiture of substantial
assets of Parent or its subsidiaries, or the Company.
Private parties may also bring legal action under the antitrust laws under
certain circumstances. Purchaser does not believe that the consummation of the
Offer shall result in a violation of any applicable antitrust laws. However,
there can be no assurance that a challenge to the Offer on antitrust grounds
will not be made or, if such a challenge is made, of the result thereof.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in such states. In
XXXXX X. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws
37
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining shareholders, provided that such laws were applicable
only under certain conditions.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, Purchaser does not believe that any
state takeover statutes apply to the Offer or the Merger. The Purchaser Group
currently has not complied with any state takeover statute or regulation.
Purchaser reserves the right to challenge the applicability or validity of
any state law purportedly applicable to the Offer or the Merger and nothing in
this Offer to Purchase or any action taken in connection with the Offer or the
Merger is intended as a waiver of that right. If it is asserted that any state
takeover statute is applicable to the Offer or the Merger and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer or the Merger, Purchaser might be required to file certain information
with, or to receive approvals from, the relevant state authorities, and
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In
such case, Purchaser may not be obligated to accept for payment or pay for any
Shares tendered pursuant to the Offer.
16. FEES AND EXPENSES
Purchaser has retained MacKenzie Partners, Inc. to act as the Information
Agent, and LaSalle Bank, N.A. to act as the Depositary, in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telex, telegraph and personal interview and may request brokers, dealers and
other nominee shareholders to forward the Offer materials to beneficial owners.
Each of the Information Agent and the Depositary shall receive reasonable and
customary compensation for their respective services, shall be reimbursed for
certain reasonable out-of-pocket expenses and shall be indemnified against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws.
Except as set forth above, Purchaser shall not pay any fees or commissions
to any broker or dealer or other person for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
shall, upon request, be reimbursed by Purchaser for customary mailing and
handling expenses incurred by them in forwarding the Offer materials to their
customers.
17. MISCELLANEOUS
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will
make a good faith effort to comply with that state statute. If, after such a
good faith effort, Purchaser cannot comply with the state statute, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares in that state. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer will be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
The Purchaser Group has filed with the Commission the Schedule TO pursuant
to Rule 14d-3 and Regulation M-A under the Exchange Act containing certain
additional information with respect to the Offer. The Schedule TO and any
amendments thereto, including exhibits, may be examined and copies may be
obtained from the principal office of the Commission in the manner set forth in
Section 7 (except that they will not be available at the regional offices of the
Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER GROUP NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
38
SCHEDULE I
SEPTEMBER 6, 2000
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER GROUP
A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The following table sets forth the name, present principal occupation or
employment and material occupation, positions, offices or employment for the
past five (5) years of each director and executive officer of Parent. Unless
otherwise indicated below, (i) the current business address of each such person
is 000 Xxxxxxxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx L5R 2V3, (ii) each
such person is a citizen of Canada, (iii) none of such persons has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) during the past five (5) years, and (iv) none of such persons has
been a party to any judicial or administrative proceeding during the past five
(5) years that resulted in a judgment, decree or final order enjoining such
person from future violations of, or prohibiting activities subject to, federal
or state securities laws, or a finding of any violation of federal or state
securities laws.
PRESENT PRINCIPAL OCCUPATION
OF EMPLOYMENT AND FIVE-YEAR
EMPLOYMENT HISTORY
NAME AND CURRENT POSITION WITH PARENT EMPLOYMENT HISTORY
------------------------------------- --------------------------------------------
Xxxx X. Xxxxxx, Chair, Board of Directors Vice-President, Onex Corporation,
a diversified industrial company
Xxxxxx X. Xxxxxx, Director and Executive President and Chief Executive Officer
Officer Vincor International Inc.
Xxxxxx X. X. Xxxxxxx, Director President, Inniskillin Wines, Inc.,
a wholly owned subsidiary of Vincor
Xxxxxxx Xxxxxxx, Director Chairman, The Second Cup Ltd.,
a specialty coffee retailer, and
Principal, XDL Investment Capital Corp.,
a venture capital fund
Xxxxxxxx X. Xxxxxxxx, Director Vice-President and Director
RBC Dominion Securities
Xxxx Xxxxx, Director Chairman and Chief Executive Officer
Arimtec International Inc., a document
archival and information retrieval company
(September 1997--present); Vice-President
and Chief Financial Officer,
Axidata Inc., a computer supply company
(September 1996--September 1997);
Executive Vice-President, Chief Financial
Officer and Director, Tenex Data
Corporation, a computer supply company
(March 1986--September 1996)
Xxxxxx Xxxx Xxxxxxx, Director Senior Counsel
Xxxxxx Xxxxxxx, a law firm (June 1997--
present); Professor, Faculty of Law,
XxXxxx University (September 1996--May
1997); Counsel with Xxx & Xxxxxxx,
Attorneys (prior to September 1996)
Xxxxxx X. Xxxx, Director President, Luba Financial Inc., an
investment company
NAME AND CURRENT POSITION WITH PARENT EMPLOYMENT HISTORY
------------------------------------- --------------------------------------------
Xxxxxxx X. Xxxxxxx, Director President and Chief Executive Officer
Indigo Books & Music Inc., a superstore
retailer
Xxxxxx X. Xxxxxxxx, Director Chairman and Chief Executive Officer
Onex Corporation, a diversified industrial
company
Xxxx Xxxxx, Director President, The Institute for Research and
Public Policy, an independent research
institute (1999--present); Associate,
Gluskin Sheff & Associates, Inc., an
investment advisory firm (1994--1999)
Xxxxxxx X. Xxxxx, Executive Officer Executive Vice-President, Finance and
Administration and Secretary,
Vincor International Inc.
Xxxxxxxx Xxxxxxxxx, Executive Officer Executive Vice-President, Corporate
Development,
Vincor International Inc. (October 1999--
present); President, Great Western Malting
Co. (November 1995--February 1999);
President, Canada Malting International
(July 1994--November 1995)
Xxxxx X. Xxxxxx, Executive Officer Executive Vice-President, Government and
Industry Relations, Vincor International
Inc. (1997--present); Executive Vice
President, Ontario Division, Vincor
International Inc. (1995--1997)
B. DIRECTORS AND EXECUTIVE OFFICERS OF HOLD CO.
The following table sets forth the name, business address, present principal
occupation or employment and material occupations, positions, offices or
employment for the past five years of each director and executive officer of
Hold Co. Unless otherwise indicated below, (i) the current business address of
each such person is 000 Xxxxxxxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx
L5R 2V3, (ii) each such person is a citizen of Canada, (iii) none of such
persons has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) during the past five (5) years, and
(iv) none of such persons has been a party to any judicial or administrative
proceeding during the past five (5) years that resulted in a judgment, decree or
final order enjoining such person from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a finding of any
violation of federal or state securities laws.
PRESENT PRINCIPAL OCCUPATION
OF EMPLOYMENT AND FIVE-YEAR
EMPLOYMENT HISTORY
NAME AND CURRENT POSITION WITH HOLD CO. EMPLOYMENT HISTORY
--------------------------------------- --------------------------------------------
Xxxxxx X. Xxxxxx, Director, President and President and Chief Executive Officer
Chief Executive Officer Vincor International Inc.
Xxxxxxx X. Xxxxx, Director, Vice-President Executive Vice-President, Finance and
and Treasurer Administration and Secretary,
Vincor International Inc.
NAME AND CURRENT POSITION WITH HOLD CO. EMPLOYMENT HISTORY
--------------------------------------- --------------------------------------------
Xxxxxxxx Xxxxxxxxx, Director, Vice-President Executive Vice-President, Corporate
and Secretary Development,
Vincor International Inc. (October 1999--
present); President, Great Western Malting
Co. (November 1995--February 1999);
President, Canada Malting International
(July 1994--November 1995)
C. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name, business address, present principal
occupation or employment and material occupations, positions, offices or
employment for the past five years of each director and executive officer of
Purchaser. Unless otherwise indicated below, (i) the current business address of
each such person is 000 Xxxxxxxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx
L5R 2V3, (ii) each such person is a citizen of Canada, (iii) none of such
persons has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) during the past five (5) years, and
(iv) none of such persons has been a party to any judicial or administrative
proceeding during the past five (5) years that resulted in a judgment, decree or
final order enjoining such person from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a finding of any
violation of federal or state securities laws.
PRESENT PRINCIPAL OCCUPATION
OF EMPLOYMENT AND FIVE-YEAR
EMPLOYMENT HISTORY
NAME AND CURRENT POSITION WITH PURCHASER EMPLOYMENT HISTORY
---------------------------------------- --------------------------------------------
Xxxxxx X. Xxxxxx, Director, President and President and Chief Executive Officer
Chief Executive Officer Vincor International Inc.
Xxxxxxx X. Xxxxx, Director, Vice-President Executive Vice-President, Finance and
and Treasurer Administration and Secretary,
Vincor International Inc.
Xxxxxxxx Xxxxxxxxx, Director, Vice-President Executive Vice-President, Corporate
and Secretary Development,
Vincor International Inc. (October 1999--
present); President, Great Western Malting
Co. (November 1995--February 1999);
President, Canada Malting International
(July 1994--November 1995)
APPENDIX A
PLAN OF MERGER
The following corporations are parties to this Plan of Merger: Toast
Acquisition Company, Inc., a California corporation ("Toast"), and
X.X. Xxxxxxxx, Inc., a California corporation ("Xxxxxxxx").
1. Toast has acquired and now owns ninety percent (90%) or more of the
outstanding shares of Xxxxxxxx.
2. Toast shall be merged into Xxxxxxxx, and Xxxxxxxx shall assume all of
the obligations of Toast, pursuant to Section 1110 of the California
Corporations Code.
3. Each outstanding share of Xxxxxxxx not owned by Toast immediately prior
to the merger shall be converted into cash in the amount of $7.00. Each
outstanding share of Xxxxxxxx owned by Toast immediately prior to the merger
shall be canceled.
4. Upon the merger, each outstanding common share of Toast shall be
converted into one common share of Xxxxxxxx.
5. Each holder of shares of Toast or Xxxxxxxx shall thereupon surrender the
share certificate or certificates to Xxxxxxxx and shall be entitled to receive
in exchange therefor either the cash or a share certificate into which the
shares theretofore represented by the certificate or certificates so surrendered
shall have been converted in accordance with paragraph 3 or 4.
APPENDIX B
SECTIONS 1300, 1301, 1302, 1303 AND 1304 OF THE CALIFORNIA CORPORATIONS CODE
SECTION1300. RIGHT TO REQUIRE PURCHASE--"DISSENTING SHARES" AND "DISSENTING
SHAREHOLDER" DEFINED.
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the National Market System of the NASDAQ Stock Market, and the
notice of meeting of shareholders to act upon the reorganization summarizes
this section and Sections 1301, 1302, 1303 and 1304; provided, however, that
this provision does not apply to any shares with respect to which there
exists any restriction on transfer imposed by the corporation or by any law
or regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that
subparagraph (A) rather than subparagraph (B) of this paragraph applies in
any case where the approval required by Section 1201 is sought by written
consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
SECTION1301. DEMAND FOR PURCHASE.
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires
to exercise the shareholder's right under such sections. The statement of price
constitutes an offer by the corporation to purchase at the price stated any
dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION1302. ENDORSEMENT OF SHARES.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SECTION1303. AGREED PRICE--TIME FOR PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION1304. DISSENTER'S ACTION TO ENFORCE PAYMENT.
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint
in the superior court of the proper county praying the court to determine
whether the shares are dissenting shares or the fair market value of the
dissenting shares or both or may intervene in any action pending on such a
complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
THE DEPOSITARY FOR THE OFFER IS:
LASALLE BANK, N.A.
BY MAIL OR BY FACSIMILE TRANSMISSION: BY HAND:
OVERNIGHT DELIVERY: LaSalle Bank, N.A. Bank of New York
LaSalle Bank, N.A. Attn: Corporate Trust Attn: Xxxxx Xxxxxxxxx
Attn: Corporate Trust Operations 000 Xxxxxxx Xxxxxx
Xxxxxxxxxx 000 Xx. LaSalle Street, Main Lobby
135 So. XxXxxxx Xxxxxx, Xxxxx 0000 Xxx Xxxx, XX 00000
Xxxxx 0000 Xxxxxxx, XX 00000 00000
Xxxxxxx, XX 00000 Fax #: 000-000-0000 10286
To confirm facsimile
call
telephone #: 000-000-0000
Questions and requests for assistance may be directed to the Information Agent
at its address and telephone number listed below. Additional copies of this
Offer to Purchase, the Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent as set forth below and shall be
furnished promptly at Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[MACKENZIE PARTNERS, INC. LOGO]
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (call collect)
or
(000) 000-0000 (TOLL FREE)
