Exhibit 13
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DOMAINES BARONS XX XXXXXXXXXX (LAFITE),
TRIPLE WINES, INC.
AND
THE CHALONE WINE GROUP, LTD.
DATED AS OF OCTOBER 30, 2004
TABLE OF CONTENTS
Page
----
ARTICLE I. THE MERGER..........................................................6
1.1 The Merger...................................................6
1.2 Closing......................................................6
1.3 Effective Time...............................................6
1.4 Effects of the Merger........................................6
1.5 Articles of Incorporation....................................6
1.6 Bylaws.......................................................7
1.7 Officers and Directors of Surviving Corporation..............7
1.8 Effect on Capital Stock......................................7
1.9 Surrender and Payment........................................7
1.10 Options; Stock Option Plans..................................9
1.11 Withholding Rights..........................................10
1.12 Employee Stock Purchase Plan................................10
ARTICLE II. REPRESENTATIONS AND WARRANTIES....................................10
2.1 Representations and Warranties of the Company...............10
2.2 Representations and Warranties of Parent....................18
2.3 Representations and Warranties of Parent and Merger Sub.....20
ARTICLE III. COVENANTS RELATING TO CONDUCT OF BUSINESS........................21
3.1 Covenants of the Company....................................21
3.2 Advice of Changes; Government Filings.......................23
ARTICLE IV. ADDITIONAL AGREEMENTS.............................................24
4.1 Preparation of Proxy Statement and Schedule 13E-3;
the Company Shareholders Meeting............................24
4.2 Access to Information.......................................24
4.3 Approvals and Consents; Cooperation.........................25
4.4 Acquisition Proposals.......................................26
4.5 Employee Benefits...........................................27
4.6 Fees and Expenses...........................................27
4.7 Indemnification; Directors' and Officers' Insurance.........28
4.8 Wine Club...................................................28
4.9 Public Announcements........................................28
4.10 Distributor Notice..........................................29
4.11 Further Assurances..........................................29
ARTICLE V. CONDITIONS PRECEDENT...............................................29
5.1 Conditions to Each Party's Obligation to Effect
the Merger..................................................29
5.2 Additional Conditions to Obligations of Parent
and Merger Sub..............................................29
5.3 Additional Conditions to Obligations of the Company.........30
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TABLE OF CONTENTS
Page
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ARTICLE VI. TERMINATION AND AMENDMENT.........................................30
6.1 Termination.................................................30
6.2 Effect of Termination.......................................32
6.3 Amendment...................................................33
6.4 Extension; Waiver...........................................33
ARTICLE VII. GENERAL PROVISIONS...............................................33
7.1 Non-Survival of Representations, Warranties and Agreements;
No Other Representations and Warranties.....................33
7.2 Notices.....................................................34
7.3 Interpretation..............................................34
7.4 Counterparts................................................35
7.5 Entire Agreement; No Third Party Beneficiaries..............35
7.6 Governing Law; Jurisdiction.................................35
7.7 Severability................................................35
7.8 Assignment..................................................36
7.9 Enforcement.................................................36
7.10 Definitions.................................................36
EXHIBITS
Exhibit A Form of Shareholder Letter Agreement
SCHEDULES
Schedule 4.8 Wine Club Dividend
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GLOSSARY OF DEFINED TERMS
Location of
Definition Defined Term
---------- ------------
Acquisition Agreement....................................................4.4(b)
Acquisition Proposal....................................................7.10(a)
Agreement..............................................................Preamble
Agreement of Merger.........................................................1.3
Board of Directors......................................................7.10(b)
Business Day............................................................7.10(c)
Certificates.............................................................1.9(b)
CGCL...................................................................Recitals
Closing.....................................................................1.2
Closing Date................................................................1.2
Code.....................................................................2.1(h)
Company................................................................Preamble
Company Benefit Plans.................................................2.1(m)(i)
Company Common Stock...................................................Recitals
Company Disclosure Schedule.................................................2.1
Company Intellectual Property Rights.....................................2.1(o)
Company Material Contracts...............................................2.1(l)
Company Permits..........................................................2.1(f)
Company Representatives.................................................7.10(e)
Company SEC Reports...................................................2.1(d)(i)
Company Shareholders Meeting.............................................4.1(b)
Company Stock Option Plan...............................................7.10(d)
Company Subsidiaries.....................................................2.1(a)
Company Voting Debt.................................................2.1(b)(iii)
Confidentiality Agreements..................................................4.2
Constellation...............................................................4.2
Effects.................................................................7.10(i)
Effective Time..............................................................1.3
Environmental Laws......................................................7.10(f)
ERISA.................................................................2.1(m)(i)
ESPP.......................................................................1.12
ESPP Termination Date......................................................1.12
Exchange Act..........................................................2.1(c)(v)
Exchange Agent...........................................................1.9(a)
Expenses....................................................................4.6
Frustrating Transactions.................................................6.2(c)
GAAP..................................................................2.1(d)(i)
Governmental Entity...................................................2.1(c)(v)
HSR Act...............................................................2.1(c)(v)
Huneeus.....................................................................4.2
Indemnified Party...........................................................4.7
Intellectual Property...................................................7.10(g)
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GLOSSARY OF DEFINED TERMS
Location of
Definition Defined Term
---------- ------------
Knowledge...............................................................7.10(h)
Liens................................................................2.1(b)(ii)
Material Adverse Effect.................................................7.10(i)
Merger.................................................................Recitals
Merger Consideration.....................................................1.8(d)
Merger Sub.............................................................Preamble
Nasdaq................................................................2.1(c)(v)
Notice of Superior Proposal..............................................4.4(b)
Options....................................................................1.10
Option Merger Consideration.............................................1.10(b)
Organizational Documents................................................7.10(j)
Outside Date.............................................................6.1(b)
Parent.................................................................Preamble
Permitted Liens.........................................................7.10(k)
Person..................................................................7.10(l)
Proxy Statement.......................................................2.1(e)(i)
Related Party............................................................2.1(i)
Required Regulatory Approvals............................................5.1(d)
Schedule 13E-3..........................................................7.10(m)
SEC...................................................................2.1(d)(i)
Securities Act........................................................2.1(c)(v)
Special Committee......................................................Recitals
Shareholder Approval.....................................................4.4(a)
Shareholder Letter Agreement...........................................Recitals
Subsidiary..............................................................7.10(n)
Superior Proposal.......................................................7.10(o)
Surviving Corporation.......................................................1.1
Tax.....................................................................7.10(p)
Taxable.................................................................7.10(p)
Taxes...................................................................7.10(p)
Tax Return..............................................................7.10(p)
Terminating Company Breach...............................................6.1(g)
Terminating Parent Breach................................................6.1(h)
Termination Fee..........................................................6.2(b)
the other party.........................................................7.10(q)
Third Party.............................................................7.10(r)
Transfer.................................................................6.2(c)
Violation ...........................................................2.1(c)(iv)
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This AGREEMENT AND PLAN OF MERGER, dated as of October 30, 2004 (this
"Agreement"), by and among Domaines Barons xx Xxxxxxxxxx (Lafite), a societe en
commandite par actions organized under the laws of France ("Parent"), Triple
Wines, Inc., a California corporation and a wholly owned subsidiary of Parent
("Merger Sub"), and The Chalone Wine Group, Ltd., a California corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, upon the terms of and subject to the conditions of this Agreement,
the Company, Parent and Merger Sub will enter into a transaction whereby each
issued and outstanding share of Common Stock, no par value per share, of the
Company ("Company Common Stock"), other than shares owned directly or indirectly
by Parent or by the Company, will be converted into the right to receive $11.75
in cash;
WHEREAS, at a meeting duly called and held, a special committee of the
Board of Directors composed entirely of independent directors (the "Special
Committee") has (i) determined in good faith that this Agreement, and the
transactions contemplated hereby, including the Merger (defined below), are in
the best interests of the Company's shareholders, other than Parent and its
affiliates, and just and reasonable to the Company under Section 310(a)(2) of
the California General Corporation Law ("CGCL") and (ii) resolved to recommend
and has recommended approval of this Agreement to the Board of Directors;
WHEREAS, at a meeting duly called and held, and acting on the
recommendation of the Special Committee and with full disclosure of the material
facts as to the Merger and after duly inquiring as to the interest of certain of
the Company's directors in the Merger and the transactions contemplated by this
Agreement, the Board of Directors (with certain members abstaining) has (i)
determined in good faith that this Agreement and the transactions contemplated
hereby, including the Merger, are in the best interests of the Company's
shareholders, other than Parent and its affiliates, and just and reasonable as
to the Company under Section 310(a)(2) of the CGCL, (ii) approved and adopted
this Agreement and the transactions contemplated hereby, including the Merger,
in accordance with the requirements of the CGCL, and (iii) subject to the
provisions of Sections 4.1 and 4.4(b), resolved to recommend approval and
adoption of this Agreement and the Merger by the shareholders of the Company;
WHEREAS, simultaneously with the execution and delivery of this Agreement,
and as a condition and inducement to the willingness of Parent and Merger Sub to
enter into this Agreement, Parent, Merger Sub and a certain shareholder of the
Company are entering into a letter agreement in the form of Exhibit A (the
"Shareholder Letter Agreement") pursuant to which such shareholder has agreed
not to transfer the shares of Company Common Stock currently owned by it, other
than to certain Permitted Transferees, as such term is defined therein, until
the earlier of (i) the termination of this Agreement for any reason, (ii) an
amendment to this Agreement which provides for a reduction in the price per
share of Company Common Stock payable to the shareholders of the Company other
than Parent or a change in any of the material financial terms of this Agreement
which is adverse to such shareholder and (iii) March 31, 2005, upon the terms
and subject to the conditions set forth therein;
WHEREAS; Xxxxxx Xxxxxx Partners LLC has delivered to the Special Committee
in accordance with Section 1203 of the CGCL its affirmative opinion in writing
as to the fairness of
the Merger Consideration (as defined below), from a financial point of view, to
the holders of Company Common Stock (other than Parent and its affiliates);
WHEREAS, in order to effectuate the foregoing, Merger Sub, upon the terms
and subject to the conditions of this Agreement and in accordance with the CGCL,
will merge with and into the Company (the "Merger"); and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the CGCL, Merger Sub shall be merged with
and into the Company at the Effective Time (as defined below). Following the
Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") in accordance with the CGCL.
1.2 Closing. The closing of the Merger (the "Closing") will take place as
soon as practicable after satisfaction or waiver (as permitted by this Agreement
and applicable law) of the conditions (excluding conditions that, by their
terms, cannot be satisfied until the Closing Date) set forth in Article V (the
"Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Xxxxxx & Xxxxxxx,
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000, unless another place
is agreed to in writing by the parties hereto.
1.3 Effective Time. Upon the Closing, the parties shall file with the
Secretary of State of the State of California an agreement of merger or other
appropriate documents (in any such case, the "Agreement of Merger") executed in
accordance with the relevant provisions of the CGCL and shall make all other
filings, recordings or publications required under the CGCL in connection with
the Merger. The Merger shall become effective at such time as the Agreement of
Merger is duly filed with the Secretary of State of the State of California, or
at such other time as the parties may agree and specify in the Agreement of
Merger (the time the Merger becomes effective being the "Effective Time").
1.4 Effects of the Merger. At and after the Effective Time, the Merger will
have the effects set forth in Section 1107 of the CGCL.
1.5 Articles of Incorporation. The articles of incorporation of Merger Sub
as in effect immediately prior to the Effective Time shall be the articles of
incorporation of the Company until thereafter changed or amended as provided
therein or by applicable law.
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1.6 Bylaws. The bylaws of Merger Sub as in effect at the Effective Time
shall be the bylaws of the Company until thereafter changed or amended as
provided therein or by applicable law.
1.7 Officers and Directors of Surviving Corporation. The officers and
directors of Merger Sub shall be the officers and directors of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or director or until their respective successors are
duly elected and qualified, as the case may be.
1.8 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, no par value per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock that is owned by the Company and each share of Company
Common Stock that is owned by Parent, Merger Sub or any other wholly owned
subsidiary of Parent shall automatically be canceled and retired and shall cease
to exist, and no Merger Consideration shall be delivered in exchange therefor.
(c) Conversion of Stock Held by Company Subsidiaries. Each share of Company
Common Stock that is owned by a wholly-owned Subsidiary of the Company shall be
converted into Surviving Corporation stock of equivalent value.
(d) Conversion of Company Common Stock. Subject to Section 1.9(i), each
issued and outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 1.8(b) and those converted in accordance
with Section 1.8(c)) shall be converted into the right to receive $11.75 in
cash, without interest (the "Merger Consideration"). As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of such certificates, the Merger Consideration.
1.9 Surrender and Payment.
(a) Exchange Agent. Prior to the Effective Time, Parent shall appoint an
agent (the "Exchange Agent") for the purpose of exchanging certificates
representing shares of Company Common Stock for the Merger Consideration.
Immediately prior to the Effective Time, Parent shall deposit with the Exchange
Agent (i) the Merger Consideration to be paid in respect of the shares of
Company Common Stock and (ii) Option Merger Consideration to be paid with
respect to the Company's outstanding Options as provided for in Section 1.10.
For purposes of determining the Merger Consideration to be made available,
Parent shall assume that no holder of shares of Company Common Stock will
perfect its right to appraisal of such shares.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger (but in any event within three Business Days after
the Effective Time), the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates (the
"Certificates") which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock, other than shares to be canceled and
retired in accordance with Section 1.8(b), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as the Surviving
Corporation may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration (which Parent shall
cause the Exchange Agent to pay promptly), and the Certificate so surrendered
shall forthwith be canceled. If any portion of the Merger Consideration is to
paid to a Person other than the registered holder of the shares represented by
the certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. Until surrendered
as contemplated by this Section 1.9, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration.
(c) No Further Ownership Rights in Company Common Stock. All Merger
Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article I shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on such shares of Company Common Stock in accordance with
the terms of this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article I, except as otherwise
provided by law.
(d) Unclaimed Funds. Any portion of the Merger Consideration made available
to the Exchange Agent pursuant to Section 1.9(a) that remains unclaimed by
holders of the Certificates for one year after the Effective Time of the Merger
shall be delivered to Parent, upon demand, and any holders of Certificates who
have not theretofore complied with this Article I shall thereafter look only to
Parent for payment of their claim for Merger Consideration.
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(e) No Liability. None of Parent, Merger Sub, the Company or the Exchange
Agent shall be liable to any Person in respect of any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Investment of Funds. The Exchange Agent shall invest any Merger
Consideration made available to the Exchange Agent pursuant to Section 1.9(a),
as directed by Parent, on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent.
(g) Lost Certificates. In the event that any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such Person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
with respect to such Certificate to which such person is entitled pursuant
hereto.
(h) Merger Consideration. Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 1.9(a) to pay for shares of
Company Common Stock for which appraisal rights have been perfected shall be
returned to Parent upon demand.
(i) Dissenting Shares. Notwithstanding Section 1.8, shares of Company
Common Stock, outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in writing
and who has demanded appraisal for such shares in accordance with the CGCL,
shall not be converted into a right to receive the Merger Consideration, unless
such holder fails to perfect or withdraws or otherwise loses its right to
appraisal. If after the Effective Time such holder fails to perfect or withdraws
or loses its right to appraisal, and subject to Section 1308 of the CGCL, such
shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration. The Company shall give Parent
prompt notice of any demands received by the Company for appraisal of shares of
Company Common Stock, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent or as may be required by
applicable law, make any payment with respect to, or settle or offer to settle,
any such demands.
1.10 Options; Stock Option Plans. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any option to
purchase shares of Company Common Stock under the Company Stock Option Plan,
whether vested or not vested (each, an "Option" and collectively, the
"Options"), or any other Person, except as expressly provided herein:
(a) each Option outstanding immediately prior to the Effective Time with an
exercise price per share equal to or greater than the Merger Consideration shall
be canceled and the holder thereof shall have no right to receive any
consideration therefor; and
(b) each Option outstanding three (3) business days prior to the Effective
Time with an exercise price per share less than the Merger Consideration shall
become fully
9
vested and exercisable as of the third business day prior to the Effective Time
and, if remaining outstanding as of the Effective Time, shall be canceled as of
the Effective Time in exchange for the right to receive a payment in cash,
without interest, equal to the product (such product, the "Option Merger
Consideration") of (i) the excess of (x) the Merger Consideration over (y) the
exercise price per share under such Option multiplied by (ii) the number of
shares of Company Common Stock underlying each such Option, which cash payment
shall be reduced by any applicable withholding taxes. As soon as reasonably
practicable after the Effective Time of the Merger (but in any event within
three Business Days after the Effective Time), the Surviving Corporation shall
cause the Exchange Agent to mail to each holder of an Option entitled to receive
Option Merger Consideration (i) a letter of transmittal in form and with such
provisions which Parent may reasonably request and (ii) instructions for use in
effecting the surrender of the Options in exchange for the Option Merger
Consideration. As soon as reasonably practicable following the Effective Time,
but in no event more than ten (10) Business Days thereafter, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of an Option
entitled to receive Option Merger Consideration, who properly completed and
returned to the Exchange Agent a letter of transmittal previously sent to such
holder by the Exchange Agent, the applicable Option Merger Consideration. As of
the Effective Time, the Company Stock Option Plan shall be terminated and no
further Options shall be granted thereunder.
1.11 Withholding Rights. Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration otherwise payable to
any Person pursuant to this Article I such amounts as it is required to deduct
and withhold with respect to the making of such payment under any provision of
federal, state, local or foreign Tax law. If the Surviving Corporation or
Parent, as the case may be, so withholds amounts, such amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock or the holder of an Option, as the case may be,
in respect of which the Surviving Corporation or Parent, as the case may be,
made such deduction and withholding.
1.12 Employee Stock Purchase Plan. The Company shall take all actions
necessary to provide that the Company's 2003 Employee Stock Purchase Plan (the
"ESPP") shall terminate on the close of business on the last Business Day
immediately prior to the Effective Time (the "ESPP Termination Date"), all
participants' rights under the ongoing offering shall terminate upon such ESPP
Termination Date, and all accumulated payroll deductions allocated to each
participant's account under the ESPP shall thereupon be used to purchase from
the Company whole shares of Company Common Stock at a price determined under the
terms of the ESPP immediately prior to the ESPP Termination Date, subject to the
terms and conditions of the ESPP. The Company shall give participants in the
ESPP at least 10 days notice of such ESPP Termination Date in accordance with
the ESPP. At the Effective Time, any Company Common Stock so purchased will be
treated as provided in Section 1.8 of this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. Except as set forth in
the Company Disclosure Schedule delivered by the Company to Parent at or prior
to the execution of this Agreement (the "Company Disclosure Schedule") or the
Company SEC Reports (as defined below), the Company represents and warrants to
Parent and Merger Sub as follows:
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(a) Organization, Standing and Power. Each of the Company and each of its
Subsidiaries (the "Company Subsidiaries") has been duly incorporated and is
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and each Company Subsidiary is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify could not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on the Company. The copies of the Organizational
Documents of the Company and the Company Subsidiaries which were previously
furnished or made available to Parent are true, complete and correct copies of
such documents as in effect on the date of this Agreement.
(b) Capital Structure.
(i) As of the date of this Agreement, the authorized capital stock of
the Company consists of 25,000,000 shares of Company Common Stock, of which
13,478,272 shares are issued and outstanding. All issued and outstanding
shares of the capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable. No class of Company capital stock is
entitled to preemptive rights. None of the issued and outstanding shares of
Company Common Stock have been issued in violation of any preemptive rights
of current or past holders of any class of Company capital stock or are
subject to any preemptive rights of current or past Company shareholders
granted by the Company. As of the date of this Agreement, there are no
outstanding options, warrants, indebtedness convertible into capital stock
or other rights to acquire capital stock from the Company other than (i)
Options representing in the aggregate the right to purchase 1,353,442
shares of Company Common Stock under the Company Stock Option Plan and (ii)
up to 50,000 shares of Company Common Stock available under the ESPP. The
Company Disclosure Schedule sets forth the name of each person holding
outstanding Options, the number of shares which may be purchased upon
exercise of such Options, the expiration date of such Options as of the
date of this Agreement and the exercise price per Share of such Options.
(ii) All of the issued and outstanding shares of capital stock of the
Company Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and are owned by the Company, free and clear of any liens,
claims, encumbrances, restrictions, preemptive rights or any other claims
of any third party ("Liens"). Except for the capital stock of the Company
Subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any Person.
(iii) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of the Company having the right to vote on any matters
on which shareholders may vote ("Company Voting Debt") are issued or
outstanding.
(iv) Other than the Options and the ESPP, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any Company Subsidiary is
a party or by which any of them is bound obligating the Company or any
Company Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of the Company or any Company Subsidiary or obligating the
Company or any Company Subsidiary to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment,
11
agreement, arrangement or undertaking. As of the date of this Agreement,
there are no outstanding obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any Company Subsidiary.
(c) Authority; No Conflicts.
(i) The Company has all requisite corporate power and corporate
authority to enter into this Agreement and, subject to the adoption of this
Agreement by the requisite vote of the holders of Company Common Stock, to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of the Company, subject in the case of the consummation of the Merger
to the approval of this Agreement and the principal terms of the Merger by
the shareholders of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding agreement of
the Company, enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally and by general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(ii) At a meeting duly called and held, the Special Committee has (i)
determined, in what the Special Committee believes to be good faith, that
this Agreement, and the transactions contemplated hereby, including the
Merger, are in the best interests of the Company's shareholders other than
Parent and its affiliates and just and reasonable to the Company under
Section 310(a)(2) of the CGCL and (ii) resolved to recommend and
recommended approval of this Agreement to the Board of Directors.
(iii) At a meeting duly called and held, and acting on the
recommendation of the Special Committee and with full disclosure of the
material facts as to the Merger and after having inquired as to the
interest of certain of the Company's directors in the Merger and the
transactions contemplated by this Agreement, the Board of Directors (with
certain members abstaining) has (1) determined, in what the Board of
Directors believes to be good faith, that this Agreement and the
transactions contemplated hereby, including the Merger, are in the best
interests of the Company's shareholders, other than Parent and its
affiliates, and just and reasonable as to the Company under Section
310(a)(2) of the CGCL, (2) approved and adopted this Agreement and the
transactions contemplated hereby, including the Merger, in accordance with
the requirements of the CGCL, and (3) subject to the provisions of Section
4.1 and 4.4(b), resolved to recommend approval and adoption of this
Agreement and the Merger by the shareholders of the Company.
(iv) The execution and delivery of this Agreement does not or will
not, as the case may be, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest, charge or other
encumbrance on any assets (any such conflict, violation, default, right of
termination, amendment, cancellation or acceleration, loss or creation, a
"Violation") pursuant to: (A) any provision of the Organizational Documents
of the Company or
12
the Company Subsidiaries, (B) except as could not reasonably be expected to
have a Material Adverse Effect on the Company, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company, the
Company Subsidiaries or their respective properties or assets or (C) except
as could not reasonably be expected to have a Material Adverse Effect on
the Company and, subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings referred to
in paragraph (v) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise or license applicable to the Company, the
Company Subsidiaries or their respective properties or assets.
(v) No consent, approval, order or authorization of, or registration,
declaration or filing with, any supranational, national, state, municipal
or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof (a
"Governmental Entity") is required by or with respect to the Company or the
Company Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (x) those required under or in
relation to (A) the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (B) the Securities Act of 1933, as amended (the
"Securities Act"), (C) the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (D) the CGCL with respect to the filing and recordation of
appropriate merger or other documents, (E) rules and regulations of the
Nasdaq National Market ("Nasdaq"), and (F) antitrust or other competition
laws of other jurisdictions, and (y) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain could not reasonably be expected to have a Material
Adverse Effect on the Company.
(d) Reports and Financial Statements.
(i) The Company has filed all required reports, schedules, forms,
statements and other documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") since January 1, 2004
(collectively, including all exhibits thereto, the "Company SEC Reports").
None of the Company SEC Reports, as of their respective dates (or, if
amended or superseded by a filing prior to the date of this Agreement or of
the Closing Date, then on the date of such filing), contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in the
Company SEC Reports presents fairly in all material respects the
consolidated financial position and consolidated results of operations and
cash flows of the Company and the Company Subsidiaries as of the respective
dates or for the respective periods set forth therein, all in conformity
with U.S. generally accepted accounting principles ("GAAP") consistently
applied during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements, to
normal and recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such Company SEC Reports, as of
their respective dates (or as of the date of any amendment to the
respective Company SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
13
(ii) Except as set forth in the Company SEC Reports filed prior to the
date of this Agreement, and except for liabilities and obligations incurred
in the ordinary course of business and consistent with past practice since
December 31, 2003, neither the Company nor any Company Subsidiary has any
liabilities or obligations of any nature required by GAAP to be set forth
on a consolidated balance sheet of the Company or any Company Subsidiary or
in the notes thereto which, individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect on the Company.
The Company has delivered to Parent complete and correct copies of all
documents governing all material "off balance sheet arrangements" (as
defined by item 303(a)(4) of Regulation S-K promulgated by the SEC) in
respect of the Company or any of its Subsidiaries.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the proxy statement related
to the meeting of the Company's shareholders to be held in connection with
the Merger and the transactions contemplated by this Agreement (the "Proxy
Statement"), the Schedule 13E-3, and any amendments or supplements thereto
will, on the date the Proxy Statement is first mailed to the Company's
shareholders or at the time of the Company Shareholders Meeting (as defined
below), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the
rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 3.1(e),
no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Proxy Statement or the
Schedule 13E-3 based on information supplied by Parent or Merger Sub for
inclusion or incorporation by reference therein.
(f) Compliance with Applicable Laws; Regulatory Matters. The Company and
the Company Subsidiaries hold all permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all Governmental
Entities which are material to the operation of their businesses, taken as a
whole (the "Company Permits"). The Company and the Company Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so to
comply, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company. The businesses of the Company and
the Company Subsidiaries are not being and have not been conducted in violation
of any law, ordinance, regulation, judgment, decree, injunction, rule or order
of any Governmental Entity, except for violations which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company. To the Knowledge of the Company, as of the date of this Agreement,
no investigation by any Governmental Entity with respect to the Company or any
Company Subsidiary is pending or threatened, other than investigations which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company.
(g) Litigation. To the Knowledge of the Company, there is no litigation,
arbitration, claim, suit, action, audit, investigation or proceeding pending or
threatened against or
14
affecting (i) the Company or any Company Subsidiary or (ii) any present or
former officer, director or employee of the Company or any Company Subsidiary,
in their capacity as a present or former officer, director or employee of the
Company or any Company Subsidiary or otherwise such that the Company of any
Company Subsidiary may be liable (whether by virtue of indemnification or
otherwise), which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Company, nor is there any
judgment, award, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any Company Subsidiary or by which
any property, asset or operation of the Company or any Company Subsidiary is
bound or affected, which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Company.
(h) Taxes. (i) The Company and the Company Subsidiaries have duly and
timely filed (taking into account any extension of time within which to file)
all material Tax Returns required to be filed by any of them and all such filed
Tax Returns are complete and accurate in all material respects; (ii) the Company
and the Company Subsidiaries have paid all Taxes that are shown as due on such
filed Tax Returns or that the Company or any Company Subsidiary is obligated to
withhold from amounts owing to any employee, creditor or third party, except
with respect to matters contested in good faith and for which adequate reserves
have been established under GAAP or for such amounts that, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company; (iii) there are no pending or, to the Knowledge of the
Company, threatened in writing audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters relating to the Company or the
Company Subsidiaries which, if determined adversely to the Company or the
Company Subsidiaries, could reasonably be expected to have a Material Adverse
Effect on the Company; (iv) there are no deficiencies or claims for any Taxes
that have been proposed, asserted or assessed against the Company or the Company
Subsidiaries which, if such deficiencies or claims were finally resolved against
the Company or the Company Subsidiaries, could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company; (v) there are no material Liens for Taxes upon the assets of the
Company or the Company Subsidiaries, other than Liens for current Taxes not yet
due and payable and Liens for Taxes that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established
under GAAP; and (vi) neither of the Company nor any Company Subsidiary has made
an election under former Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code").
(i) Absence of Certain Changes or Events. Since December 31, 2003 through
the date of this Agreement, (A) each of the Company and the Company Subsidiaries
has conducted its business in the ordinary course and has not incurred any
material liability, except in the ordinary course of their respective
businesses; and (B) there has not been (i) any change in the business, financial
condition or results of operations of the Company or the Company Subsidiaries
that has had, or could reasonably be expected to have, a Material Adverse Effect
on the Company, (ii) any change in any method of accounting or accounting
principles or practice by the Company or any of its Subsidiaries, except for any
such change required by reason of a concurrent change in GAAP or Regulation S-X
under the Exchange Act, (iii) any Tax election made or changed, any annual tax
accounting period changed, any method of tax accounting adopted or changed, any
material amended Tax Returns or claims for Tax refunds filed, any material
closing agreement entered into, any material Tax claim, audit or assessment
settled, or
15
any right to claim a material Tax refund, offset or other reduction in Tax
liability surrendered, (iv) any material change in practices relating to pricing
or royalties set or charged by the Company to its customers or licensees except
changes in the ordinary course of business to pricing or royalties charged to an
individual customer or licensee, or any notification made to the Company of a
material change in pricing or royalties set or charged by licensors to the
Company, (v) any agreement, commitment, arrangement or plan entered into by the
Company with (A) any director or officer of the Company or (B) any "associates"
or members of the "immediate family" (as such terms are respectively defined in
Rule 12b-2 and Rule 16a-1 of the Exchange Act) of any director or officer of the
Company (each such Person described in clauses (A) or (B) above, a "Related
Party"), or (vi) any material payment, reimbursement, refund or other fund
transfer by the Company to any Related Party, other than the payment of salaries
to officers made in the ordinary course of business consistent with past
practice pursuant to agreements in place on the date hereof which have been
provided to Parent or payment to directors for service on the Special Committee.
(j) Inventory. All of the Inventory has been produced and packaged in all
material respects in accordance with all applicable laws, regulations and
orders. All of the Company's and the Company Subsidiaries' vehicles, machinery
and equipment necessary for the operation of their businesses have been
maintained in the ordinary course of business and are in operable condition
(normal wear and tear excepted), except as could not be reasonably expected to
have a Material Adverse Effect on the Company.
(k) Real Property. Each of the Company and the Company Subsidiaries has
good and valid title to the real property owned by it, and valid and subsisting
leasehold estates in the real property leased by it, in each case subject to no
lien or encumbrance, except Permitted Liens.
(l) Certain Agreements. All contracts listed as an exhibit to the Company's
Annual Report on Form 10-K under the rules and regulations of the SEC relating
to the business of the Company and the Company Subsidiaries (the "Company
Material Contracts") are valid and in full force and effect except to the extent
they have previously expired in accordance with their terms or as could not
otherwise reasonably be expected to have a Material Adverse Effect on the
Company, and neither the Company nor any Company Subsidiary has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time, or both, could reasonably be expected to constitute a
default under the provisions of, any such Company Material Contract, except for
defaults which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company. To the Knowledge of
the Company, no counterparty to any such Company Material Contract has violated
any provision of, or committed or failed to perform any act which, with or
without notice, lapse of time, or both, could reasonably be expected to
constitute a default or other breach under the provisions of, any such Company
Material Contract, except for defaults or breaches which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company.
(m) Employee Benefit Plans; Labor Matters.
(i) With respect to each employee benefit plan, program, arrangement
and contract (including, without limitation, any "employee benefit plan,"
as defined in Section
16
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, change
in control and severance plan, program, arrangement and contract) to which
the Company or any Company Subsidiary is a party, which is maintained or
contributed to by the Company or any Company Subsidiary, or with respect to
which the Company or any Company Subsidiary could incur material liability
under Section 4069, 4201 or 4212(c) of ERISA (the "Company Benefit Plans"),
the Company has made available to Parent a true and complete copy of each
such Company Benefit Plan.
(ii) Each of the Company Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (except as
set forth in Schedule 2.1(m)(ii) hereto), and the Company is not aware of
any circumstances likely to result in the revocation of any such favorable
determination letter that could reasonably be expected to have a Material
Adverse Effect on the Company.
(iii) With respect to the Company Benefit Plans, no event has occurred
and, to the Knowledge of the Company, there exists no condition or set of
circumstances, in connection with which the Company or any Company
Subsidiary could be subject to any liability under the terms of such
Company Benefit Plans, ERISA, the Code or any other applicable law which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company.
(iv) Neither of the Company nor any Company Subsidiary is a party to
any collective bargaining or other labor union contracts and no collective
bargaining agreement is being negotiated by the Company or the Company
Subsidiaries. There is no pending labor dispute, strike or work stoppage
against the Company or any Company Subsidiary which may interfere with the
respective business activities of the Company or the Company Subsidiaries,
except where such dispute, strike or work stoppage could not reasonably be
expected to have a Material Adverse Effect on the Company. There is no
pending charge or complaint against the Company or any of the Company
Subsidiaries by the National Labor Relations Board or any comparable state
agency, except where such unfair labor practice, charge or complaint could
not reasonably be expected to have a Material Adverse Effect on the
Company.
(n) Environmental Compliance and Conditions. The Company and the Company
Subsidiaries have all permits, licenses and other authorizations required under
Environmental Laws, except where the failure to hold such licenses, permits and
authorizations could not reasonably be expected to have a Material Adverse
Effect. To the Knowledge of the Company, the Company and each of the Company
Subsidiaries are in compliance with all terms and conditions of any and all such
required permits, licenses, and authorizations and are also in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements and obligations contained in any applicable Environmental Law,
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect on the Company. Except as would not have a Material
Adverse Effect:
(i) No written notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed,
no penalty has been assessed, and no investigation, action, claim, suit,
proceeding or review is pending or, to the
17
Knowledge of the Company, is threatened by any governmental entity or other
Person relating to or arising out of any Environmental Law; and
(ii) there are no liabilities of or relating to the Company or any of
the Company Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising under
or relating to any Environmental Law, and to the Knowledge of the Company,
there are no facts, conditions, situations or set of circumstances that
could reasonably be expected to result in or be the basis for any such
liability.
For purposes of this Section, the terms "Company" and "Company Subsidiaries"
shall include any entity that is, in whole or in part, a predecessor of the
Company or any of its Subsidiaries.
(o) Intellectual Property. The Company and the Company Subsidiaries own or
license under valid and subsisting licenses all Intellectual Property which is
necessary or required for the operation of their businesses as currently
conducted (the "Company Intellectual Property Rights"). None of the Company
Intellectual Property Rights owned by the Company have been adjudged invalid or
unenforceable in whole or part, and, to the Knowledge of the Company, all
Intellectual Property owned by the Company, excluding any pending applications
for Intellectual Property, is valid and enforceable. The consummation of the
transactions contemplated by this Agreement will not alter, impair or extinguish
in any material respect any of the Company's or the Company's Subsidiaries'
rights in and to the Company Intellectual Property Rights.
Neither the Company nor any Company Subsidiary has received any notice or claim
that it is, and to the Knowledge of the Company, neither the Company nor any
Company Subsidiary is, infringing or misappropriating the Intellectual Property
of any Person and the Company has no Knowledge of any infringement by any Person
of any Intellectual Property owned by the Company or the Company Subsidiaries,
except in each case such infringement or misappropriations that could not
reasonably be expected to have a Material Adverse Effect on the Company.
(p) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except Xxxxxx Xxxxxx Partners LLC. The Company has
provided to Parent a true and correct copy of all engagement letters relating to
arrangements with Xxxxxx Xxxxxx Partners LLC.
(q) Opinion of Financial Advisor. The Special Committee has received, in
accordance with Section 1203 of the CGCL, the affirmative opinion in writing of
Xxxxxx Xxxxxx Partners LLC dated the date of this Agreement, to the effect that,
as of such date, the Merger Consideration is fair, from a financial point of
view, to the holders of Company Common Stock (other than Parent and its
affiliates).
2.2 Representations and Warranties of Parent. Parent represents and
warrants to the Company as follows:
18
(a) Organization, Standing and Power. Parent has been duly organized and is
validly existing under the laws of its jurisdiction of organization. Parent is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, except where the failure so to qualify could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Parent.
(b) Authority; No Conflicts.
(i) Parent has all requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly
executed and delivered by Parent and constitutes a valid and binding
agreement of Parent, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not or will
not, as the case may be, and the consummation of the transactions
contemplated hereby will not, result in any Violation of: (A) any provision
of the Organizational Documents of Parent or (B) except as could not
reasonably be expected to have a Material Adverse Effect on Parent and
subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or its respective
properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent in connection with the execution and
delivery of this Agreement by Parent or the consummation by Parent of the
transactions contemplated hereby, except for (A) the consents, approvals,
orders, authorizations, registrations, declarations and filings required
under or in relation to clause (x) of Section 2.1(c)(v) and (B) such
consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to make or obtain could not reasonably be
expected to have a Material Adverse Effect on Parent or impair or delay the
ability of Parent to consummate the transactions contemplated hereby.
(c) Information Supplied.
(i) None of the information supplied or to be supplied by Parent or
Merger Sub for inclusion or incorporation by reference in the Proxy
Statement or Schedule 13E-3 will, on the date the Proxy Statement is first
mailed to the Company's shareholders or at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
19
The Schedule 13E-3 will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 2.2(c),
no representation or warranty is made by Parent or Merger Sub with respect
to statements made or incorporated by reference in the Proxy Statement or
Schedule 13E-3 based on information supplied by the Company for inclusion
or incorporation by reference therein.
(d) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub, except Citigroup Global Markets Inc.
(e) Financing. Merger Sub will have, prior to the Effective Time,
sufficient funds to pay all Merger Consideration and to consummate the
transactions contemplated by this Agreement.
2.3 Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub represent and warrant to the Company as follows:
(a) Organization and Corporate Power. Merger Sub is a wholly owned
Subsidiary of Parent and a corporation duly incorporated, validly existing and
in good standing under the laws of California. The copies of the Organizational
Documents of Merger Sub which were previously furnished or made available to the
Company are true, complete and correct copies of such documents as in affect on
the date of this Agreement.
(b) Corporate Authorization. Merger Sub has all requisite corporate power
and corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. This Agreement has been duly
executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not contravene or conflict with the
Organizational Documents of Merger Sub.
(d) No Business Activities. Merger Sub is not a party to any material
agreements and has not conducted any activities other than in connection with
the organization of Merger Sub, the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereby. Merger Sub has no
Subsidiaries.
20
ARTICLE III.
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement, including Section 3.1 of the
Company Disclosure Schedule, or to the extent that Parent shall otherwise
consent in writing, which consent shall not be unreasonably withheld with
respect to matters set forth in Sections 3.1(h)(i), (ii), (iii) and (v)):
(a) Ordinary Course. The Company and the Company Subsidiaries shall carry
on their respective businesses in the usual, regular and ordinary course in all
material respects and in compliance in all material respects with all applicable
laws and regulations, pay their debts and Taxes when due subject to good faith
disputes over such debts or Taxes, pay or perform other material obligations
when due, and shall use reasonable efforts to (i) preserve intact their present
business organizations, (ii) maintain their properties in good operating
condition, (iii) keep available the services of their present officers,
employees and independent contractors and (iv) preserve their relationships with
customers, suppliers and others having business dealings with them. In addition,
during such period, the Company shall manage its working capital in the ordinary
course of business, consistent with past business practices or as otherwise
mutually determined by Parent and the Company. However, no action by the Company
or any Company Subsidiary with respect to matters specifically addressed by any
other provision of this Section 3.1 shall be deemed a breach of this Section
3.1(a) unless such action would constitute a breach of one or more of such other
provisions.
(b) Dividends; Changes in Share Capital. The Company shall not, and shall
not permit the Company Subsidiaries to, and shall not propose to, (i) declare or
pay any dividends on or make other distributions in respect of any of its
capital stock, other than as provided for by this Agreement, and other than the
"wine dividend" paid consistent with the Company's wine dividend program in
place as of the date of this Agreement, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock or (iii) repurchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock.
(c) Issuance of Securities. The Company shall not and shall cause the
Company Subsidiaries not to issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Company Voting Debt or any securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such shares or Company Voting
Debt, or enter into any agreement with respect to any of the foregoing, other
than (i) the issuance of Company Common Stock upon the exercise of Options
outstanding on the date hereof in accordance with the terms of the Company Stock
Option Plan as in effect on the date of this Agreement and (ii) the issuance of
Company Common Stock pursuant to the ESPP.
(d) Organizational Documents. Except to the extent required to comply with
their respective obligations hereunder, required by law or required by the rules
and regulations of Nasdaq, the Company and the Company Subsidiaries shall not
amend or propose to amend their respective Organizational Documents.
21
(e) Indebtedness; Payment of Creditors. The Company shall not, and shall
not permit the Company Subsidiaries to, (i) incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any Company
Subsidiary or guarantee any debt securities of other Persons other than
indebtedness of the Company or any Company Subsidiary to the Company or any
Company Subsidiary and other than in the ordinary course of business, (ii) fail
to pay any creditor any material amount owed to such creditor when due unless
disputed in good faith by appropriate proceedings consistent with past practice,
(iii) make any loans, advances or capital contributions to, or investments in,
any other Person, other than by the Company or any Company Subsidiary to or in
the Company or any Company Subsidiary or (iv) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the case of clauses (iii) and (iv),
loans, advances, capital contributions, investments, payments, discharges or
satisfactions incurred or committed to in the ordinary course of business
consistent with past practice.
(f) Benefit Plans. The Company shall not, and shall not permit the Company
Subsidiaries to (i) increase the compensation payable or to become payable to
any of its executive officers or employees, (ii) take any action with respect to
the grant of any severance or termination pay or bonus or other incentive
arrangement (other than pursuant to benefit plans, agreements and policies in
effect on the date of this Agreement), other than, with respect to (i) and (ii)
above, any such increases or grants made to persons other than executive
officers in the ordinary course of business and in accordance with past
practice, or (iii) except as required by law, modify or amend any Company
Benefit Plan.
(g) Fundamental Transactions. Except as otherwise permitted by this
Agreement, the Company shall not, and shall not permit the Company Subsidiaries
to, merge or consolidate with any other Person or acquire a material amount of
stock or assets of any other Person or sell, lease, license or otherwise dispose
of any material Subsidiary or any material amount of assets, securities or
property except (i) pursuant to existing contracts or commitments or (ii) in the
ordinary course of business consistent with past practice.
(h) Agreements and Commitments; Related Party Transactions. The Company
shall not, and shall not permit the Company Subsidiaries to (i) amend or modify
in any material respect or consent to the termination of any material contract
or the Company's or the Company Subsidiaries' rights thereunder; (ii) enter into
any material lease, contract or agreement with regard to real property; (iii)
enter into any non-compete agreement or other material restriction on any of its
businesses following the Closing Date; (iv) hire, employ, contract or enter into
any agreement with new employees or independent contractors, which employees or
independent contractors have an aggregate annual salary of more than $125,000;
(v) cancel, terminate, or willfully take any action causing the cancellation or
termination of, any insurance policy naming it as a beneficiary or a loss payee,
including by the non-payment of premiums which are due and payable; or (vi)
enter into any agreement, commitment, arrangement or plan with any Related
Party; or (vii) make any material payment, reimbursement, refund or other fund
transfer to any Related Party, other than the payment of salaries to officers or
employees made in the ordinary course of business consistent with past practice,
pursuant to agreements in place on the date hereof, or to directors for service
on the Special Committee.
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(i) Tax Matters. The Company shall not, and shall not permit the Company
Subsidiaries to, (i) unless required by law, to the extent it may affect or
relate to the Company or any Company Subsidiary, make or change any Tax
election, change any annual Tax accounting period, adopt or change any method of
Tax accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
offset or other reduction in Tax liability, consent to any extension or waiver
of the limitations period applicable to any Tax claim or assessment; or (ii)
without the consent of Parent, which consent will not be unreasonably withheld,
make any material payment of, or in respect of, any Tax to any person or any
Taxing Authority, except to the extent such payment is in respect of a Tax that
is due or payable or has been properly estimated in accordance with applicable
law as applied in a manner consistent with past practice of the Company.
(j) Other Actions. The Company shall not, and shall not permit the Company
Subsidiaries to, enter into any agreement or otherwise commit to do any of the
foregoing.
3.2 Advice of Changes; Government Filings. Each party shall (a) confer on a
regular and frequent basis with the other and upon the reasonable request of the
other shall promptly meet in Northern California, (b) report (to the extent
permitted by law, regulation and any applicable confidentiality agreement) to
the other on operational matters and (c) promptly advise the other orally and in
writing of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it
(A) to comply with or satisfy in any respect any covenant, condition or
agreement required to be complied with or satisfied by it under this Agreement
that is qualified as to materiality or (B) to comply with or satisfy in any
material respect any covenant, condition or agreement required to be complied
with or satisfied by it under this Agreement that is not so qualified as to
materiality or (iii) any change, event or circumstance that has had or could
reasonably be expected to have a Material Adverse Effect on such party or
materially adversely affect its ability to consummate the Merger in a timely
manner; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. The Company
and Parent shall file all reports required to be filed by each of them with the
SEC (and all other Governmental Entities) between the date of this Agreement and
the Effective Time and shall (to the extent permitted by law or regulation or
any applicable confidentiality agreement) deliver to the other party copies of
all such reports promptly after the same are filed. Subject to applicable laws
relating to the exchange of information, each of the Company and Parent shall
have the right to review in advance, and to the extent practicable each will
consult with the other, with respect to all the information relating to the
other party and each of their respective Subsidiaries, which appears in any
filings, announcements or publications made with, or written materials submitted
to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party agrees that, to the extent practicable, it will consult
with the other party with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party apprised of the status of
matters relating to completion of the transactions contemplated hereby.
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ARTICLE IV.
ADDITIONAL AGREEMENTS
4.1 Preparation of Proxy Statement and Schedule 13E-3; the Company
Shareholders Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy Statement and
the Schedule 13E-3. Each of the Company and Parent shall use commercially
reasonable efforts to cause the Proxy Statement to be mailed to the Company's
shareholders as promptly as practicable.
(b) Subject to Section 4.4, the Company shall, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of its shareholders (the "Company Shareholders Meeting") for the
purpose of obtaining shareholder approval. In connection with such meeting, the
Company shall (i) promptly prepare and file with the SEC, use its commercially
reasonable efforts to have cleared by the SEC and thereafter mail to its
shareholders as promptly as practicable the Proxy Statement and all other proxy
materials for such meeting, which Proxy Statement shall include the opinion of
Xxxxxx Xxxxxx Partners LLC, as to the fairness of the Merger Consideration to
the shareholders of the Company (other than Parent and its Affiliates), as
required by Section 1203 of the CGCL, (ii) use its commercially reasonable
efforts to obtain the necessary approvals by its shareholders of this Agreement
and the transactions contemplated hereby and (iii) otherwise comply with all
legal requirements applicable to such meeting. Subject to Section 4.4(b), the
Company shall, through its Board of Directors, recommend to its shareholders
that they approve the transactions contemplated by this Agreement; provided,
however, that except in connection with an Acquisition Proposal, in which case
the provisions of Section 4.4(b) shall apply, the Board of Directors of the
Company may withdraw, modify or change such recommendation and shall be released
of its obligations set forth above in Section 4.1(b)(ii) if it (A) determines in
good faith, based upon the advice of outside counsel, that making such
recommendation, or the failure to so withdraw, modify or change its
recommendation, could reasonably be deemed to cause the members of the Board of
Directors to breach their fiduciary duties under applicable law, (B) otherwise
complies with this Agreement and (C) subject to compliance with applicable
securities laws, gives Parent (x) notice of its decision to invoke this Section
4.1(b), including the reasons for its decision, and (y) a reasonable opportunity
to discuss this decision with the Board of Directors.
(c) Except as required by Section 6.2(c), Parent shall vote or cause to be
voted all the shares of Company Common Stock owned of record by Parent or any of
its Subsidiaries in favor of the transactions contemplated by this Agreement.
4.2 Access to Information. Upon reasonable notice, the Company shall (and
shall cause its Subsidiaries, to the extent permitted by the Organizational
Documents or other pertinent agreements of such entity, to) afford to the
officers, employees, accountants, counsel, financial advisors and other
representatives of Parent, Constellation Brands, Inc. ("Constellation") and
Huneeus Vintners LLC ("Huneeus") reasonable access during normal business hours,
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and its officers, employees and
representatives, and, during such period, the Company shall (and shall cause its
Subsidiaries, to the extent permitted by the Organizational Documents
24
or other pertinent agreements of such entity, to) furnish promptly to Parent,
Constellation and Huneeus (a) a copy of each report, schedule, registration
statement and other document filed, published, announced or received by it
during such period pursuant to the requirements of Federal or state securities
laws, as applicable (other than reports or documents which such party is not
permitted to disclose under applicable law) and (b) consistent with its legal
obligations, all other information concerning its business, properties and
personnel as the other party may reasonably request; provided, however, the
Company may restrict the foregoing access to the extent that (i) a Governmental
Entity requires such party or any of its Subsidiaries to restrict access to any
properties or information reasonably related to any such contract on the basis
of applicable laws and regulations or (ii) any law, treaty, rule or regulation
of any Governmental Entity applicable to such party or any of its Subsidiaries
requires such party or any of its Subsidiaries to restrict access to any
properties or information. Such information shall be held in confidence to the
extent required by, and in accordance with, the provisions of the letter (the
"Confidentiality Agreements") dated July 8, 2004, between the Company and each
of Parent, Constellation and Huneeus, which Confidentiality Agreements shall
remain in full force and effect.
4.3 Approvals and Consents; Cooperation. Each of the Company and Parent
shall cooperate with each other and use (and shall cause their respective
Subsidiaries to use) its commercially reasonable efforts to take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable on their part under this Agreement and applicable laws to consummate
and make effective the Merger and the other transactions contemplated by this
Agreement as soon as practicable, including (i) preparing and filing as promptly
as practicable all documentation to effect all necessary applications, notices,
petitions, filings, tax ruling requests and other documents and to obtain as
promptly as practicable all consents, waivers, licenses, orders, registrations,
approvals, permits, tax rulings and authorizations necessary or advisable to be
obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement and (ii) taking reasonable steps as may be necessary to obtain all
such consents, waivers, licenses, registrations, permits, authorizations, tax
rulings, orders and approvals. Without limiting the generality of the foregoing,
each of the Company and Parent agrees to make all necessary filings in
connection with the Required Regulatory Approvals as promptly as practicable
after the date of this Agreement, and to use its reasonable efforts to furnish
or cause to be furnished, as promptly as practicable, all information and
documents requested with respect to such Required Regulatory Approvals and shall
otherwise cooperate with the applicable Governmental Entity in order to obtain
any Required Regulatory Approvals in as expeditious a manner as possible. Each
of the Company and Parent shall use its reasonable efforts to resolve such
objections, if any, as any Governmental Entity may assert with respect to this
Agreement and the transactions contemplated hereby in connection with the
Required Regulatory Approvals. In the event that a suit is instituted by a
Person or Governmental Entity challenging this Agreement and the transactions
contemplated hereby as violative of applicable antitrust or competition laws,
each of the Company and Parent shall use its reasonable efforts to resist or
resolve such suit. The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and shareholders and such other matters as may reasonably be
necessary or advisable in connection with the Proxy Statement, the Schedule
13E-3 and any other statement, filing, tax ruling request, notice or application
made by or on behalf of the Company, Parent or any of their respective
Subsidiaries
25
to any third party and/or any Governmental Entity in connection with the Merger
or the other transactions contemplated by this Agreement.
4.4 Acquisition Proposals. At any time prior to obtaining the approval of
Company shareholders as provided in Section 4.1 ("Shareholder Approval"), either
the Company's Board of Directors or a special committee thereof may, to the
extent necessary to inform itself with respect to a potential Acquisition
Proposal that such Board of Directors or special committee determines in good
faith may lead to a Superior Proposal, directly or indirectly through advisors,
agents or other intermediaries, (i) engage in negotiations or discussions with
any Third Party that has made an Acquisition Proposal and (ii) furnish to any
Third Party in connection with a potential Acquisition Proposal nonpublic
information relating to the Company or any of its Subsidiaries pursuant to a
confidentiality agreement with terms no less favorable to the Company than those
contained in the Confidentiality Agreements, except that such confidentiality
agreement need not have standstill provisions comparable to the Confidentiality
Agreements. The Company shall be entitled to disclose the substance of its
rights under this Section 4.4 and to solicit and encourage Acquisition
Proposals.
(b) Except as expressly permitted by Section 4.4(b), neither the Company's
Board of Directors nor a special committee thereof shall (i) approve or cause or
permit the Company or any Subsidiary to enter into any letter of intent,
agreement in principle, definitive agreement or similar agreement (other than a
confidentiality agreement) constituting or relating to, or which is intended to
or is reasonably likely to lead to, an Acquisition Proposal (an "Acquisition
Agreement"), (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Agreement or Acquisition Proposal or (iii) agree or resolve to take
actions set forth in clauses (i) or (ii) of this sentence. Notwithstanding the
foregoing, if, at any time prior to obtaining Shareholder Approval, the Company
receives a written Superior Proposal, the Board of Directors or a special
committee thereof (or the Company at the direction of the Board of Directors or
a special committee thereof) may, during such period, in response to such
Superior Proposal, (i) approve or cause the Company to enter into an Acquisition
Agreement with respect to such Superior Proposal, (ii) recommend such Superior
Proposal to the Company's shareholders, (iii) withdraw, modify or refrain from
making its recommendation of the transactions contemplated by this Agreement,
and, to the extent it does so, refrain from calling, providing notice of and
holding the Company Shareholders Meeting and from soliciting proxies or consents
or taking any other action to secure the vote or written consent of its
shareholders to approve the transactions contemplated by this Agreement, and
(iv) terminate this Agreement in accordance with Section 6.1(d); provided that
the Company shall (x) provide Parent written notice of the Company's receipt of
a Superior Proposal (specifying the financial and other material terms and
conditions of such Superior Proposal) together with the Company's intention to
execute or enter into an Acquisition Agreement with respect to such Superior
Proposal (a "Notice of Superior Proposal") at least five (5) Business Days prior
to the taking of any such actions in subsections (i) through (iv) above (it
being understood that any amendment to the price or material terms of a Superior
Proposal shall require an additional Notice of Superior Proposal and an
additional three (3) Business Day period thereafter to the extent permitted
under applicable law) and Parent has not proposed adjustments in the terms and
conditions of this Agreement which would cause the relevant Acquisition Proposal
to no longer be a Superior Proposal, and (y) pay to Parent prior to, or within
two (2) Business Days following, any such termination of this Agreement, the
Termination Fee.
26
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.4, the Company promptly, and in any event within
twenty-four (24) hours, shall (i) advise Parent in writing of receipt by it (or
any Company Representatives) of any Acquisition Proposal and (ii) notify Parent
after receipt of any request for nonpublic information relating to the Company
or any of the Subsidiaries or for access to the Company's or any of the
Subsidiaries' properties, books or records by any Person that may be considering
making, or has made, an Acquisition Proposal, identifying such Person and the
information requested by such Person, and provide Parent access to any nonpublic
information that is given to such Person pursuant to Section 4.4(a). The Company
shall provide to Parent as promptly as practicable any applicable written
agreement that describes any of the terms or conditions of any Acquisition
Proposal.
(d) Nothing contained within this Section 4.4 shall prevent the Board of
Directors or the Special Committee from complying with Rule 14e-2(a) under the
Exchange Act with regard to any Acquisition Proposal; provided, however, that in
complying with such rule, the Company shall honor the provisions of Section
4.4(b).
4.5 Employee Benefits.
(a) Subject to subparagraph 4.5(c) below, for a period of two years
immediately following the Closing Date, Parent shall or shall cause the
Surviving Corporation to maintain in effect employee benefit plans and
arrangements which provide substantially equivalent employee benefits, in the
aggregate, as provided by the Company Benefit Plans (not taking into account any
such plans which are equity based), and the employees of the Company who remain
employees of the Surviving Corporation shall receive such benefits.
Notwithstanding the foregoing, Parent may or may cause the Surviving Corporation
to increase the required percentage of any employee contribution to payment for
such Company Benefit Plans to percentages that are standard in the industry.
(b) For purposes of determining eligibility to participate, vesting and
accrual or entitlement to benefits (but not for benefit accrual) where length of
service is relevant under any employee benefit plan or arrangement of Parent,
the Surviving Corporation or any of their respective affiliates, employees of
the Company and the Company Subsidiaries as of the Effective Time shall receive
service credit for service with the Company and the Company Subsidiaries to the
same extent such service credit was granted under the Company Benefit Plans,
subject to offsets for previously accrued benefits and no duplication of
benefits.
(c) Parent shall cause the Surviving Corporation to assume and honor in
accordance with their terms all written employment, severance and termination
plans and agreements (including change in control provisions and retention bonus
agreements) of employees of the Company and the Company Subsidiaries provided to
Parent on or prior to the date of this Agreement, and to pay the employee
bonuses granted by the Compensation Committee of the Board of Directors in
accordance with Section 3.1 of the Company Disclosure Schedule.
4.6 Fees and Expenses. Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
(a) if the Merger is consummated, the
27
Surviving Corporation shall pay, or cause to be paid, any and all property or
transfer taxes imposed on the Company or the Company Subsidiaries and any real
property transfer tax imposed on any holder of shares of capital stock of the
Company resulting from the Merger, (b) the Expenses incurred in connection with
the printing, filing and mailing to shareholders of the Proxy Statement and the
Schedule 13E-3 shall be shared equally by the Company and Parent unless the
Agreement is terminated pursuant to Section 6.1(d), (e) or (g) in which case the
Company shall pay all such fees or unless this Agreement is terminated pursuant
to Section 6.1(h) in which case Parent shall pay all such fees and (c) as
provided in Section 6.2. As used in this Agreement, "Expenses" includes all
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Proxy Statement
and the Schedule 13E-3 and the solicitation of shareholder approvals and all
other matters related to the transaction contemplated hereby.
4.7 Indemnification; Directors' and Officers' Insurance. Parent and the
Surviving Corporation shall cause to be maintained in effect (i) for a period of
six years after the Effective Time, the current provisions regarding
indemnification of current or former officers and directors (each an
"Indemnified Party") contained in the Organizational Documents of the Company or
the Company Subsidiaries and in any agreements between an Indemnified Party and
the Company or the Company Subsidiaries and (ii) for a period of six years, the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by the Company (provided that Parent or the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from facts or events that occurred on or before the Effective Time. This
covenant is intended to be for the benefit of, and shall be enforceable by, each
of the Indemnified Parties and their respective heirs and legal representatives.
For a period of six years after the Effective Time, Parent and the Surviving
Corporation shall indemnify the Indemnified Parties to the same extent as such
Indemnified Parties are entitled to indemnification pursuant to clause (i) of
the first sentence of this Section 4.7.
4.8 Wine Club. Following the Effective Time, Parent shall cause the Company
to provide a one-time wine dividend as well as wine club benefits, to the
beneficial owners of the shares of Company Common Stock immediately prior to the
Effective Time as described on Schedule 4.8 hereto.
4.9 Public Announcements. The Company and Parent shall use reasonable
efforts to develop a joint communications plan and each party shall use
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
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4.10 Distributor Notice. Prior to the Effective Time, the Company will give
notice to its distributors with respect to the distribution of its products.
Such notice shall be in a form mutually and reasonably acceptable to the Company
and Parent.
4.11 Further Assurances. In case at any time after the Effective Time any
further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Parent and Merger Sub shall take
any such reasonably necessary action.
ARTICLE V.
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approval. The Company shall have received the approval of
this Agreement and all the transactions contemplated hereby (including the
Merger) by the affirmative vote of a majority of the outstanding shares of
Company Common Stock, which shall include the affirmative vote of a majority of
the votes cast with respect to the approval of this Agreement and all the
transactions contemplated hereby (including the Merger) by Company shareholders
other than Parent and its affiliates.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints, Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
other Governmental Entity of competent jurisdiction shall be in effect and have
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger; provided, however, that the provisions of this Section 5.1(c) shall
not be available to any party whose failure to fulfill its obligations pursuant
to Section 4.3 shall have been the cause of, or shall have resulted in, such
order or injunction.
(d) Required Regulatory Approvals. All authorizations, consents, orders and
approvals of, and declarations and filings with, and all expirations of waiting
periods imposed by, any Governmental Entity which, if not obtained in connection
with the consummation of the transactions contemplated hereby, could reasonably
be expected to have a Material Adverse Effect on the Company (collectively,
"Required Regulatory Approvals") shall have been obtained, have been declared or
filed or have occurred, as the case may be, and all such Required Regulatory
Approvals shall be in full force and effect.
5.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent on or prior to the Closing Date of, the
following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement shall have been true and
correct when made and shall be true and correct on and as of the Closing Date as
if made on and as of such
29
date (other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date), except
where the failures of such representations and warranties to be so true and
correct could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(b) Performance of Obligations of the Company. The Company shall have
performed or complied with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date that are qualified as
to materiality and shall have performed or complied in all material respects
with all other agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are not so qualified as to
materiality.
5.3 Additional Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger are subject to the satisfaction of, or waiver
by the Company on or prior to the Closing Date of, the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement shall have been
true and correct when made and shall be true and correct on and as of the
Closing Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct as of such certain date), except in each case where the failures of
such representations and warranties to be so true and correct could not
reasonably be expected to have a Material Adverse Effect on the Company.
(b) Performance of Obligations of Parent. Parent shall have performed or
complied with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are qualified as to
materiality and shall have performed or complied in all material respects with
all other agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified as to
materiality.
ARTICLE VI.
TERMINATION AND AMENDMENT
6.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval of the matters
presented in connection with the Merger by the shareholders of the Company or
the Parent, as the case may be:
(a) By mutual written consent of Parent and the Company, by action of their
respective Boards of Directors;
(b) By either the Company or Parent if the Merger shall not have been
consummated by March 31, 2005 (the "Outside Date"); provided that the right to
terminate this Agreement under this Section 6.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or before such
date;
30
(c) By either the Company or Parent if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall have used their reasonable
efforts to resist, resolve or lift, as applicable, subject to the provisions of
Section 4.3) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable;
(d) By the Company, if permitted by, and in compliance with, Section
4.4(b);
(e) By Parent if (i) the Board of Directors of the Company shall have
withdrawn or materially and adversely modified its recommendation of the Merger
or this Agreement or fails to re-confirm such recommendation if requested by
Parent within the ten (10) Business Days following such request or if the Board
of Directors resolves to take any of the foregoing actions; (ii) the Board of
Directors of the Company shall have recommended to the shareholders of the
Company that they approve an Acquisition Proposal other than contemplated by
this Agreement; or (iii) a tender offer or exchange offer that, if successful,
would result in any Person or "group" becoming a "beneficial owner" (such terms
having the meaning in this Agreement as is ascribed under Regulation 13D under
the Exchange Act) of 50% or more of the outstanding shares of Company Common
Stock is commenced (other than by Parent or an affiliate of Parent) and the
Board of Directors of the Company recommends that the shareholders of the
Company tender their shares in such tender or exchange offer or fails to
recommend against or takes a neutral position with respect to a tender or
exchange offer related to an Acquisition Proposal, or resolves to take any such
actions;
(f) By either Parent or the Company if the approval by the shareholders of
the Company required by the Company's Organizational Documents, law or this
Agreement for the consummation of the Merger or the other transactions
contemplated hereby shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of shareholders or at any
adjournment thereof, provided that Parent shall not be entitled to terminate
this Agreement pursuant to this Section 6.1(f) if Parent has failed to vote in
favor of the Merger or has revoked or withdrawn in any respect its vote;
(g) By Parent, upon a material breach of any covenant or agreement on the
part of the Company set forth in this Agreement or if (i) any representation or
warranty of the Company that is qualified as to materiality shall have become
untrue or (ii) any representation or warranty of the Company that is not so
qualified shall have become untrue in any material respect, in each case such
that the conditions set forth in Section 5.2(a) or Section 5.2(b) would not be
satisfied (a "Terminating Company Breach"); provided, however, that, if such
Terminating Company Breach is capable of being cured by the Company prior to the
Outside Date through the exercise of its best efforts and for so long as the
Company continues to exercise such best efforts, Parent may not terminate this
Agreement under this Section 6.1(g); or
(h) By the Company, upon a material breach of any covenant or agreement on
the part of Parent or Merger Sub set forth in this Agreement, or if (i) any
representation or warranty of Parent or Merger Sub that is qualified as to
materiality shall have become untrue or (ii) any representation or warranty of
Parent or Merger Sub that is not so qualified shall have become untrue in any
material respect, in each case such that the conditions set forth in Section
5.3(a) or Section 5.3(b) would not be satisfied ("Terminating Parent Breach");
provided,
31
however, that, if such Terminating Parent Breach is capable of being cured by
Parent prior to the Outside Date through the exercise of best efforts, and so
long as Parent continues to exercise such best efforts, the Company may not
terminate this Agreement under this Section 6.1(h).
6.2 Effect of Termination.
(a) In the event of termination of this Agreement by either the Company or
Parent as provided in Section 6.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company or their respective officers or directors except (i) with respect to
Section 4.6, this Section 6.2 and Article VII and (ii) with respect to any
liabilities or damages incurred or suffered by a party as a result of the
willful breach by the other party of any of its covenants, representations and
warranties, or other agreements set forth in this Agreement.
(b) In the event that this Agreement is terminated pursuant to Section
6.1(d) or Section 6.1(e) the Company shall pay the Parent a cash fee of
$2,475,000 (the "Termination Fee"), which amount shall be payable by wire
transfer of immediately available funds no later than two Business Days after
such termination. The Company acknowledges that the agreements contained in this
Section 6.2(b) are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, the Parent and Merger Sub would
not enter into this Agreement.
(c) If the Board of Directors approves a sale of all of the outstanding
shares of Company Common Stock pursuant to a Superior Proposal, and this
Agreement is terminated by the Company pursuant to Section 6.1(d) and subject to
compliance by the Company with Section 6.2(b), Parent will vote or cause to be
voted all of its shares of Company Common Stock (i) in favor of the approval and
adoption of such Superior Proposal and the terms thereof and (ii) against (A)
any merger agreement or merger (other than the merger agreement and the merger
contemplated by the Superior Proposal), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company, (B) any Acquisition Proposal (other than the
Superior Proposal), or (C) any amendment of the Company's articles of
incorporation or by-laws or other proposal, action or transaction involving the
Company or any of the Company Subsidiaries or any of its shareholders, which
amendment or other proposal, action or transaction would in any manner impede,
frustrate, prevent or delay the consummation of the transaction contemplated by
the Superior Proposal or change in any manner the voting rights of the holders
of Company Common Stock (collectively "Frustrating Transactions"), at any
meeting of the shareholders of the Company called to vote upon such Superior
Proposal, or at any adjournment thereof or in any other circumstances upon which
a vote or other approval is sought, unless the Board of Directors has prior to
such vote withdrawn its approval of, or withdrawn or materially and adversely
modified its recommendation of, such transaction or until the merger agreement
contemplating such Superior Proposal has been terminated. Parent will not commit
to or agree to take any action inconsistent with the foregoing or that would
otherwise facilitate a Frustrating Transaction. If the Superior Proposal is in
the form of a tender offer, Parent will tender all of its shares of Company
Common Stock into such tender offer so long as Parent is able to sell all of its
shares of Company Common Stock pursuant to such tender offer.
32
Parent represents and warrants that, as of the date hereof, it beneficially owns
6,589,466 shares of Company Common Stock. From the date hereof until the earlier
of the Effective Time or the date upon which the Company has terminated the
merger agreement contemplated by such Superior Proposal or such tender offer
shall have expired, Parent shall not (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively "Transfer"), or consent
to or permit any Transfer of, any of its shares of Company Common Stock or any
interest therein, or enter into any loan or credit agreement, bond, debenture,
note, mortgage, indenture, lease or other contract, commitment, agreement,
option, instrument, arrangement, understanding, obligation or undertaking with
respect to the Transfer (including any profit sharing or other derivative
arrangement) of any of its shares of Company Common Stock or any interest
therein, to any Person other than pursuant to such merger agreement or tender
offer, (ii) enter into any voting arrangement, whether by proxy, voting
agreement or otherwise, with respect to any of its shares of Company Common
Stock and shall not commit or agree to take any of the foregoing actions, other
than pursuant to this Agreement, (iii) take any other action that would in any
way restrict, limit or interfere with the performance of Parent's obligations
under this Section 6.2(c) or (iv) deposit any of its shares of Company Common
Stock into a voting trust.
6.3 Amendment. Notwithstanding Section 7.5(b), any provisions of this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of the
Company, but, after any such approval, no amendment shall be made which by law
or in accordance with the rules of Nasdaq requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
6.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. No delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. Unless
otherwise provided, the rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies which the parties hereto may
otherwise have at law or in equity. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
ARTICLE VII.
GENERAL PROVISIONS
7.1 Non-Survival of Representations, Warranties and Agreements; No Other
Representations and Warranties. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement,
33
including any rights arising out of any breach of such representations,
warranties, covenants and other agreements, shall survive the Effective Time,
except for those covenants and agreements contained herein and therein that by
their terms apply or are to be performed in whole or in part after the Effective
Time and this Article VII. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, none of the Company,
Parent or Merger Sub makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or any
of its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this
Agreement, the documents and the instruments referred to herein, or the
transactions contemplated hereby or thereby, notwithstanding the delivery or
disclosure to the other party or the other party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
7.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the date of dispatch if
delivered by a nationally recognized next-day courier service or (c) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Parent or Merger Sub, to Domaines Barons xx Xxxxxxxxxx (Lafite),
00, xxx xx xx Xxxxx, 00000 Xxxxx, Xxxxxx, Attention: M. Xxxxxxxx Xxxx, Facsimile
No.: x00-0-00-00-00-00, E-mail: xxxxx@xxxxxx.xxx with a copy to Xxxxx Xxxx &
Xxxxxxxx, 0000 Xx Xxxxxx Xxxx, Xxxxx Xxxx, XX 00000, Attention: Xxxxxxx X.
Xxxxxx, Facsimile No.: (000) 000-0000, E-mail: xxxxxxx@xxx.xxx; and
(b) if to the Company, The Chalone Wine Group Ltd., Attention: Xx. Xxxxxx
Xxxxxxxxx, President and Chief Executive Officer, Facsimile No.: (000) 000-0000,
with a copy to Xxxxxx & Xxxxxxx, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, XX 00000,
Attention: Xxxxxxxxxxx X. Xxxxxxx, Facsimile No.: (000) 000-0000, E-mail:
xxxxxxxxxxx.xxxxxxx@xx.xxx, and a copy to Xxxxxxxx & Xxxxxxxx, 000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxxxx, Facsimile No.: (415)
268-7522, E-mail: xxxxxxxxx@xxxx.xxx.
7.3 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the content requires otherwise. It is
understood and agreed that neither the specifications of any dollar amount in
this Agreement nor the inclusion of any specific item in the Schedules or
34
Exhibits is intended to imply that such amounts or higher or lower amounts, or
the items so included or other items, are or are not material, and neither party
shall use the fact of setting of such amounts or the fact of the inclusion of
such item in the Schedules or Exhibits in any dispute or controversy between the
parties as to whether any obligation, item or matter is or is not material for
purposes hereof.
7.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
7.5 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement (including the Schedules and Exhibits) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
other than the Confidentiality Agreements, which shall survive the execution and
delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Sections 4.7 and 4.8 (which are intended to be for the benefit of the Persons
covered thereby and may be enforced by such Persons).
7.6 Governing Law; Jurisdiction. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without regard
to the laws that might be applicable under conflicts of laws principles. The
parties hereto agree that any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought in any
federal court located in the Northern District of the State of California or any
California state court located in San Francisco, California, and each of the
parties hereby irrevocably consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section 7.2 shall be deemed effective service of
process on such party.
7.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally
35
contemplated to the greatest extent possible. Any provision of this Agreement
held invalid or unenforceable only in part, degree or certain jurisdictions will
remain in full force and effect to the extent not held invalid or unenforceable.
To the extent permitted by applicable law, each party waives any provision of
law which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.
7.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
7.9 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
7.10 Definitions. As used in this Agreement:
(a) "Acquisition Proposal" means, other than the transactions contemplated
by this Agreement, any offer, proposal or inquiry relating to, or any Third
Party indication of interest in, (A) any acquisition or purchase, direct or
indirect, of 20% or more of the consolidated assets of the Company and its
Subsidiaries or over 20% of any class of equity or voting securities of the
Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute more than 20% of the consolidated assets of the Company,
(B) any tender offer (including a self-tender offer) or exchange offer that, if
consummated, would result in such Third Party's beneficially owning 20% or more
of any class of equity or voting securities of the Company or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute more
than 20% of the consolidated assets of the Company or (C) a merger,
consolidation, share exchange, business combination, sale of substantially all
the assets, reorganization, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 20% of the
consolidated assets of the Company.
(b) "Board of Directors" means the Board of Directors of any specified
Person and any properly serving and acting committees thereof.
(c) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York or Paris, France.
(d) "Company Stock Option Plan" means The Chalone Wine Group, Ltd. 1997
Stock Option Plan, The Chalone Wine Group, Ltd. 1988 Non-Discretionary Stock
Option Plan and The Chalone Wine Group, Ltd. 1987 Stock Option Plan.
36
(e) "Company Representatives" any of the Company's or the Company's
Subsidiaries' officers, directors, investment bankers, attorneys, accountants,
consultants or other agents or advisors.
(f) "Environmental Laws" means any federal, state, provincial, local,
municipal or foreign statute, law, rule, regulation, ordinance, code, policy or
rule of common law and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or any chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
(g) "Intellectual Property" means United States and foreign trademarks,
service marks, trade names, trade dress, domain names, logos, business and
product names, and slogans, including registrations and applications to register
or renew the registration of any of the foregoing; copyrights and registrations
or renewals thereof; and United States and foreign letters patent and patent
applications, including all reissues, continuations, divisions,
continuations-in-part or renewals or extensions thereof.
(h) "Knowledge" with respect to a Person means the actual knowledge, after
due inquiry, of the officers of such Person.
(i) "Material Adverse Effect" means, with respect to any entity, any
adverse change, circumstance or effect (an "Effect") that, individually or in
the aggregate with all other Effects, is or is reasonably likely to be
materially adverse to the business, operations, assets, liabilities, financial
condition or results of operations of such entity and its Subsidiaries taken as
a whole; provided, however, that in no event shall any of the following be
deemed to constitute a Material Adverse Effect: (A) any Effect affecting any of
the industries in which such entity operates generally or affecting the economy
generally (to the extent that such Effects do not disproportionately affect such
entity, taken as a whole with its Subsidiaries, as compared to other companies
in such industries); (B) any change in such entity's stock price or trading
volume; provided, however, that clause (B) shall not exclude any underlying
Effect which may have caused such change in stock price or trading volume; or
(C) any Effect resulting from the announcement or pendency of the Merger or the
announcement or pendency of Parent's proposal made in May 2004.
(j) "Organizational Documents" means, with respect to any entity, the
articles of incorporation, bylaws or other governing documents of such entity.
(k) "Permitted Liens" means (a) liens and encumbrances contained in the
Company SEC Reports (including the notes thereto), (b) liens and encumbrances
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto that do not materially detract from the value of, or materially
impair the use of, such property by the Company or any of the Company
Subsidiaries in the operation of their respective business, (c) liens and
encumbrances of carriers, warehousemen, mechanics, suppliers, materialmen or
repairmen arising in the ordinary course of business, (d) interests of the
lessor to any leased property or (e) liens and encumbrances that do not have a
Material Adverse Effect on the Company.
37
(l) "Person" means an individual, corporation, partnership, limited
liability company association, trust, unincorporated organization, entity or
group (as defined in the Exchange Act).
(m) "Schedule 13E-3" means the filing on Schedule 13E-3 under the Exchange
Act.
(n) "Subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting and economic
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries. For purposes of Article II,
Xxxx Valley Vineyards shall be considered as a Subsidiary of the Company.
(o) "Superior Proposal" means any bona fide written Acquisition Proposal
for at least a majority of the outstanding shares of Company Common Stock on
terms that the Board of Directors of the Company or a special committee thereof
determines in good faith, after considering the advice of a financial advisor of
nationally recognized reputation and its legal counsel, and taking into account
all the terms and conditions of the Acquisition Proposal, including any break-up
fees, expense reimbursement provisions and conditions to consummation, are more
favorable and provide greater value to all the Company's shareholders than as
provided hereunder and for which the Board has reasonably determined, based on
either a good faith review of the offeror's balance sheet or a commitment letter
from a reputable bank or other financial institution, that adequate funding is
available.
(p) (i) "Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax,
whether disputed or not, and (ii) "Tax Return" means all returns and reports
(including elections, claims, declarations, disclosures, schedules, estimates,
computations and information returns) required to be supplied to a Tax authority
in any jurisdiction relating to Taxes.
(q) "the other party" means, with respect to the Company, Parent and means,
with respect to Parent, the Company.
(r) "Third Party" means any person other than Parent or any of its
affiliates.
38
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of October 30, 2004.
DOMAINES BARONS DE
ROTHSCHILD (LAFITE), a
societe en commandite par
actions organized under the
laws of France
By: /s/ Xxxx xx Xxxxxxxxxx
---------------------------------
Name: Xxxx xx Xxxxxxxxxx
Title: Managing Director
TRIPLE WINES, INC.
a California corporation
By: /s/ Xxxxxxxx Xxxx
---------------------------------
Name: Xxxxxxxx Xxxx
Title: Secretary and Chief Financial
Officer
THE CHALONE WINE GROUP, LTD.,
a California corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President/CEO
39
Exhibit A To Exhibit 13
Form of Shareholder Letter Agreement
[See Exhibit 14 to Amendment No. 30 to this Schedule 13D]
Schedule 4.8 To Exhibit 13
Wine Club Dividend
Beneficial owners of shares of Company Common Stock immediately prior to
the Effective Date will be entitled for three months following the Closing to
enroll at no additional cost as members of a new Founders Club, and the
shareholders will receive a one-time wine dividend of $1.00 per share. This
Founders Club membership and this one-time wine dividend will not be
transferable, and the wines purchased with this dividend cannot be re-sold.
This wine dividend can be used through the Founders Club to purchase wines
at a 50% discount on all wine purchases up to an amount equal to $1.00 per
share. So if a shareholder had 500 shares on the Closing Date and enrolled in
the Founders Club, the shareholder would receive a $500.00 wine dividend that it
could use to purchase $1,000.00 of wine at a 50% discount. This Founders Club
wine dividend will remain valid for one year from the Closing Date.
In addition to this wine dividend, this Founders Club membership will give
members 15 years access to the following benefits:
1) The Annual Founders Celebration. This will be an annual party where the
Company will invite all Founders Club members to one of the Company's
wineries for a special and exclusive celebration where the Company will
introduce new vintages and new wines to the members. This party will
operate in a similar manner to Chalone's annual shareholders party.
2) VIP Tours. Founders Club members will be able to participate in special
VIP tours and tastings with special access at each of the Company's
wineries. As part of the Founders Club, the Company will have a Concierge
so that members can have one central place to conveniently schedule
appointments at all wineries.
3) Founders Club Discount. As has been the tradition, the Company will give
the Founders Club members special access to selections of its most
exclusive wines and allocated bottlings. This will be done in quarterly
communications the Company will send to all Founders Club members. Founders
Club members will also receive Founders Club discounted pricing on all
these offerings. The special one-time wine dividend can be used in
connection with these discounted prices. For example if the price of the
wine selected by the Founders Club member was $75 after the standard
Founders Club discount, the Founders Club member could use $37.50 of his or
her one-time discount to purchase this wine and have to pay only $37.50 in
cash for the purchase.
4) Special Allocations. In addition, Founders Club members who purchase at
least $500.00 per year (net of the wine dividend) from the Founders Club
selections will qualify for special allocations of the Company's most
limited wines and unique sizes.
The Founders Club will be subject to commercially reasonable rules,
restrictions and modifications adopted by the Company for all Founders Club
members.
