EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LIQUID HOLDINGS INC.,
LIQUID ACQUISITION CORP.,
AND
XXXXXXXXX & XXXX, INC.
DATED SEPTEMBER 27, 1999
TABLE OF CONTENTS
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Page
AGREEMENT AND PLAN OF MERGER..................................... 1
RECITALS......................................................... 1
ARTICLE I........................................................ 1
THE MERGER..................................................... 1
1.1 The Merger............................................. 1
1.2 Effect of the Merger................................... 2
1.3 Consummation of the Merger............................. 2
1.4 Charter; Bylaws; Directors and Officers................ 2
1.5 Conversion of Securities............................... 2
1.6 Company Stock Options and Related Matters.............. 3
1.7 Dissenting Shares...................................... 4
1.8 Exchange of Certificates............................... 4
1.9 Supplementary Action................................... 6
ARTICLE II....................................................... 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 6
2.1 Organization and Qualification......................... 6
2.2 Articles of Organization; Bylaws;
and Stock Transfer Records........................... 7
2.3 Capitalization of the Company.......................... 7
2.4 Corporate Power, Authorization and Enforceability...... 8
2.5 No Conflict; Required Filings and Consents............. 8
2.6 SEC Reports; Financial Statements...................... 9
2.7 No Default............................................. 10
2.8 Compliance with Law.................................... 10
2.9 Permits................................................ 10
2.10 Absence of Certain Changes............................. 11
2.11 No Undisclosed Liabilities............................. 11
2.12 Litigation............................................. 11
2.13 ERISA.................................................. 12
2.14 Tax Returns and Reports................................ 14
2.15 Trademarks, Patents and Copyrights..................... 15
2.16 Proxy Statement........................................ 16
2.17 Material Agreements.................................... 16
2.18 Environmental Matters.................................. 17
2.19 Insurance.............................................. 17
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2.20 Absence of Certain Business Practices.................. 18
2.21 Takeover Laws.......................................... 18
2.22 Vote Required.......................................... 18
2.23 Opinion of Financial Advisor........................... 18
2.24 Board Recommendation................................... 19
2.25 Disclosure............................................. 19
2.26 Brokers and Finders.................................... 19
ARTICLE III...................................................... 19
REPRESENTATIONS AND WARRANTIES OF PARENT
AND PURCHASER................................................. 19
3.1 Organization and Qualification......................... 19
3.2 Corporate Power, Authorization and Enforceability...... 20
3.3 No Conflict; Required Filings and Consents............. 20
3.4 Board Approval......................................... 21
3.5 Brokers and Finders.................................... 21
3.6 Capitalization......................................... 21
3.7 Financing.............................................. 21
3.8 Solvency............................................... 22
3.9 Alcoholic Beverage Licenses............................ 22
ARTICLE IV....................................................... 22
COVENANTS...................................................... 22
4.1 Conduct of Business by the Company..................... 22
4.2 Access to Information; Confidentiality................. 25
4.3 Proxy Statement........................................ 27
4.4 Meeting of Stockholders of the Company................. 27
4.5 No Solicitation by the Company......................... 28
4.6 Public Announcements................................... 30
4.7 Notification of Certain Matters........................ 30
4.8 Officers' and Directors' Indemnification; Insurance.... 31
4.9 Additional Agreements.................................. 32
4.10 Company Indebtedness................................... 32
4.11 Other Actions by the Company........................... 33
4.12 Litigation Cooperation................................. 33
4.13 Future Filings......................................... 33
4.14 Alcoholic Beverage Licenses............................ 33
4.15 Company Actions Relating to Tax Matters................ 34
4.16 Financing.............................................. 34
4.17 Up Front Payment....................................... 34
4.18 Institutional Investor Agreement....................... 35
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ARTICLE V........................................................ 35
CONDITIONS OF MERGER........................................... 35
5.1 Conditions to the Obligations of Each Party to
Effect the Merger.................................... 35
5.2 Conditions Precedent to Parent's and Purchaser's
Obligations.......................................... 35
5.3 Conditions to Obligations of the Company............... 36
ARTICLE VI....................................................... 37
TERMINATION, AMENDMENT AND WAIVER.............................. 37
6.1 Termination............................................ 37
6.2 Procedure and Effect of Termination.................... 38
6.3 Fees and Expenses...................................... 39
6.4 Initial Equity Proceeds................................ 39
6.5 Amendment.............................................. 39
6.6 Waiver................................................. 40
ARTICLE VII...................................................... 40
DEFINITIONS.................................................... 40
ARTICLE VIII..................................................... 42
MISCELLANEOUS.................................................. 42
8.1 Severability........................................... 42
8.2 Notices................................................ 42
8.3 Headings............................................... 43
8.4 Representations and Warranties, etc.................... 43
8.5 Miscellaneous.......................................... 43
8.6 Nature of Obligation................................... 43
EXHIBITS:
Exhibit A Form of Stockholder Agreement
Exhibit B Form of Company Option Agreement
Exhibit C Form of Articles of Merger
Exhibit D Alcoholic Beverage License Approvals
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
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into as of this 27th day of September, 1999, by and among LIQUID HOLDINGS INC.,
a Delaware corporation ("Parent"), LIQUID ACQUISITION CORP., a Massachusetts
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corporation and a direct or indirect wholly-owned subsidiary of Parent
("Purchaser"), and XXXXXXXXX & XXXX, INC., a Massachusetts corporation (the
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"Company").
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RECITALS
The Boards of Directors of Parent, Purchaser and the Company each deem it
advisable and in the best interests of Parent, Purchaser and the Company and
their respective stockholders that Purchaser be merged with and into the Company
(the "Merger") upon the terms and subject to the conditions set forth herein and
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in accordance with the Massachusetts Business Corporation Law (the "MBCL"). The
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Boards of Directors of Parent and Purchaser and the Parent as the sole
stockholder of Purchaser have adopted this Agreement. The Board of Directors of
the Company has approved this Agreement and has resolved to recommend to the
stockholders of the Company to vote in favor of this Agreement.
Substantially concurrently herewith and as a condition and inducement to
Parent's willingness to enter into this Agreement, certain stockholders of the
Company, who include certain of the directors of the Company and its
Subsidiaries (as defined below) and who hold, in the aggregate, more than 33% of
the outstanding shares of Common Stock, par value $.01, of the Company, are
entering into a Stockholder Agreement in the form of Exhibit A hereto (the
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"Stockholder Agreement").
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Substantially concurrent herewith and as a condition and inducement to
Parent's and Purchaser's willingness to enter into this Agreement, the Company
has entered into an Option Agreement in the form of Exhibit B hereto (the
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"Company Option Agreement").
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Certain defined terms used in this Agreement are defined in Article VII
hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Parent, Purchaser and Company
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.3 hereof),
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in accordance with this Agreement and the MBCL, Purchaser shall be merged with
and into
the Company, the separate existence of the Purchaser (except as may be continued
by operation of law) shall cease, and the Company shall continue as the
surviving corporation under the corporate name it possesses immediately prior to
the Effective Time. The Company after the Merger sometimes is referred to
hereinafter as the "Surviving Corporation."
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1.2 Effect of the Merger. At the Effective Time, the effect of the Merger
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shall be as provided in the applicable provisions of this Agreement and the
MBCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the rights and property of the Company and the Purchaser
(the "Constituent Corporations") shall vest in the Surviving Corporation, and
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all debts and liabilities of the Company and the Purchaser shall become the
debts and liabilities of the Surviving Corporation.
1.3 Consummation of the Merger. In the event of, and as soon as is
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practicable after, the satisfaction or waiver of the conditions set forth in
Article V hereof, but in no event prior to December 6, 1999, the parties hereto
will cause the Merger to be consummated by filing with the Secretary of the
Commonwealth of Massachusetts Articles of Merger in the form of Exhibit C (the
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time of confirmation of such filing or such later time as is specified in such
Articles of Merger being the "Effective Time"). Contemporaneous with the filing
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referred to in this Section 1.3, a closing (the "Closing") will be held at the
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offices of Xxxxxxx Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 or
at such other location as the parties may establish for the purpose of
confirming all the foregoing. The date and the time of such Closing are
referred to as the "Closing Date."
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1.4 Charter; Bylaws; Directors and Officers. Unless otherwise determined
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by Purchaser prior to the Effective Time, the Articles of Organization and
Bylaws of the Surviving Corporation shall be the Articles of Organization and
Bylaws of Company, as in effect immediately prior to the Effective Time, until
thereafter amended as provided therein and under the MBCL. The directors of
Purchaser immediately prior to the Effective Time will be the initial directors
of the Surviving Corporation, and the officers of the Company immediately prior
to the Effective Time will be the initial officers of the Surviving Corporation,
in each case until their successors are elected and qualified.
1.5 Conversion of Securities. At the Effective Time, by virtue of the
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Merger and without any action on the part of the Purchaser, the Company, the
Surviving Corporation or the holder of any of the following securities:
(a) Each share of Common Stock, $.01 par value per share, of the
Company (the "Shares"), issued and outstanding immediately prior to the
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Effective Time (other than Shares to be cancelled pursuant to Section 1.5(b)
hereof and any Dissenting Shares (as hereinafter defined)), shall be cancelled
and extinguished and be automatically converted into and become a right to
receive $10.00 per share in cash (the "Per Share Merger Consideration") upon
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surrender in the manner provided in Section 1.8 of the certificate that
evidenced the Shares (the "Certificate").
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(b) Each Share which is issued and held in the treasury of the
Company immediately prior to the Effective Time or issued and outstanding and
owned by the Parent or any direct or indirect Subsidiary (as defined in Article
VII) of the Parent or the Company, shall be cancelled and retired, and no
payment shall be made with respect thereto.
(c) Each share of Common Stock, par value $.01 per share, of the
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and become one validly issued, fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving Corporation.
(d) The holders of Dissenting Shares, if any, shall be entitled to
payment for such Shares only to the extent permitted by and in accordance with
the provisions of the MBCL; provided, however, that if, in accordance with the
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applicable provisions of the MBCL, any holder of Dissenting Shares shall forfeit
such right to payment of the fair cash value of such Shares, such Shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Per Share Merger
Consideration provided in Section 1.5(a).
1.6 Company Stock Options and Related Matters.
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(a) Immediately prior to the Effective Time, each outstanding option
(an "Option") to purchase Shares heretofore granted under the Company's Stock
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Option Plan, Non-Employee Director Stock Option Plan or any other employee or
director stock option or compensation plan or arrangement of the Company,
excluding the Company's Employee Stock Purchase Plan (the "ESPP") (collectively,
----
the "Plans"), whether or not exercisable, shall be cancelled by the Company and
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each holder of a cancelled Option shall receive from the Surviving Corporation
promptly after the Effective Time, in cancellation and settlement of such
Option, a cash payment in an amount equal to the excess of the Per Share Merger
Consideration over the per Share exercise price of such Option, if any,
multiplied by the number of Shares covered by such Option (the "Option
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Settlement Amount"), subject to income tax withholding as required by applicable
-----------------
law. Prior to the Closing, Company will provide Parent with a listing of
Options held by each optionee (including the date of grant, the number of shares
issuable upon exercise of the Option, and the Option Settlement Amount to which
the Optionee is entitled) certified by an executive officer of Company. The
Board of Directors of the Company or an appropriate committee thereof will
provide for the full and immediate vesting of any and all options as of the
Effective Time. Except as provided in the immediately preceding sentence, the
Company shall not grant or amend any Option after the date hereof.
(b) In the event the Closing occurs on or before December 31, 1999,
the Board of Directors of Company (the "Board") shall take all actions necessary
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pursuant to the terms of the ESPP in order to shorten the Purchase Periods (as
defined in the ESPP) then in progress such that the Purchase Date (as defined in
the ESPP) shall occur immediately prior to the Effective Time. The Board will
not permit any Purchase Period to commence after December 31, 1999 and will not
permit any individuals not
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listed in Section 2.3 of the Company Disclosure Letter to participate in the
current Purchase Period and will not permit any of the participating individuals
listed in Section 2.3 of the Company Disclosure Letter to increase their level
of participation for the Current Purchase Period.
1.7 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary,
holders of Shares which are entitled to dissenter's rights in connection with
the Merger under the MBCL (collectively, the "Dissenting Shares") shall not be
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converted into or represent the right to receive the Per Share Merger
Consideration. Such stockholders shall be entitled to receive payment of the
fair market value of such Shares held by them in accordance with the provisions
of the MBCL, except that all Dissenting Shares held by stockholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to the payment of fair market value for such shares under the MBCL shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Per Share Merger
Consideration, without any interest thereon, upon surrender, in the manner
provided in Section 1.8, of the certificate or certificates that formerly
evidenced such Shares.
(b) The Company shall give the Purchaser (i) prompt notice of any
demand for payment of fair market value received by the Company, the withdrawals
of any such demand, and any other instrument served pursuant to the MBCL and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for payment of fair market value under the
MBCL. The Company shall not, except with the prior written consent of the
Purchaser, make any payment with respect to any demands for payment of fair
market value or offer to settle or settle any such demands.
1.8 Exchange of Certificates.
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(a) From and after the Effective Time, a bank or trust company to be
designated by the Purchaser (the "Exchange Agent") shall act as exchange agent
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in effecting the exchange of the Per Share Merger Consideration for Certificates
which, prior to the Effective Time, represented Shares entitled to payment
pursuant to Section 1.5 hereof. At or immediately prior to the Effective Time,
the Parent or the Purchaser shall deposit with the Exchange Agent the aggregate
Per Share Merger Consideration necessary to make the payments contemplated
hereby on a timely basis (the "Deposit Amount") in trust for the benefit of the
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holders of Certificates. Pending distribution pursuant to this Section 1.8(a)
of the Deposit Amount deposited with the Exchange Agent, the Surviving
Corporation may direct the Exchange Agent to invest such Deposit Amount,
provided that such investments (i) shall be obligations of or guaranteed by the
United States of America, in commercial paper obligations receiving the highest
rating from either Xxxxx'x Investors Services, Inc. or Standard & Poor's Ratings
Services, a division of The McGraw Hill Companies, Inc., or in certificates of
deposit, bank repurchase agreements or bankers acceptances of commercial banks
with capital
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exceeding $500,000,000 (collectively "Permitted Investments") or in money market
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funds which are invested solely in Permitted Investments and (ii) shall have
maturities that will not prevent or delay payments to be made pursuant to this
Section 1.8(a). Upon the surrender of each such Certificate and the issuance and
delivery by the Exchange Agent of the Per Share Merger Consideration in exchange
therefor, such Certificate shall forthwith be cancelled. Until so surrendered
and exchanged, each such Certificate (other than Certificates representing
Shares held by the Parent or the Company or any direct or indirect Subsidiary of
the Parent or the Company and Dissenting Shares) shall represent solely the
right to receive the Per Share Merger Consideration, without interest,
multiplied by the number of Shares represented by such Certificate. Promptly
after the Effective Time, the Exchange Agent shall mail to each record holder of
Certificates which immediately prior to the Effective Time represented Shares a
form of letter of transmittal and instructions for use in surrendering such
Certificates and receiving the Per Share Merger Consideration therefor. Upon the
surrender to the Exchange Agent of such an outstanding Certificate together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder shall receive the Per Share Merger
Consideration, without any interest thereon and such Certificate shall be
cancelled. If any Per Share Merger Consideration is to be paid to a name other
than the name in which the Certificate representing Shares surrendered in
exchange therefor is registered, it shall be a condition to such payment or
exchange that the Person requesting such payment or exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the payment of
such Per Share Merger Consideration to a name other than that of the registered
holder of the Certificate surrendered, or such Person shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any Per Share Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(b) The Surviving Corporation shall not be entitled to the return of
any of the Deposit Amount in the possession of the Exchange Agent relating to
the transactions described in this Agreement until the date which is 180 days
after the Effective Time. Thereafter, each holder of a Certificate representing
a Share may surrender such Certificate to the Surviving Corporation and (subject
to applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Per Share Merger Consideration, without any interest thereon, but
shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation.
(c) At and after the Effective Time, the holders of Certificates to
be exchanged for the Per Share Merger Consideration pursuant to this Agreement
shall cease to have any rights as stockholders of the Company except for the
right to surrender such holder's Certificates in exchange for payment of the Per
Share Merger Consideration, and after the Effective Time there shall be no
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the
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Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent, they shall be cancelled and
exchanged for the Per Share Merger Consideration, as provided in this Article I,
subject to applicable law in the case of Dissenting Shares.
(d) The provisions of this Section 1.8 shall also apply to Dissenting
Shares that lose their status as such, except that the obligations of the
Exchange Agent under this Section 1.8 shall commence on the date of loss of such
status.
1.9 Supplementary Action. If at any time after the Effective Time, any
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further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either the Company or
Purchaser, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of the Company and Purchaser, to execute
and deliver any and all things necessary or proper to vest or to perfect or
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the Purchaser that,
except as described in the applicable section of the Company Disclosure Letter
furnished by the Company to the Parent prior to the execution of this Agreement
(the "Company Disclosure Letter") corresponding to the Sections set forth below:
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2.1 Organization and Qualification. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. Each Subsidiary of the Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, except where failure to be in good standing
individually and in the aggregate would not be reasonably expected to have a
Material Adverse Effect (as defined in Article VII). The Company and its
Subsidiaries have all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as it is now being
conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, other than in jurisdictions where
the failure to be so qualified, individually and in the aggregate, has not had
and would not reasonably be expected to have a Material Adverse Effect. Other
than the Company's ownership interest in its Subsidiaries, the Company has no
direct or indirect equity interest in any partnership, corporation, limited
liability company, joint venture, business association or other entity, except
for any such equity interests that individually and in the aggregate are not
material
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to the Company and its Subsidiaries taken as a whole and would not reasonably be
expected to have a Material Adverse Effect.
2.2 Articles of Organization; Bylaws; and Stock Transfer Records. The
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Company has made available to the Parent prior to the date of this Agreement
complete and correct copies of (i) the Articles of Organization (or other
charter document) and By-laws of the Company and each of its Subsidiaries, (ii)
shareholder list of each of the Company's Subsidiaries and (iii) all stock
certificates representing any of the issued and outstanding capital stock of
each of the Company's Subsidiaries, and in each case such copies are accurate
and complete as of the date of this Agreement.
2.3 Capitalization of the Company.
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(a) On the date of this Agreement, the authorized capital stock of
the Company consists of (i) 1,000,000 shares of Preferred Stock, par value $.01
per share, of which none are issued and outstanding, and (ii) 10,000,000 shares
of Common Stock, par value $.01 per share, of which 3,848,405 Shares are issued
and outstanding. Except for (i) rights created pursuant to the Company's Stock
Option Plan, Non-Employee Director Stock Option Plan and ESPP (the "Identified
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Equity Plans"), (ii) the rights created pursuant to this Agreement and the
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Company Option Agreement, (iii) the Company's right to repurchase any unvested
shares under the Identified Equity Plans, and (iv) as set forth in Section 2.3
of the Company Disclosure Letter, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which the Company is a
party or by which it is bound obligating the Company to issue, sell, deliver,
repurchase or redeem or cause to be issued, sold, delivered, repurchased or
redeemed any shares of capital stock of, or equity interests in, the Company.
Section 2.3 of the Company Disclosure Letter identifies the participants in the
ESPP for the current Purchase Period and their level of participation. All
outstanding Shares are, and all Shares subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights or rights of first refusal. None
of the Company or any of its Subsidiaries is required to redeem, repurchase or
otherwise acquire shares of capital stock of the Company or any of its
Subsidiaries, respectively, as a result of the transactions contemplated by this
Agreement. The Company has no stockholder rights plan or agreement in force
providing for the issuance to holders of Shares of rights to purchase or receive
stock, cash or other assets upon the acquisition or proposed acquisition of
Shares by a Person (a "Rights Plan"), nor has the Company's Board of Directors
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or stockholders ever adopted a Rights Plan.
(b) All of the Company's Subsidiaries are listed in Exhibit 21 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(the "1998 10-K"). Except as set forth in the 1998 10-K, the Company owns all
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of the outstanding capital stock of its Subsidiaries free and clear of any
liens, security interests, pledges, agreements, claims, charges or encumbrances
of any nature whatsoever ("Encumbrances"), except for any Encumbrances securing
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the Company's obligations to BankBoston, N.A. under its line of credit (or any
successor line of credit) and any other
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Encumbrances that are not material to the Company and the Subsidiaries taken as
a whole. Except as set forth in Section 2.3 of the Company Disclosure Letter
there are no voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries may be bound with respect to the voting of the capital stock of
the Company or any of the Company's Subsidiaries. Except as set forth in Section
2.3 of the Company Disclosure Letter, there are no options, warrants, calls,
rights, commitments, or agreements of any character to which any of the
Company's Subsidiaries is a party or by which any of the Company's Subsidiaries
is bound obligating such Subsidiary to issue, sell, deliver, repurchase or
redeem, or caused to be issued, sold, delivered, repurchased or redeemed, any
shares of capital stock of, or equity interests in, such Subsidiary. All of the
outstanding capital stock of each of the Company's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and issued free of
preemptive rights or rights of first refusal.
2.4 Corporate Power, Authorization and Enforceability. The Company has
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all requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder and to consummate all the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations hereunder and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Company's Board of Directors and no other
corporate action on the part of the Company is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by
stockholders holding two-thirds of the outstanding Shares entitled to vote
thereon). This Agreement has been duly executed and delivered by the Company
and is a legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
2.5 No Conflict; Required Filings and Consents.
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(a) Assuming satisfaction of any applicable requirements referred to
in Section 2.5(b) below, the execution and delivery by the Company of this
Agreement, the compliance by the Company with the provisions hereof and the
consummation by the Company of the transactions contemplated hereby:
(A) will not conflict with or violate any statute, law,
ordinance, rule, regulation, order, writ, judgment, award, injunction,
decree or ruling applicable to the Company or any of its Subsidiaries or
any of their properties, or conflict with, violate or result in any breach
of or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, cancellation or acceleration of, or the loss of a
benefit under, or result in the creation of a lien, security interest,
charge or encumbrance on any of the properties or assets of the Company or
any of its Subsidiaries pursuant to (i) the Articles of Organization (or
other charter document) or Bylaws of the Company or any of its
Subsidiaries, or (ii) any contract, lease, agreement, note, bond, mortgage,
indenture, deed of trust, or other
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instrument or obligation, or any license, authorization, permit,
certificate or other franchise, other than such conflicts, violations,
breaches, defaults, losses, rights of termination, amendment, cancellation
or acceleration, liens, security interests, charges or encumbrances as to
which requisite waivers have been obtained or which individually and in the
aggregate have not had and would not reasonably be expected to have a
Material Adverse Effect; and
(B) do not and will not result in any grant of rights to any
other party under the Articles of Organization (or other charter document)
or Bylaws of the Company or any of its Subsidiaries or restrict or impair
the ability of the Parent or any of its Subsidiaries to vote, or otherwise
exercise the rights of a stockholder with respect to shares of the Company
or any of its Subsidiaries that may be directly or indirectly acquired or
controlled by them.
(b) Other than in connection with or in compliance with the
provisions of the MBCL, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the "blue sky" laws of various states, approvals,
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registrations, permits, licenses, authorizations, waivers or consents required
to be obtained under applicable state or local alcoholic beverage control laws
("Regulatory Consents") and the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
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1976, as amended (the "HSR Act"), (i) the Company is not required to submit any
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notice, report, registration, declaration or other filing with any federal,
state or local government, court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (collectively,
"Governmental Entities"), in connection with the execution or delivery of this
---------------------
Agreement by the Company or the performance by the Company of its obligations
hereunder or the consummation by the Company of the transactions contemplated by
this Agreement and (ii) no waiver, consent, approval, order or authorization of
any Governmental Entity is required to be obtained in connection with the
execution or delivery of this Agreement by the Company or the performance by the
Company of its obligations hereunder or the consummation by the Company of the
transactions contemplated by this Agreement, other than such notices, reports,
registrations, declarations, filings, waivers, consents, approvals, orders, or
authorizations, the absence of which would not, individually and in the
aggregate, subject the Company or its Subsidiaries to any criminal penalties or
otherwise reasonably be expected to have a Material Adverse Effect.
2.6 SEC Reports; Financial Statements. The Company has filed all required
---------------------------------
reports, schedules, forms, statements and other documents with the Securities
and Exchange Commission (the "SEC") from June 24, 1994 through the date hereof
---
(collectively, the "SEC Reports"). The financial statements contained in the
-----------
SEC Reports (or incorporated therein by reference) and the consolidated
financial statements of the Company and its Subsidiaries for the fiscal year
ended December 31, 1998 included in the 1998 10-K and for the quarter ended
March 31, 1999 included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 ("March 1999 10-Q") and for the quarter ended June
---------------
30, 1999 included in the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 (the "June 1999 10-Q") (collectively, the "Financial
-------------- ---------
Statements"), were prepared in
----------
9
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved ("GAAP") (except as may be indicated in
----
the notes or schedules thereto and except, in the case of the unaudited interim
statements, as may be permitted under Form 10-Q of the Exchange Act) and present
fairly in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows as of the dates and for
the fiscal periods indicated therein (subject, in the case of unaudited interim
financial statements, to normal year-end adjustments). On the date of filing
thereof each SEC Report filed with the SEC complied in all material respects
with the then applicable requirements of the Exchange Act and the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations of the
--------------
SEC promulgated thereunder and did not contain any untrue statement of a
material fact or omit 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. None of the Company's Subsidiaries is
required to file any statements or reports with the SEC.
2.7 No Default. Neither the Company nor any of its Subsidiaries is in
----------
default or violation (and no event has occurred which with or without notice,
the lapse of time or the happening or occurrence of any other event would
constitute a default or violation) of any term, condition or provision of (i)
its Articles of Organization (or other charter document) or Bylaws, or (ii) any
contract, lease, agreement, license, note, bond, mortgage, indenture, deed of
trust or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or its Subsidiaries or any of
their properties or assets may be bound (nor to the knowledge of the Company is
any other party thereto in breach thereof or default thereunder), except in the
case of this clause (ii) for any defaults or violations that individually and in
the aggregate would not have a Material Adverse Effect.
2.8 Compliance with Law. Except as set forth in Section 2.8 of the
-------------------
Company Disclosure Letter, each of the Company and its Subsidiaries is in
compliance, and has conducted its respective businesses so as to comply with,
all statutes, laws, ordinances, rules, regulations, permits and approvals
applicable to its operations, except for violations which, individually and in
the aggregate, do not and insofar as reasonably can be foreseen in the future
would not have a Material Adverse Effect. Except as disclosed in the SEC
Reports, as of the date hereof no investigation or review by any Governmental
Entity with respect to the Company, any of its Subsidiaries or any property
owned or leased by the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, except for any investigation or review
that would not individually and in the aggregate have a Material Adverse Effect.
2.9 Permits. The Company and its Subsidiaries have all permits,
-------
authorizations, licenses and franchises from Governmental Entities required to
conduct their business as now being conducted, and all such authorizations,
licenses and franchises are valid and in effect, except for such permits,
authorizations, licenses and franchises the absence of which would not,
individually and in the aggregate, have a
10
Material Adverse Effect. Section 2.9 of the Company Disclosure Letter lists as
of the date of this Agreement all of the Company's licenses and permits relating
to the purchase, transportation, storage or sale of alcoholic beverages (the
"Alcoholic Beverage Licenses"). To the knowledge of the Company the Alcoholic
---------------------------
Beverage Licenses are the only permits and licenses relating to the purchase,
transportation, storage, or sale of alcoholic beverages required by the Company
to operate such business as currently conducted, except for such permits and
licenses the absence of which would not, individually and in the aggregate, have
a Material Adverse Effect. The Company is not in default with respect to any of
the Alcoholic Beverage Licenses, except for any defaults that individually and
in the aggregate have not had and would not reasonably be expected to have a
Material Adverse Effect and would not reasonably be expected to prevent or delay
in any material respect obtaining the Regulatory Consents referred to in Section
4.14.
2.10 Absence of Certain Changes. As of the date of this Agreement, except
--------------------------
as disclosed in the 1998 10-K, March 1999 10-Q or June 1999 10-Q, since December
31, 1998, the Company and its Subsidiaries have conducted their business in the
ordinary course consistent with past practice and have not taken any of the
actions set forth in paragraphs (a)(i) through (iv) or (vi) through (ix) of
Section 4.1, and there has not been any occurrence, including the commencement
or threat of any action, suit, investigation or proceeding against the Company
or its Subsidiaries, that has had or would reasonably be expected to have a
Material Adverse Effect, other than changes relating to or arising out of the
economy in general or the industries of the Company and its Subsidiaries in
general and not specifically relating to the Company or any of its Subsidiaries.
2.11 No Undisclosed Liabilities. Except for liabilities and obligations
--------------------------
incurred since December 31, 1998 in the ordinary course of business, liabilities
and obligations incurred under this Agreement or any of the agreements to be
entered into pursuant to this Agreement and liabilities and obligations
identified in Section 2.11 of the Company Disclosure Letter, neither the Company
nor any of its Subsidiaries has any liabilities or obligations of any nature
whatsoever (whether absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise), required by generally accepted accounting principles
to be recognized or disclosed on a consolidated balance sheet of the Company and
its Subsidiaries or in the notes thereto, other than (i) recognized or disclosed
in the Financial Statements or disclosed in the 1998 10-K or March 1999 10-Q or
June 1999 10-Q, and (ii) liabilities which would not individually and in the
aggregate have a Material Adverse Effect.
2.12 Litigation. Section 2.12 of the Company Disclosure Letter includes a
----------
list of all litigation pending against the Company as of September 23, 1999 and
to the knowledge of the Company all material threatened litigation as of
September 23, 1999. The Company has made available to Parent correct and
complete copies of all audit inquiry response letters prepared by its counsel
for the Company's auditors in connection with the last completed audit of the
Company's financial statements and any such correspondence since the date of the
last such audit. As of the date of this Agreement,
11
there are no actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against the Company arising out of or in any way related to
this Agreement, the Merger or any of the transactions contemplated hereby or
thereby.
2.13 ERISA.
-----
(a) Section 2.13 of the Company Disclosure Letter lists each
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other written or oral
-----
plans or agreements involving direct or indirect compensation (including any
employment agreements entered into between the Company or any of its
Subsidiaries and any employee or former employee of the Company or any of its
Subsidiaries, but excluding worker's compensation, unemployment compensation and
other government-mandated programs) currently or previously maintained,
contributed to or entered into by the Company or any of its Subsidiaries or any
ERISA Affiliate thereof for the benefit of any employee or former employee of or
current or former service provider to the Company or any of its Subsidiaries
under which the Company or any of its Subsidiaries or any ERISA Affiliate
thereof has or may have any present or future obligation or liability
(collectively, the "Company Employee Plans"). For purposes of this Section 2.13,
----------------------
"ERISA Affiliate" shall mean any entity which is a member of (i) a "controlled
---------------
group of corporations," as defined in Section 414(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), (ii) a group of entities under "common
----
control," as defined in Section 414(c) of the Code or (iii) an "affiliated
service group," as defined in Section 414(m) of the Code or treasury regulations
promulgated under Section 414(o) of the Code, any of which includes the Company
or any of its Subsidiaries. Section 2.13 of the Company Disclosure Letter
identifies the only Company Employee Plans which individually or collectively
would constitute an "employee pension benefit plan," as defined in Section 3(2)
of ERISA (collectively, the "Company Pension Plans").
---------------------
(b) No Company Pension Plan is subject to Title IV of ERISA, Part 3
of Title I of ERISA or Section 412 of the Code. No Company Pension Plan
constitutes or has since the enactment of ERISA constituted a "multiemployer
plan," as defined in Section 3(37) of ERISA. Nothing done or omitted to be done
and no transaction or holding of any asset under or in connection with any
Company Employee Plan has or is likely to make the Company or any of its
Subsidiaries or any officer or director thereof subject to any material
liability as a result of a violation of Title I of ERISA or liable for any
material tax pursuant to Section 4975 of the Code.
(c) Each Company Pension Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, except to the extent that the requirements for
qualification may be satisfied by adopting retroactive amendments under Section
401(b) of the Code and the regulations thereunder or under Section 1140 of the
Tax Reform Act of 1986. Each trust forming a part of a Company Pension Plan is
exempt from tax pursuant to Section 501(a) of the Code. Each Company Employee
Plan has been maintained in compliance with its terms and with the applicable
requirements of ERISA
12
and the Code except where failure to be in compliance individually and in the
aggregate has not had and would not reasonably be expected to have a Material
Adverse Effect.
(d) Each employment, severance or other similar contract, arrangement
or policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), vacation benefits, severance
or severance-type benefits, disability benefits, death benefits, hospitalization
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or benefits
which (i) is not a Company Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by the Company or any of its Subsidiaries,
and (iii) covers any employee or former employee of or other current or former
service provider to the Company or any of its Subsidiaries, is herein referred
to as a "Company Benefit Arrangement" and collectively as the "Company Benefit
--------------------------- ---------------
Arrangements." All material Company Benefit Arrangements are listed in Section
------------
2.13 of the Company Disclosure Letter. Each Company Benefit Arrangement has
been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes (including but not limited to the Code),
orders, rules and regulations which are applicable to such Company Benefit
Arrangements except where failure to be in compliance individually and in the
aggregate has not had and would not reasonably be expected to have a Material
Adverse Effect.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Subsidiaries
relating to, or change in employee participation or coverage under, any Company
Employee Plan or Company Benefit Arrangement which would increase materially the
expense of maintaining such Company Employee Plan or Company Benefit Arrangement
above the level of the expense incurred in respect thereof for the fiscal year
ended December 31, 1998.
(f) The Company has complied with the requirements of Section 4980B
of the Code with respect to any "qualifying event" (as defined in Section
4980B(f)(3) of the Code) occurring prior to and including the Closing Date,
except where failure to be in compliance individually and in the aggregate has
not had and would not reasonably be expected to have a Material Adverse Effect
and, to the Company's knowledge, no tax payable on account of Section 4980B of
the Code has been incurred with respect to any current or former employees of
the Company or any of its Subsidiaries.
(g) Except as may be contained in any of the agreements listed as
exhibits to the 1998 10-K, there is no term of any Company Employee Plan or
Company Benefit Arrangement covering a "disqualified individual" (as defined in
Section 280G(c) of the Code), or of any contract, instrument, agreement or
arrangement with any such disqualified individual, that individually or
collectively could result in a disallowance of the deduction for any "excess
parachute payment" (as defined in Section 280G(b)(i) of the Code) or the
imposition of the excise tax provided in Section 4999 of the Code. The
13
consummation of the transactions contemplated by this Agreement will not result
in any "excess parachute payment" or the imposition of any such excise tax.
(h) The Company has heretofore delivered or made available to Parent
copies of all of the Company Employee Plans, Company Pension Plans and Company
Benefit Arrangements listed in Section 2.13 of the Company Disclosure Letter.
(i) There is no pending or, to the Company's knowledge, threatened
legal action, proceeding or investigation, other than routine claims for
benefits, concerning any Company Employee Plan, Company Pension Plan or Company
Benefit Arrangement or, to the knowledge of the Company, any fiduciary or
service provider thereof and, to the knowledge of the Company, there is no basis
for any such legal action or proceeding.
(j) No Company Employee Plan or Company Benefit Arrangement provides
health, life or other similar welfare coverages after termination of employment
except to the extent required by applicable state insurance laws and Title I,
Part 6 of ERISA.
(k) With respect to each Company Employee Plan, Company Pension Plan
or Company Benefit Arrangement for which a separate fund of assets is or is
required to be maintained, full payment has been made of all amounts required of
the Company and its Subsidiaries and ERISA Affiliates under the terms of each
such Company Employee Plan, Company Pension Plan or Company Benefit Arrangement
or applicable law, through the Closing Date.
(l) Except as described in the 1998 10-K or the Company's Proxy
Statement for its 1999 Annual Meeting of Stockholders, neither the Company nor
any of its Subsidiaries has any plan or policy obligating the Company or any
Subsidiary to pay severance to any employee.
2.14 Tax Returns and Reports.
-----------------------
(a) The Company and its Subsidiaries have timely filed with the
appropriate taxing authorities all federal, state, county, local and foreign
returns, estimates, information statements, reports and other documents in
respect of Taxes (as defined in Article VII) required to be filed by the Company
and its Subsidiaries, except where the failure to file such Tax return would not
individually and in the aggregate have a Material Adverse Effect. All amounts
shown due on such returns have been timely paid as required by law, except where
the failure to timely pay individually and in the aggregate has not had and
would not reasonably be expected to have a Material Adverse Effect.
(b) To the Company's knowledge, as of the date of this Agreement,
none of the federal, state, local or foreign Tax returns of the Company or its
Subsidiaries is presently being examined, audited or contested by the relevant
taxing authorities. The
14
Company has not received any notice at any time prior to the date of this
Agreement from any taxing authority indicating that any of the federal, state,
local or foreign Tax returns of the Company or its Subsidiaries will be audited,
except for any audits that have been completed and for which the Company has
paid any outstanding Taxes. Neither the Company nor any of its Subsidiaries has
executed, or been asked in writing to execute, an agreement or waiver extending
the statutory period of limitation applicable to any Tax return for any period
with respect to which the applicable statute of limitations has not expired,
except for any of the foregoing that individually or in the aggregate has not
had and would not reasonably be expected to have a Material Adverse Effect.
(c) As of the date of this Agreement, the Company has no ruling
requests currently pending with the Internal Revenue Service.
(d) Neither the Company nor any of its past or present Subsidiaries
has ever been a member of an "affiliated group", as defined in Section 1504 of
the Code (or any analogous combined, consolidated or unitary group defined under
state, foreign or local Tax law), other than any affiliated group of which the
Company is the parent corporation.
(e) The Company and its Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, consultant, independent contractor, creditor, stockholder or
other party, except where the failure to so withhold and pay individually and in
the aggregate has not had and would not reasonably be expected to have a
Material Adverse Effect.
2.15 Trademarks, Patents and Copyrights.
----------------------------------
(a) The Company or its Subsidiaries own or possess adequate licenses
or other valid rights to use all patents, patent rights, trademarks, trademark
rights, service marks, trade names, trade name rights, copyrights, know-how and
other proprietary information used or held for use in connection with the
business of the Company or any of its Subsidiaries as currently being, or
proposed to be, conducted (except where the failure to own or possess such
licenses or rights would not individually and in the aggregate have a Material
Adverse Effect) and is unaware of any material assertions or claims challenging
the validity of any of the foregoing; and to the knowledge of the Company, the
conduct of the business of the Company and its Subsidiaries as now conducted or
proposed to be conducted does not and will not conflict with any patents, patent
rights, licenses, service marks, trademarks, trademark rights, trade names,
trade name rights or copyrights of others in any material way. No material
infringement of any proprietary right owned by or licensed by or to the Company
or any of its Subsidiaries is known to the Company.
(b) The Company owns or has the right to use pursuant to valid
license agreements and software maintenance agreements all computer software
used in its business as presently conducted (the "Software Licenses"), except
-----------------
where the failure to own or have adequate rights to use any such software
individually and in the aggregate
15
has not had and would not reasonably be expected to have a Material Adverse
Effect. The Company is in compliance with all of its Software Licenses, except
for any non-compliance that individually and in the aggregate has not had and
would not reasonably be expected to have a Material Adverse Effect. The
consummation of the transactions contemplated by this Agreement will not cause
any of the Software Licenses to terminate or become cancellable or trigger a
third party consent requirement or fee or penalty, except for any of the
foregoing that individually and in the aggregate has not had and would not
reasonably be expected to have a Material Adverse Effect.
2.16 Proxy Statement. The proxy statement to be sent to the stockholders
---------------
of the Company in connection with the Special Meeting (as defined in Section
4.4) (such proxy statement, as amended or supplemented, being referred to herein
as the "Proxy Statement"), shall not, at the date the Proxy Statement (or any
---------------
amendment or supplement thereto) is first mailed to stockholders of the Company,
at the time of the Special Meeting or at the Effective Time, be false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Special Meeting which shall
have become false or misleading, except that no representation or warranty is
made by the Company with respect to information furnished by the Parent or
Purchaser specifically for inclusion in the Proxy Statement. The Proxy
Statement shall comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
2.17 Material Agreements. Except as set forth in the 1998 10-K, the March
-------------------
1999 10-Q and the June 1999 10-Q and except for this Agreement and the
agreements specifically referred to herein, neither the Company nor any of its
Subsidiaries is a party to or bound by any of the following agreements (with the
following agreements, and the agreements included as exhibits to the SEC
Reports, collectively referred to as the "Material Agreements"):
-------------------
(a) any contract or agreement or amendment thereto that would be
required to be filed as an exhibit to a registration statement on Form S-1 filed
by the Company as of the date hereof;
(b) any confidentiality agreement, non-competition agreement or other
contract or agreement that contains covenants limiting in any material respect
the Company's or any of its Subsidiaries' freedom to compete in any line of
business or in any location or with any Person; and
(c) any loan agreement, indenture, note, bond, debenture or any other
document or agreement evidencing a capitalized lease obligation or other
Indebtedness (as defined in Article VII) to any Person, other than any
Indebtedness in a principal amount less than $25,000 individually or $100,000 in
the aggregate.
16
The Company has made available to the Parent true, correct and complete
copies of all Material Agreements together with all modifications and
supplements thereto.
2.18 Environmental Matters.
---------------------
(a) Neither the Company nor any of its Subsidiaries nor to the
knowledge of the Company as of the date of this Agreement any operator or owner
of their respective past or present properties is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
----
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("XXXX"),
-------- ----
the Federal Water Pollution Control Act, the Solid Waste Disposal Act, as
amended, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act of 1970, as
amended, or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter "Environmental
-------------
Laws"), except where any such violations individually and in the aggregate have
----
not had and would not reasonably be expected to have a Material Adverse Effect.
(b) To the knowledge of the Company or any of its Subsidiaries there
have been no releases (i.e., any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of any hazardous waste as defined
by 42 U.S.C. (S)6903(5), any hazardous substances as defined by 42 U.S.C.
(S)9601(33) or any toxic substance, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
---------
Substances") on, upon, into or from any properties of the Company or its
----------
Subsidiaries, which releases would individually or in the aggregate have a
Material Adverse Effect.
(c) To the Company's knowledge, as of the date of this Agreement, no
Hazardous Substance has been discharged, generated, treated, manufactured,
handled, stored, transported, emitted, released or is present at any property
now or previously owned, leased or operated by the Company except in compliance
with all applicable Environmental Laws, except for any non-compliances that
individually and in the aggregate have not had and would not reasonably be
expected to have a Material Adverse Effect.
2.19 Insurance. (a) The Company has previously provided to the Parent
---------
true and correct copies of all insurance policies, in effect as of the date of
this Agreement, for the Company or any of its Subsidiaries. The Company has
previously furnished or made available to the Parent all material
correspondence, including any notices of cancellation, relating to these
insurance policies which was received by the Company prior to the date of this
Agreement. As of the date of this Agreement, all such insurance is in full
force and effect and no notice of cancellation or termination, or reduction of
coverage or
17
intention to cancel, terminate or reduce coverage, has been received by the
Company with respect to any policy for such insurance.
(b) With respect to the medical and dental insurance provided
pursuant to the Company's Group Health Plan, the Company has previously provided
to the Parent a true and correct summary of incurred and paid claims for the
1998-1999 policy year and for the 1999-2000 policy year through August 25, 1999.
These policies have been in full force and effect at all times since January 1,
1998.
2.20 Absence of Certain Business Practices. No employee, consultant,
-------------------------------------
agent or other representative of the Company or any of its Subsidiaries has
directly or indirectly within the past five years given or agreed to give any
gift or similar benefit to any customer, supplier, governmental employee or
other Person who is or may be in a position to help or hinder the business of
the Company or any of its Subsidiaries in connection with any actual or proposed
transaction which (a) would reasonably be expected to subject the Company or any
of its Subsidiaries to any material damage or penalty in any civil, criminal or
governmental litigation or proceeding, (b) if not given in the past, would
reasonably be expected to have had a Material Adverse Effect, or (c) if not
continued in the future, would reasonably be expected to have a Material Adverse
Effect. Without limiting the generality of the foregoing, the Company has not
committed, been charged with or to the knowledge of the Company been under
investigation with respect to, nor does there exist, any violation by the
Company of the Foreign Corrupt Practices Act, as amended.
2.21 Takeover Laws. The provisions of Chapters 110C-110F of the MBCL
-------------
either do not apply to the execution, delivery and performance of this
Agreement, the Stockholder Agreement or the Company Option Agreement and the
consummation of the Merger or have been rendered inapplicable because of a vote
of the Board of Directors of the Company approving the consummation of the
Merger and the transactions contemplated by this Agreement, the Stockholder
Agreement and the Option Agreement. To the Company's knowledge, no "fair
price," "moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation enacted in any jurisdiction other than Massachusetts is
applicable to the execution, delivery and performance of this Agreement, the
Stockholder Agreement or the Company Option Agreement or the consummation of the
Merger.
2.22 Vote Required. The provisions of Section 6.13 of the Company's
-------------
Restated Articles of Organization have been rendered inapplicable to the
consummation of the Merger and the transactions contemplated by this Agreement,
the Stockholder Agreement and the Company Option Agreement as a result of a vote
of the Board of Directors of the Company meeting the requirements of Section
6.13(D) of the Company's Restated Articles of Organization.
2.23 Opinion of Financial Advisor. The Board of Directors of the Company
----------------------------
has received the opinion of the Company's Financial Advisor, as of the date of
this
18
Agreement, to the effect that the Per Share Merger Consideration is fair, from a
financial point of view, to the Company and the Company's stockholders.
2.24 Board Recommendation. The Board of Directors of the Company, at a
--------------------
meeting duly called and held, has by a unanimous vote of those directors present
(i) approved the Merger and declared it advisable, (ii) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are in
the best interests of the stockholders of the Company, and (iii) resolved
subject to its fiduciary duties under applicable law to recommend that the
stockholders of the Company adopt this Agreement.
2.25 Disclosure. To the Company's knowledge, as of the date of this
----------
Agreement, no representation or warranty by the Company in this Agreement
contains any untrue statement of a material fact.
2.26 Brokers and Finders. The Company has furnished to Parent or its
-------------------
counsel a true and complete copy of that certain letter agreement (the "Xxxxxx
------
Engagement Letter") between the Company and Xxxxxx Brothers Inc. (the "Company's
----------------- ---------
Financial Advisor"), such letter agreement being the only agreement pursuant to
-----------------
which such firm would be entitled to any payment relating to the transactions
contemplated hereunder. No broker, finder or investment banker other than the
Company's Financial Advisor is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company that:
3.1 Organization and Qualification. Each of Parent and Purchaser is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted. Purchaser and Parent are new
corporations that were formed for the purpose of consummating the transactions
contemplated by this Agreement. As of the date of this Agreement the Purchaser
is a wholly-owned Subsidiary of the Parent and will remain a direct or indirect
wholly-owned Subsidiary of the Parent. Neither the Parent nor the Purchaser has
conducted any business or engaged in any activities unrelated to the
transactions contemplated by this Agreement. Neither the Parent nor the
Purchaser has any material liabilities other than in connection with the
transactions contemplated by this Agreement and the Financing Agreements (as
defined in Section 3.7).
19
3.2 Corporate Power, Authorization and Enforceability. Each of Parent and
-------------------------------------------------
Purchaser has full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder and to consummate all the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Purchaser, the performance by each of Parent and Purchaser of their respective
obligations hereunder and the consummation by Parent and Purchaser of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Purchaser and the Parent, and the Parent as the sole
stockholder of the Purchaser, and no other corporate action on the part of
Parent or Purchaser is necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Purchaser and is a legal, valid and binding
obligation of each of Parent and Purchaser, enforceable against Parent and
Purchaser in accordance with its terms.
3.3 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Assuming satisfaction of all applicable requirements referred to
in Section 3.3(b) below, the execution and delivery of this Agreement by the
Parent and the Purchaser, the compliance by the Parent and the Purchaser with
the provisions hereof and the consummation by the Parent and the Purchaser of
the transactions contemplated hereby will not conflict with or violate any
statute, law, ordinance, rule, regulation, order, writ, judgment, award,
injunction, decree or ruling applicable to the Parent or any of its Subsidiaries
or any of their properties, or conflict with, violate or result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, cancellation or acceleration of, or the loss of a benefit under, or
result in the creation of a lien, security interest, charge or encumbrance on
any of the properties or assets of the Parent or any of its Subsidiaries
pursuant to (i) the organizational documents of the Parent or any of its
Subsidiaries or (ii) any contract, lease, agreement, note, bond, mortgage,
indenture, deed of trust, or other instrument or obligation, or any license,
authorization, permit, certificate or other franchise, other than such
conflicts, violations, breaches, defaults, losses, rights of termination,
amendment, cancellation or acceleration, liens, security interests, charges or
encumbrances as to which requisite waivers have been obtained or which
individually and in the aggregate would not have a material adverse effect on
the ability of the Parent and Purchaser to perform their obligations under this
Agreement.
(b) Other than in connection with or in compliance with the provisions
of the MBCL, the Exchange Act, the "blue sky" laws of various states and the HSR
Act and the approvals and consents contemplated by Section 4.14, (i) neither
Parent nor Purchaser is required to submit any notice, report, registration,
declaration or other filing with any Governmental Entity in connection with the
execution or delivery of this Agreement by Parent and Purchaser or the
performance by Parent and Purchaser of their obligations hereunder or the
consummation by Parent and Purchaser of the transactions contemplated by this
Agreement and (ii) no waiver, consent, approval, order or authorization of any
Governmental Entity is required to be obtained by the Parent or the
20
Purchaser in connection with the execution or delivery of this Agreement by
Parent and Purchaser or the performance by the Parent and the Purchaser of their
obligations hereunder or the consummation by the Parent and the Purchaser of the
transactions contemplated by this Agreement. None of the information supplied by
Parent or Purchaser for inclusion in the Proxy Statement shall, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to stockholders, at the time of the Special Meeting or at the Effective Time,
contain any untrue statement of a material fact required to be stated therein or
necessary in order to make the statements made therein in light of the
circumstances under which they were made, not misleading.
3.4 Board Approval. The Board of Directors of the Parent, at a meeting
--------------
duly called and held, has by at least a majority vote of those directors present
(i) approved the Merger and (ii) authorized the proper officers to execute and
deliver this Agreement.
3.5 Brokers and Finders. No broker, finder or investment banker, other
-------------------
than any whose fees and expenses will be paid by the Parent, is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Parent or any of its Subsidiaries.
3.6 Capitalization. The Parent has received $10,000,000 in cash proceeds
--------------
(the "Initial Equity Proceeds") from the sale of shares of the Parent's capital
-----------------------
stock to Liquid Experience II, LLC, a Delaware limited liability company
("Liquid Experience"). The Purchaser and the Parent have previously provided to
-----------------
the Company true and complete copies of their certificate of incorporation and
by-laws.
3.7 Financing. (a) The Parent and Purchaser have provided to the Company
---------
true and correct copies of: (i) a Subscription Agreement with Liquid Experience
and Xxxxxx X. Xxxx ("RSH") (the "LE Agreement"), pursuant to which Liquid
--- ------------
Experience has provided the Initial Equity Proceeds and has agreed to provide up
to an additional $5,000,000 of financing on the terms and conditions set forth
in the LE Agreement, and RSH has guaranteed Liquid Experience's obligation to
provide this additional $5,000,000; and (ii) a commitment letter (the
"Institutional Investor Agreement") with an institutional investor (the
---------------------------------
"Institutional Investor"), pursuant to which the Institutional Investor has
-----------------------
agreed to provide up to $35,000,000 of financing on the terms and conditions of
the Institutional Investor Agreement. There are no other agreements with Liquid
Experience or the Institutional Investor or any other Persons regarding the
financing contemplated by the LE Agreement and the Institutional Investor
Agreement (the "Financing Agreements").
--------------------
(b) The Initial Equity Proceeds together with the additional amounts to be
provided pursuant to the Financing Agreements constitute all of the financing
that Parent and Purchaser would require to consummate the transactions
contemplated hereby (including payment of amounts payable under Article I and
transaction costs to be borne by the Surviving Corporation hereunder) and to
fund working capital requirements. The commitment fee referred to in the
Institutional Investor Agreement has been paid. As of
21
the date of this Agreement, the Financing Agreements are in full force and
effect and have not been terminated and there are no facts or circumstances
which would permit the termination thereof by Liquid Experience or the
Institutional Investor or otherwise excuse the obligor(s) thereunder from
funding their commitments thereunder other than any fact or circumstance that
would under Article V hereof excuse the Parent and Purchaser from consummating
the Merger.
(c) The Parent has duly and validly authorized, executed and delivered the
Financing Agreements.
3.8 Solvency. Immediately after the Effective Time, and after giving
--------
effect to any change in the Surviving Corporation's assets and liabilities as a
result of the Merger and the financing effected by Purchaser and assuming the
continued accuracy of the Company's representations and warranties in Section
2.11, the Surviving Corporation will not (i) be insolvent (either because its
financial condition is such that the sum of its debts is greater than the fair
value of its assets or because the fair saleable value of its assets is less
than the amount required to pay its probable liability on its existing debts as
they mature), (ii) have unreasonably small capital with which to engage in its
business or (iii) have incurred debts beyond its ability to pay as they become
due.
3.9 Alcoholic Beverage Licenses. As of the date of this Agreement the
---------------------------
Parent and Purchaser have no knowledge of any fact or circumstance relating to
them or the Financing Agreements which would reasonably be expected to prevent
the parties from obtaining any of the Pre-Closing Licensing Approvals referred
to in Section 4.14, except (i) for any facts or circumstances that could lead to
a Special Regulatory Event (as defined in Article VII) and (ii) except for those
matters set forth in Section 2.8 of the Company Disclosure Letter.
ARTICLE IV
COVENANTS
4.1 Conduct of Business by the Company. (a) Except as required or
----------------------------------
permitted by this Agreement or as disclosed in Section 4.1 of the Company
Disclosure Letter, during the period from the date of this Agreement until the
Effective Time, the Company agrees as to itself and its Subsidiaries that
(except to the extent that Purchaser shall otherwise consent in writing) the
Company and its Subsidiaries shall conduct their respective operations in the
ordinary course of business consistent with past practice, and each of the
Company and its Subsidiaries will use its reasonable efforts to preserve intact
its present business organization, to keep available the services of its present
officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relationships with it and to maintain insurance on the same
terms as are in effect on the date of this Agreement. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, neither the Company nor any of its Subsidiaries shall,
without the prior written consent of Purchaser (which consent will be given or
denied
22
within a reasonable time after any request for such consent and will not be
unreasonably withheld with respect to the matters described in paragraph (v),
(vi), (x) or (xii) below):
(i) amend its Articles of Organization or other charter document or
Bylaws;
(ii) authorize for issuance, issue, sell, deliver, pledge or agree or
commit to issue, sell, deliver or pledge (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any capital stock of any class or any debt or other securities
convertible into capital stock or equivalents (including, without limitation,
stock appreciation rights), or amend any of the terms of any of the foregoing,
other than the issuance of shares of capital stock upon the exercise of
outstanding options or rights under the Identified Equity Plans;
(iii) (A) split, combine or reclassify any shares of its capital
stock, or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, adopt or approve any Rights Plan, or repurchase, redeem or
otherwise acquire any of its securities or any securities of its Subsidiaries,
or (B) make any payment of cash or other property to terminate, cancel or
otherwise settle any outstanding Options or any rights under the ESPP, other
than in the case of clauses (A) or (B) above for the issuance of Shares in
connection with the exercise of options or rights under the Identified Equity
Plans or the repurchase of Shares to the extent contractually required pursuant
to the terms of existing employee stock repurchase agreements;
(iv) (A) incur or assume any short-term or long-term Indebtedness,
other than up to $1,000,000 under the Company's existing credit line with
BankBoston, N.A. (or any successor line of credit) or grant, extend or increase
the amount of a mortgage lien on any leasehold or fee simple interest of the
Company or its Subsidiaries; or, except in the ordinary course of business
consistent with past practice in the case of clauses (B) through (E) below, (B)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person,
except for obligations of the Company or any Subsidiary of the Company; (C) make
any loans, advances or capital contributions to, or investments in, any other
Person; (D) pledge or otherwise encumber shares of capital stock of the Company
or any of its Subsidiaries; or (E) mortgage or pledge any of its assets,
tangible or intangible, or create or suffer to exist any lien thereon except as
existing on the date of this Agreement or as may be required under agreements
outstanding on the date of this Agreement to which the Company or any of its
Subsidiaries are parties;
(v) except as expressly provided in this Agreement, enter into, adopt
or amend in any manner or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation,
23
employment, severance, change-in-control or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee, or increase in any manner the compensation
(including bonuses) or fringe benefits of any director, officer or employee or
pay any benefit not required by any plan or arrangement as in effect as of the
date of this Agreement or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(vi) sell, lease, license, pledge or otherwise dispose of or encumber
any material assets except in the ordinary course of business consistent with
past practice (including without limitation any indebtedness owed to it or any
claims held by it);
(vii) except as otherwise permitted pursuant to Section 4.5, acquire
or agree to acquire any business or any corporation, partnership, limited
liability company, association or other business organization or division
thereof, whether by merger or consolidation or by purchasing capital stock or
assets, or by any other manner;
(viii) change any of the accounting principles or practices used by
it affecting its assets, liabilities or business, except for such changes
required by a change in generally accepted accounting principles;
(ix) pay, discharge or satisfy any claims, liabilities or obligations
(whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise), other than the payment, discharge or satisfaction of liabilities (A)
in the ordinary course of business consistent with past practices, (B) with
notice to Purchaser, in an amount which does not exceed $50,000 in the
aggregate, (C) incurred pursuant to the terms of the Xxxxxx Engagement Letter
up to but not exceeding $400,000 (including any payments made prior to the date
of this Agreement) plus reimbursement of out-of-pocket expenses, and (D)
incurred in connection with the transactions contemplated hereby, including any
costs for legal and accounting professionals, but only if they are calculated on
a time and disbursements basis at standard rates and itemized in reasonable
detail;
(x) without prior consultation with the Parent (in addition to the
consent requirement described above) commence any litigation or arbitration
other than in accordance with past practice or settle any litigation or
arbitration for money damages or other relief in excess of $50,000 or if as part
of such settlement the Company or any Subsidiary would agree to any restrictions
on its operations;
(xi) grant any license with respect to or otherwise convey any
intellectual property rights, other than in the ordinary course of business
consistent with past practice;
(xii) elect or appoint any new directors or officers of the Company
or any Subsidiary;
(xiii) waive, release or amend its rights under any confidentiality,
"standstill" or similar agreement that the Company entered into in connection
with its
24
consideration of a potential strategic transaction; provided, however, that the
-----------------
Company may waive, release or amend its rights under any such confidentiality,
"standstill" or similar agreement if the Company's Board determines, based on
the advice of independent legal counsel, that failure to do so would be
reasonably likely to constitute a breach of its fiduciary duties to the
Company's stockholders under applicable law; or
(xiv) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(i) through 4.1(xiii).
(b) In the event that the Company wishes to negotiate potential
strategic alliances or e-commerce partnering arrangements ("Strategic
---------
Relationships"), the Company will notify the Parent prior to furnishing any non-
-------------
public information to any Person in connection with any potential Strategic
Relationship and prior to any negotiations regarding a Strategic Relationship,
and will permit the Parent and its representatives to participate in any such
negotiations. Subject to compliance with the preceding sentence the Company
will be permitted to discuss in these negotiations the possibility of partner(s)
in Strategic Relationships making investments in the Company in an amount not to
exceed $2,000,000. Before the Company enters into, or makes any binding
agreement to enter into, any Strategic Relationship it will obtain the prior
written consent of the Parent if such Strategic Relationship would include the
issuance of shares of capital stock or options, warrants or other rights to
acquire capital stock, would impose any non-competition, exclusive dealing or
other restrictions on the operation of the Company's business or would otherwise
be outside the ordinary course of business consistent with past practice.
4.2 Access to Information; Confidentiality.
--------------------------------------
(a) From the date of this Agreement to the Effective Time, the
Company shall, and shall cause its Subsidiaries, officers, directors, employees
and agents to, afford the officers, employees and agents of Parent, Purchaser
and their Affiliates and the attorneys, accountants, banks, other financial
institutions and investment banks working with Parent or Purchaser, and their
respective officers, employees and agents, reasonable access, at all reasonable
times upon reasonable notice and in such manner as will not unreasonably
interfere with the conduct of the Company's business, to its officers,
employees, agents, properties, books, records and contracts, and shall furnish
Parent, Purchaser and their Affiliates and the attorneys, banks, other financial
institutions and investment banks working with Parent or Purchaser, all
financial, operating and other data and information as they reasonably request.
(b) Any information heretofore or hereafter furnished by the Company
which is non-public, confidential or proprietary in nature is referred to in
this Agreement as "Confidential Information". The Parent and the Purchaser
------------------------
agree that the Confidential Information will be used solely for the purpose of
consummating the transactions contemplated by this Agreement, and until the
Effective Time, such information will be kept confidential by the Parent and the
Purchaser and their Representatives (as defined below), except that the
Confidential Information or portions thereof may be disclosed to
25
those Representatives of the Parent and the Purchaser who need to know such
information solely for the purpose of evaluating the transactions contemplated
by this Agreement. Before disclosing any Confidential Information to any
Representatives, the Parent and the Purchaser will inform them of the
confidential nature of the Confidential Information. As used herein
"Representatives" means directors, officers, employees, advisors and prospective
investors and representatives of such advisors and investors. The Parent and the
Purchaser agree that any disclosure of Confidential Information to prospective
investors shall be subject to the following procedures: (i) if any Confidential
Information is to be included in an offering memorandum to be sent to
prospective investors, the Company must consent to the type and form of
Confidential Information to be included, such consent not to be unreasonably
withheld or delayed, and the Parent must enter into a confidentiality agreement
with such prospective investor, in a form reasonably satisfactory to the
Company, providing that the Company is a third party beneficiary of such
confidentiality agreement and (ii) any other disclosure of Confidential
Information to any prospective investor shall be subject to the prior consent of
the Company, both as to the Confidential Information to be disclosed and the
identity of the intended recipient, such consent not to be unreasonably withheld
or delayed. The Parent and the Purchaser will be responsible for any breach of
this Section 4.2 by their Representatives.
(c) In the event that the Parent or the Purchaser or any of their
Representatives become legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or similar process) to
disclose any of the Confidential Information, the Parent or the Purchaser shall
provide the Company with prompt prior written notice of such requirement so that
the Company may seek a protective order or other appropriate remedy and/or waive
compliance with the terms of this Section 4.2. In the event that such
protective order or other remedy is not obtained, or that the Company waives
compliance with the provisions hereof, the Parent or the Purchaser agree to
furnish only that portion of the Confidential Information which the Parent or
the Purchaser are advised by counsel is legally required and to exercise
commercially reasonable efforts to obtain assurance that confidential treatment
will be accorded such Confidential Information.
(d) The term "Confidential Information" does not include any
information that the Parent or the Purchaser can demonstrate that (i) at the
time of disclosure or thereafter is generally available to the public (other
than as a result of its disclosure directly or indirectly by the Parent or the
Purchaser or their Representatives), or (ii) was available to the Parent or the
Purchaser on a non-confidential basis from a source other than the Company or
its advisors, provided that such source confirms to the Parent or the Purchaser
in writing that such source is not and was not bound by a confidentiality
agreement regarding the Company.
(e) If this Agreement is terminated pursuant to Article VI, the
Parent and the Purchaser will promptly return to the Company any and all copies
of the Confidential Information in their possession or in the possession of
their Representatives, and the Parent or the Purchaser and their Representatives
will promptly destroy all copies
26
of any analyses, compilations, studies or other documents prepared by or for the
Parent or the Purchaser which reflect or contain any Confidential Information,
except for any of the foregoing which Parent or its counsel deems advisable to
retain in connection with pending or future litigation, provided that such
-------------
Confidential Information is retained by the Parent's counsel and only for so
long as considered advisable in light of any pending or future litigation.
(f) The provisions of paragraphs (a)-(e) above supersede the
provisions of paragraphs 1, 3, 4 and 5 of the July Agreement (as defined in
Section 6.2).
(g) No investigation pursuant to this Section 4.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
4.3 Proxy Statement.
---------------
(a) Promptly after execution and delivery of this Agreement, the
Company shall prepare and shall file with the SEC as soon as is reasonably
practicable a preliminary Proxy Statement, together with a form of proxy, with
respect to the meeting of the Company's stockholders at which the stockholders
of the Company will be asked to vote upon and approve this Agreement and the
Merger and shall use all reasonable efforts to have the Proxy Statement and form
of proxy cleared by the SEC as promptly as practicable, and promptly thereafter
shall mail the definitive Proxy Statement and form of proxy to stockholders of
the Company. Subject to its fiduciary duties under applicable law, the Proxy
Statement shall contain the recommendation of the Board of Directors that the
stockholders of the Company vote to adopt and approve the Merger and this
Agreement. The term "Proxy Statement" shall mean such proxy or information
statement at the time it initially is mailed to the Company's stockholders and
all amendments or supplements thereto, if any, similarly filed and mailed.
(b) The Parent and Purchaser will provide the Company with all
information concerning Parent and Purchaser (or their Affiliates) required to be
included in, or otherwise reasonably requested by the Company in connection with
the preparation of, the Proxy Statement. The information provided and to be
provided by Parent, Purchaser and the Company, respectively, for use in the
Proxy Statement shall, on the date the Proxy Statement is first mailed to the
Company's stockholders and on the date of the Special Meeting (as hereinafter
defined), not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make such information, in light of the
circumstances under which it was provided, not misleading, and the Company,
Parent and Purchaser each agree to correct any information provided by it for
use in the Proxy Statement which shall have become false or misleading in any
material respect. The Proxy Statement shall comply as to form in all material
respects with all applicable requirements of federal securities laws.
4.4 Meeting of Stockholders of the Company. Promptly after execution and
--------------------------------------
delivery of this Agreement, the Company shall take all action necessary, in
accordance
27
with the MBCL and its Articles of Organization and Bylaws, to convene a meeting
of its stockholders (the "Special Meeting") as promptly as practicable to
---------------
consider and vote upon this Agreement and the Merger. The Company shall use
reasonable efforts to solicit from stockholders of the Company proxies in favor
of such adoption and approval and to take all other action necessary to secure
the vote or consent of stockholders required by the MBCL to effect the Merger.
At the Special Meeting, Parent and its direct and indirect Subsidiaries shall
vote, or cause to be voted, all of the Shares then owned by Parent and its
direct and indirect Subsidiaries in favor of the Merger.
4.5. No Solicitation by the Company.
------------------------------
(a) Except as provided in Section 4.5(b), the Company agrees that,
from the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement pursuant to Section 6.1, the Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any of its directors, officers or employees or any representative retained by it
(including the Company's Financial Advisor) or any of its Subsidiaries to,
directly or indirectly through another Person, (i) solicit, initiate, request or
take any other action to facilitate (including by way of furnishing non-public
information) any inquiries or the making of any proposal or offer from any third
party other than the Parent or its Affiliates regarding any merger, sale of
substantial assets, sale or purchase of (or right to sell or purchase) shares of
capital stock (other than pursuant to the exercise of stock options outstanding
on the date of this Agreement) or similar transactions involving the Company or
any of its Subsidiaries (an "Acquisition Proposal") or (ii) participate in any
--------------------
discussions or negotiations regarding any Acquisition Proposal; provided,
--------
however, that if, at any time, the Board of Directors of the Company determines
-------
in good faith, after consultation with and receipt of advice from outside
counsel, that it is necessary to do so in order to act in a manner consistent
with its fiduciary duties to the Company's stockholders under applicable law,
the Company may, in response to what the Board of Directors determines, in good
faith after consultation with and receipt of advice from outside counsel, is
reasonably likely to lead to a Superior Proposal (as defined below) and subject
to delivering a Company Notice (as defined in paragraph (c) below) and
compliance with the other provisions of paragraph (c) below, following delivery
of the Company Notice (x) furnish information with respect to the Company and
its Subsidiaries to any Person making such Acquisition Proposal pursuant to a
confidentiality agreement entered into between such Person and the Company with
terms no less favorable to the Company than those contained in Section 4.2 of
this Agreement and (y) participate in discussions or negotiations regarding such
Acquisition Proposal. Immediately following the execution and delivery of this
Agreement by the parties hereto, the Company will cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted with respect to the foregoing. Promptly following the execution of
this Agreement by the parties hereto, the Company will request each Person that
has, prior to the date of this Agreement, executed a confidentiality agreement
in connection with its consideration of an Acquisition Proposal to return or
destroy all confidential information heretofore furnished to such Person by or
on behalf of the Company or any of its Subsidiaries.
28
(b) Except as expressly permitted by this Section 4.5, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to the
Parent, the approval or recommendation by such Board of Directors or such
committee of the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or (iii) cause the
Company to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Company Acquisition Agreement")
-----------------------------
related to any Acquisition Proposal. Notwithstanding the foregoing, if at any
time the Board of Directors of the Company determines in good faith, after
consultation with and receipt of advice from outside counsel, that it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to the Company's stockholders under applicable law, subject to compliance
with paragraph (c) below, the Board of Directors of the Company (x) may withdraw
or modify, or propose publicly to withdraw or modify, any approval or
recommendation by such Board of Directors or such committee of the Merger or
this Agreement and (y) may approve or recommend, or propose publicly to approve
or recommend, a Superior Proposal and (z) may cause the Company to enter into a
Company Acquisition Agreement related to a Superior Proposal and may terminate
this Agreement pursuant to Section 6.1(d) and accept such Superior Proposal.
For purposes of this Agreement, a "Superior Proposal" means any Acquisition
-----------------
Proposal providing for the merger of the Company or the acquisition of all or
substantially all of the capital stock or assets of the Company which (i) the
Board of Directors of the Company determines in good faith is reasonably likely
to be consummated, taking into account the Person making the proposal and all
legal, financial and regulatory aspects of the proposal, including any break-up
fees, expense reimbursement provisions and conditions to consummation, and (ii)
the Board of Directors determines in good faith (after consultation with and
based upon the advice of its outside financial advisors) would, if consummated,
result in a more favorable transaction to the Company's stockholders than the
transaction contemplated by this Agreement. Notwithstanding the existence of
one or more Superior Proposals or anything in this Section 4.5 to the contrary,
the Stockholder Agreement and Company Option Agreement shall remain in full
force and effect in accordance with their terms.
(c) In addition to the obligations of the Company as set forth in
paragraphs (a) and (b) of this Section 4.5, the Company shall advise the
Purchaser orally and in writing of any request for non-public information, any
Acquisition Proposal, including all of the material proposed terms of such
Acquisition Proposal, the identity of the third party, or any decision by the
Company to take any of the actions permitted in clauses (x) or (y) of paragraph
(a) above (with any such notice referred to as a "Company Notice"). Any such
--------------
Company Notice will be delivered promptly after (and in no event later than 48
hours after) receipt of any request for non-public information or of any
Acquisition Proposal and prior to the Company taking any of the actions
permitted in clauses (x) or (y) of paragraph (a) above. In addition, in the
event the Company intends to enter into a Company Acquisition Agreement relating
to a Superior Proposal, the Company will deliver a Company Notice at least 48
hours prior to entering into such Company Acquisition Agreement, which Company
Notice will identify the third party and the material proposed terms of such
Superior Proposal. Subject to confidentiality
29
agreement requirements imposed by any such third party and which the Board of
Directors determines in good faith, after consultation with and receipt of
advice from outside counsel, are necessary to enter into in order to act in a
manner consistent with its fiduciary duties to the Company's stockholders under
applicable law, the Company will keep the Purchaser reasonably informed of the
status of any such request or Acquisition Proposal and will update the
information required to be provided in the Company Notice upon the request of
the Purchaser.
(d) Nothing in this Section 4.5 is intended or shall be construed to
prevent (i) the Board of Directors of the Company from taking, and disclosing to
the Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer and (ii)
from pursuing or negotiating any Strategic Relationship, subject to compliance
with Section 4.1(b).
4.6 Public Announcements. Parent and Purchaser on the one hand and the
--------------------
Company on the other hand will consult with each other before, and obtain the
other party's consent with respect to, issuing any press release, any filing
with the SEC on Form 8-K or otherwise making any public statements with respect
to this Agreement or the Merger or the other transactions contemplated hereby,
and shall not issue any such press release, SEC Form 8-K filing or make any such
public statement prior to such consultation and consent, except to the extent
that compliance with legal requirements requires a party to issue a press
release or public announcement or make an 8-K filing without such consultation
and consent. Any consent required pursuant to the preceding sentence shall not
be unreasonably withheld or delayed. This Section 4.6 shall supersede any
conflicting provisions in the July Agreement.
4.7 Notification of Certain Matters.
-------------------------------
(a) The Company shall give prompt notice (which notice shall state
that it is delivered pursuant to Section 4.7 of this Agreement) in writing to
Purchaser, and Parent and Purchaser shall give prompt notice in writing to the
Company, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
as of the time such representation or warranty is made and (ii) any material
failure of the Company, Parent or Purchaser, as the case may be, or of any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
(b) The Company shall give prompt notice in writing (which notice
shall state that it is delivered pursuant to Section 4.7 of this Agreement) to
Purchaser of any occurrence that has had or may reasonably be expected to have a
Material Adverse Effect, other than changes relating to or arising out of the
economy in general or the industries of the Company and its Subsidiaries in
general and not specifically relating to the Company or any of its Subsidiaries.
30
(c) No failure of the Company to provide notice as required under
this Section 4.7 shall be deemed a breach of covenant for purposes of Section
5.2(c) unless such failure results in a material prejudice to Parent and
Purchaser. No failure of the Parent and the Purchaser to provide notice as
required under this Section 4.7 shall be deemed a breach of covenant for
purposes of Section 5.3(b) unless such failure results in a material prejudice
to the Company.
4.8 Officers' and Directors' Indemnification; Insurance.
---------------------------------------------------
(a) The Purchaser agrees that for a period ending on the sixth
anniversary of the Effective Time, the Surviving Corporation will maintain all
rights to indemnification (including with respect to the advancement of expenses
incurred in the defense of any action or suit) existing on the date of this
Agreement in favor of the present and former directors, officers, employees and
agents of the Company as provided in the Company's Articles of Organization and
Bylaws, in each case as in effect on the date of this Agreement, and that during
such period, neither the Articles of Organization nor the Bylaws of the
Surviving Corporation shall be amended to reduce or limit the rights of
indemnity afforded to the present and former directors, officers, employees and
agents of the Company, or the ability of the Surviving Corporation to indemnify
them, nor to hinder, delay or make more difficult the exercise of such rights or
indemnity or the ability to indemnify.
(b) The Purchaser agrees to indemnify and to cause the Surviving
Corporation to indemnify to the fullest extent permitted under its Articles of
Organization, its Bylaws and applicable law the present and former directors,
officers, employees and agents of the Company against all losses, damages,
liabilities or claims made against them arising from their service in such
capacities prior to and including the Effective Time, to at least the same
extent as such persons are currently permitted to be indemnified pursuant to the
Company's Articles of Organization and Bylaws, for a period ending on the sixth
anniversary of the Effective Time.
(c) Should any claim or claims be made against any present or former
director, officer, employee or agent of the Company, on or prior to the sixth
anniversary of the Effective Time, arising from such person's service as such at
any time prior to the Effective Time, the provisions of this Section 4.8
respecting the Articles of Organization and Bylaws and the obligation of
indemnity of the Surviving Corporation shall continue in effect until the final
disposition of all such claims.
(d) The Purchaser agrees that in the event that the Surviving
Corporation or any of its successors or assigns consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations of the Surviving Corporation, set forth
in this Section 4.8.
31
(e) The provisions of this Section 4.8 are intended to be for the
benefit of, and shall be enforceable by, each indemnified party and such party's
heirs and representatives.
(f) The Purchaser will cause to be maintained for a period of six
years from the Effective Time the Company's current directors' and officers'
insurance and indemnification policy to the extent that it provides coverage for
events occurring prior to the Effective Time (the "D&O Insurance") for all
-------------
persons who are directors and officers of the Company on the date of this
Agreement, so long as such insurance is available on commercially reasonable
terms and the annual premium therefor would not be in excess of 200% of the last
annual premium paid prior to the date of this Agreement (the "Maximum Premium").
---------------
If the existing D&O Insurance expires, is terminated or cancelled during such
six-year period, the Purchaser will use all reasonable efforts to cause to be
obtained as much D&O Insurance as can be obtained for the remainder of such
period for an annualized premium not in excess of the Maximum Premium, on terms
and conditions no less advantageous than the existing D&O Insurance.
4.9 Additional Agreements.
---------------------
(a) Subject to the terms and conditions hereof, each of the parties
to this Agreement agrees to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement (including consummation of the
Merger) and to cooperate with each other in connection with the foregoing.
(b) Subject to the terms and conditions hereof, each of the parties
to this Agreement agrees to use commercially reasonable efforts to: (i) obtain
all necessary waivers, consents and approvals from other parties to loan
agreements, leases, licenses and other contracts, (ii) obtain all necessary
consents, approvals and authorizations as required to be obtained under any
federal, state or foreign law or regulations, including, but not limited to,
those required under the HSR Act and those referred to in Section 4.14, (iii)
defend all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, (v) effect
all necessary registrations and filings, including, but not limited to, filings
under the HSR Act and submissions of information requested by Governmental
Entities, and (vi) fulfill all conditions to this Agreement.
4.10 Company Indebtedness. Prior to the Effective Time, the Company shall
--------------------
cooperate with Purchaser in taking such actions requested by the Purchaser as
are reasonably appropriate or necessary in connection with the redemption,
prepayment, modification, satisfaction or elimination at or promptly after the
Effective Time of any outstanding Indebtedness of the Company or any of its
Subsidiaries, including contacting lenders for pay-off letters and lien
discharges.
32
4.11 Other Actions by the Company. If any "fair price," "moratorium,"
----------------------------
"control share acquisition," "shareholder protection" or other form of anti-
takeover statute, regulation or charter provision or contract is or shall become
applicable to the Merger or the transactions contemplated hereby, the Company
and the Board of Directors of the Company shall, promptly upon the request of
the Purchaser, grant such approvals and take such actions as are necessary under
such laws and provisions so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute, regulation,
provision or contract on the transactions contemplated hereby.
4.12 Litigation Cooperation. Promptly upon execution of this Agreement
----------------------
and until the Effective Time, each of the Company, Parent and Purchaser shall
cooperate with each other in connection with any litigation by a third party
arising out of or in connection with this Agreement or any of the transactions
contemplated by this Agreement.
4.13 Future Filings. The Company will deliver to the Purchaser as soon as
--------------
they become available true and complete copies of any report or statement mailed
by it to its stockholders generally or filed by it with the SEC subsequent to
the date of this Agreement and prior to the Effective Time. As of their
respective dates, such reports and statements (excluding any information therein
provided by the Parent or the Purchaser, as to which the Company makes no
representation) will not contain any untrue statement of a material fact or omit
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 are made, not
misleading and will comply as to form in all material respects with all
applicable requirements of law. The consolidated financial statements of the
Company to be included in such reports and statements (excluding any information
therein provided by the Parent or the Purchaser, as to which the Company makes
no representation) will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except (i) as otherwise indicated in such financial statements and the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
permitted under Form 10-Q under the Exchange Act) and will present fairly the
consolidated financial position, results of operations and cash flows of the
Company as of the dates thereof and for the periods indicated therein (subject,
in the case of any unaudited interim financial statements, to normal year-end
audit adjustments). The Parent shall deliver to the Company as soon as they
become available, true and complete copies of any report or statement mailed by
it to the Company's stockholders generally or filed by it with the SEC
subsequent to the date of this Agreement and prior to the Effective Time.
4.14 Alcoholic Beverage Licenses. (a) Each party agrees to cooperate and
---------------------------
use commercially reasonable efforts to obtain the Regulatory Consents required
from Governmental Entities in order for the Alcoholic Beverage Licenses to
remain in full force and effect upon consummation of the Merger.
33
(b) Without limiting the generality of paragraph (a) above, the Parent and
the Purchaser will as promptly as practicable prepare the filings and requests
for approvals set forth in Exhibit D hereto, at the direction of the Parent and
---------
Purchaser the Company will sign such filings and requests (subject to the
Company's approval, not to be unreasonably withheld or delayed), the Parent and
Purchaser will file such filings and requests and the Parent, Purchaser and the
Company will proceed diligently to obtain the Regulatory Consents that are
required to be obtained prior to consummation of the Merger as indicated on
Exhibit D (the "Pre-Closing License Approvals"). The Parent, Purchaser and the
--------- -----------------------------
Company acknowledge that Exhibit D does not purport to list all of the Producer
---------
Approvals (as defined in Article VII).
(c) The Parent will give the Company written notice promptly after
becoming aware of the occurrence of any Special Regulatory Event. No failure of
the Parent to provide notice as required under this Section 4.14(c) shall be
deemed a breach of covenant for purposes of Section 5.3(b) unless such notice
was delivered more than ten (10) business days after the Parent became aware of
such Special Regulatory Event.
4.15 Company Actions Relating to Tax Matters. Without the prior consent
---------------------------------------
of Purchaser (which shall not be unreasonably withheld or delayed and which
shall be deemed given if there is no response within five business days of a
request for consent), neither the Company nor any Subsidiary shall make or
change any election, request permission of any Tax authority to change any
accounting method, file any amended Tax return, enter into any closing
agreement, settle any Tax claim or assessment relating to the Company or its
Subsidiaries, surrender any right to claim a refund of Taxes, or consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment relating to the Company or its Subsidiaries, if any such election,
adoption, change, amendment, agreement, settlement, surrender or consent would
have the effect of materially increasing the Tax liability of the Company, any
Subsidiary, or the Surviving Corporation (or Parent).
4.16 Financing. The Parent will not waive or amend the Financing
---------
Agreements in any material respect without the prior written consent of the
Company. The Parent will perform in all material respects its obligations under
the Financing Agreements. The Parent will enforce its rights under the
Financing Agreements and will contribute to Purchaser the proceeds thereof to
the extent required by Purchaser to fulfill its obligations under this
Agreement.
4.17 Up Front Payment. Simultaneously with the execution and delivery of
----------------
this Agreement, the Parent has paid the Company $1,250,000 (the "Payment"). The
-------
Parent and the Purchaser acknowledge that the Company will use the Payment for
its general corporate expenses, subject to compliance with the other provisions
of this Article IV. The Parent and Purchaser further acknowledge that the
Payment is not refundable except as provided in Section 6.3(c). The Company
acknowledges and agrees that it will refund the Payment under the circumstances
and at the time set forth in Section 6.3(c).
34
4.18 Institutional Investor Agreement. The Company hereby agrees to
--------------------------------
comply with the provisions of Section 12.02 of the Institutional Investor
Agreement.
ARTICLE V
CONDITIONS OF MERGER
5.1 Conditions to the Obligations of Each Party to Effect the Merger. The
----------------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the requisite vote of the stockholders of the Company.
(b) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) No temporary restraining order, preliminary or permanent
injunction, judgment or other order, decree or ruling nor any statute, rule,
regulation or order shall be in effect which would make the acquisition or
holding by Parent or its Affiliates of Shares or shares of Common Stock of the
Surviving Corporation illegal or otherwise prevent the consummation of the
Merger.
5.2 Conditions Precedent to Parent's and Purchaser's Obligations. Parent
------------------------------------------------------------
and Purchaser shall be obligated to perform the acts contemplated for
performance by them under Article I only if each of the following conditions is
satisfied at or prior to the Closing Date, unless any such condition is waived
in writing by Parent and Purchaser:
(a) The representations and warranties of the Company set forth in
Article 2 (other than Section 2.3(a)) shall be true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of the Closing Date
with the same force and effect as though made again at and as of the Closing
Date, except for any representations and warranties that address matters only as
of a particular date (which shall remain true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of such date).
(b) The representations and warranties of the Company set forth in
Section 2.3(a) shall be true and correct in all respects as of the Closing Date
with the same force and effect as though made again at and as of the Closing
Date, except for any representations and warranties that address matters only as
of a particular date (which shall remain true and correct in all respects as of
such date).
(c) The Company shall have performed and complied (i) in all respects
with its covenants under Sections 4.1(a)(ii) and 4.1(a)(iii) and (ii) in all
material respects (without giving duplicative effect to any materiality
qualification contained in the
35
applicable obligation) with all other covenants and agreements contained in this
Agreement required to be performed or complied with by it on or before the
Closing Date.
(d) Since the date of this Agreement, there shall not have been the
occurrence of any event or condition that has had or would reasonably be
expected to have a Material Adverse Effect other than changes relating to or
arising out of the economy in general or the industries of the Company and its
Subsidiaries in general and not specifically relating to the Company or any of
its Subsidiaries.
(e) The Company shall have executed and delivered to Purchaser and
Parent at and as of the Closing a certificate, duly executed by the Company's
President and Chief Financial Officer, in form and substance reasonably
satisfactory to Parent and Parent's counsel, certifying that to such officers'
knowledge, the conditions specified in (a), (b), (c) and (d) have been
satisfied.
(f) The Company and the Purchaser shall have obtained the Pre-Closing
License Approvals referred to in Section 4.14.
(g) There shall not have occurred a Special Regulatory Event.
(h) The Company shall have obtained the third party consents listed
in Section 5.2(h) of the Company Disclosure Letter.
(i) The Company shall have resolved certain outstanding regulatory
issues as provided in Section 5.2(i) of the Company Disclosure Letter.
5.3 Conditions to Obligations of the Company. The Company shall be
----------------------------------------
obligated to perform the acts contemplated for performance by it under Article I
only if each of the following conditions is satisfied at or prior to the Closing
Date, unless any such condition is waived in writing by the Company:
(a) The representations and warranties of the Parent and Purchaser
set forth in Article 3 shall be true and correct in all material respects
(without giving duplicative effect to any materiality qualification contained in
the applicable representation or warranty) as of the Closing Date with the same
force and effect as though made again at and as of the Closing Date, except for
any representations and warranties that address matters only as of a particular
date (which shall remain true and correct in all material respects (without
giving duplicative effect to any materiality qualification contained in the
applicable representation or warranty) as of such date).
(b) The Parent and Purchaser shall have performed and complied in all
material respects (without giving duplicative effect to any materiality
qualification contained in the applicable obligation) with all covenants and
agreements contained in this Agreement required to be performed or complied with
by them on or before the Closing Date.
36
(c) The Parent and Purchaser shall have executed and delivered to the
Company at and as of the Closing a certificate, duly executed by the Parent's
and Purchaser's Presidents and Chief Financial Officers, in form and substance
reasonably satisfactory to the Company and the Company's counsel, certifying
that to such officers' knowledge, the conditions specified in (a) and (b) have
been satisfied.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated, at any time prior to
-----------
the Effective Time, whether before or after approval by the stockholders of the
Company:
(a) by mutual written agreement of the Boards of Directors of
Purchaser and the Company; or
(b) by either Purchaser or Company:
(i) if any court of competent jurisdiction in the United States
or other United States governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable; or
(ii) if there has been a material breach by the other party of
any representation, warranty, covenant or agreement set forth in this Agreement
unless such breach is capable of being cured and is cured prior to the Closing
Date, except with respect to any breach of Section 4.5, which must be cured
within five (5) days after written notice from the Purchaser specifying such
breach;
(c) by Purchaser, if the Board of Directors of the Company or any
committee thereof shall have approved or recommended an Acquisition Proposal by
a third party, or withdrawn or modified in a manner adverse to Parent or
Purchaser its approval or recommendation of this Agreement or the transactions
contemplated hereby, or failed to include in the Proxy Statement to its
stockholders such recommendation (including the recommendation that the
stockholders of the Company vote in favor of the Merger); or publicly resolved
to do any of the foregoing;
(d) by the Company, pursuant to Section 4.5, in the event the Company
has complied with all the provisions of Section 4.5 and has determined to accept
a Superior Proposal; provided that (A) at the time of terminating this Agreement
-------------
pursuant to this Section 6.1(d), the Company pay the Break-Up Fee referred to in
Section 6.3(b) and refund the Payment as provided in Section 6.3(c), (B) the
Company shall have provided Purchaser with forty-eight (48) hours' prior written
notice of the Company's decision to so terminate (the "Company Termination
-------------------
Notice"); and (C) the Stockholder Agreement and the Company Option Agreement
------
shall remain in full force and effect in
37
accordance with their terms. The Company Termination Notice shall indicate in
reasonable detail the terms and conditions of such Superior Proposal, including,
without limitation, the amount and form of the proposed consideration and
whether such Superior Proposal is subject to any material conditions;
(e) by either the Company or the Purchaser in the event the Effective
Time has not occurred by January 31, 2000; provided that in the event by
-------------
January 31, 2000 at least 66 2/3 % of the Pre-Closing License Approvals have
been obtained by the Parent and the Parent, after consultation with its
regulatory counsel, reasonably believes that the remaining Pre-Closing License
Approvals will be obtained by February 29, 2000, then at the request of the
Parent this January 31, 2000 outside date will be extended to February 29, 2000;
provided that as a condition to such extension the Parent and the Purchaser
-------- ----
waive the conditions set forth in Section 5.2(a), Section 5.2(d) and Section
5.2(e) (as it relates to Sections 5.2(a) and (d)), and confirm in writing that,
except as otherwise noted, as of the date of such extension they are not aware
of (x) any fact or circumstances that would then permit them to terminate this
Agreement pursuant to any provision of this Section 6.1 or (y) any fact or
circumstance, other than the receipt of such pending Pre-Closing License
Approvals, that would cause the conditions set forth in Section 5.2 to not be
fulfilled.
(f) by the Company if the Financing Agreements have been terminated
unless, on or before December 28, 1999, the Parent and Purchaser have obtained
binding equity commitments in at least the same amount and in a form and from
financing sources reasonably satisfactory to the Company (the "New Commitments")
---------------
and the Parent and the Purchaser have waived the condition set forth in Section
5.2(g) and their termination right pursuant to Section 6.1(g);
(g) by the Purchaser, in the event a Special Regulatory Event occurs;
and
(h) by the Company, in the event a Special Regulatory Event occurs
unless on or before December 28, 1999 the Parent and Purchaser have provided New
Commitments and have waived the condition set forth in Section 5.2(g) and their
termination right pursuant to Section 6.1(g).
6.2 Procedure and Effect of Termination. In the event of the termination
-----------------------------------
of this Agreement by the Company or Purchaser or both of them pursuant to
Section 6.1, the terminating party shall provide written notice of such
termination to the other party and this Agreement shall forthwith become void
and there shall be no liability on the part of Parent, Purchaser or the Company,
except as set forth in this Section 6.2 and in Sections 4.2(b)-(f) and 6.3 of
this Agreement. The foregoing shall not relieve any party for liability for
damages actually incurred as a result of any breach of this Agreement. Sections
4.2(b)-(f), 6.2, 6.3, 6.4 and Article VIII of this Agreement shall survive the
termination of this Agreement. In addition, the provisions of paragraph 9 of
the letter agreement, dated July 12, 1999, among Liquid Experience LLC, Combined
Properties,
38
Inc. and the Company (as amended to date, the "July Agreement") shall survive
--------------
the termination of this Agreement and the Parent and Purchaser agree to be bound
by such provisions.
6.3 Fees and Expenses. (a) Except as otherwise provided in this Agreement
-----------------
and whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses. The Parent and the Purchaser understand and agree that, subject to
compliance by the Company with the provisions of Section 4.1, the Company will
pay at or before the Closing its financial advisory, legal and accounting
expenses, including without limitation all amounts owed to the Company's
Financial Advisor pursuant to the Lehman Engagement Letter (subject to the
limits set out in Section 4.1).
(b) In the event that the Purchaser terminates this Agreement
pursuant to Section 6.1(c) or the Company terminates this Agreement pursuant to
Section 6.1(d), then the Company shall pay to the Purchaser the amount of
$1,250,000 as reimbursement of the Purchaser's and Parent's expenses and as
liquidated damages (the "Break-Up Fee"). Any such payment shall be made within
------------
three (3) business days after a termination pursuant to Section 6.1(c) or at the
time of any termination pursuant to Section 6.1(d).
(c) In the event that the Purchaser terminates this Agreement
pursuant to Section 6.1(g) or the Company terminates this Agreement pursuant to
Section 6.1(h), the Company's retention of the Payment will be considered
liquidated damages and the Company will have no further recourse with respect to
such termination. In the event that the Company terminates this Agreement
pursuant to Section 6.1(d), then in addition to the Break-Up Fee the Company
will refund the entire Payment to the Purchaser at the time of any termination
pursuant to Section 6.1(d).
6.4 Initial Equity Proceeds. The Purchaser agrees that in the event of
-----------------------
any termination of this Agreement pursuant to Section 6.1(b), (e) or (f), the
Purchaser will retain the Initial Equity Proceeds for a period of thirty days
after the effective date of the termination of this Agreement (the "Release
-------
Date") and if prior to the Release Date the Company has asserted in writing any
----
claim of any breach of this Agreement by the Parent or the Purchaser, specifying
the amount of damages caused by such breach, the Parent will retain or cause the
Purchaser to retain the Initial Equity Proceeds in an amount equal to 125% of
the amount of such alleged damages, but in no event more than the remaining
Initial Equity Proceeds (the "Required Amount"), unless RSH, in exchange for the
---------------
transfer of the remaining Initial Equity Proceeds to him or an Affiliate, (i)
agrees to guarantee the obligations of the Parent and Purchaser under this
Agreement, up to the amount of the Initial Equity Proceeds distributed to such
Person, and (ii) at the time of such guarantee, RSH delivers to the Company
personal financial statements evidencing a net worth of at least three (3) times
the Required Amount.
6.5 Amendment. This Agreement may be amended by each of the parties by
---------
action taken by or on behalf of their respective Boards of Directors at any time
prior to
39
the Effective Time; provided, however, that (i) such amendment shall be in
-----------------
writing signed by all of the parties, and (ii) after adoption of this Agreement
and the Merger by the stockholders of the Company, no amendment may be made
without the further approval of the stockholders of the Company to the extent
such approval is required by applicable law.
6.6 Waiver. Subject to the requirements of applicable law, at any time
------
prior to the Effective Time, whether before or after the Special Meeting, any
party hereto, by action taken by its Board of Directors, may (i) extend the time
for the performance of any of the obligations or other acts of any other party
hereto or (ii) waive compliance with any of the agreements of any other party or
with any conditions to its own obligations. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party by a duly authorized
officer of such party. Notwithstanding the above, any waiver given shall not
apply to any subsequent failure of compliance with agreements of the other party
or conditions to its own obligations.
ARTICLE VII
-----------
DEFINITIONS
As used herein the following terms not otherwise defined have the following
respective meanings:
"Affiliate" means, with respect to any specified Person, any other Person
---------
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. As used
in this definition the term "control" (including the terms "controlled by" and
------- -------------
"under common control with") means, with respect to the relationship between or
--------------------------
among two or more Persons, the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Indebtedness" means (i) all indebtedness of the Company or any of its
------------
Subsidiaries for borrowed money, whether current or funded, or secured or
unsecured, (ii) all indebtedness of the Company or any of its Subsidiaries for
the deferred purchase price of property or services represented by a note or
other security, (iii) all indebtedness of the Company created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by the Company or any of its Subsidiaries (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (iv) all indebtedness of
the Company or any of its Subsidiaries secured by a purchase money mortgage or
other lien to secure all or part of the purchase price of property subject to
such mortgage or lien, (v) all obligations under leases which shall have been or
must be, in accordance
40
with generally accepted accounting principles, recorded as capital leases in
respect of which the Company or any of its Subsidiaries is liable as lessee,
(vi) any liability of the Company or any of its Subsidiaries in respect of
banker's acceptances or letters of credit, and (vii) all indebtedness referred
to in clause (i), (ii), (iii), (iv), (v) or (vi) above which is directly or
indirectly guaranteed by the Company or any of its Subsidiaries or which the
Company or any of its Subsidiaries has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which it has otherwise assured a
creditor against loss.
"Material Adverse Effect" means any material adverse effect on the
-----------------------
business, properties, assets, results of operations or financial condition of
the Company and its Subsidiaries taken as a whole.
"Person" means any corporation, association, partnership, limited liability
------
company, organization, business, individual, government or political subdivision
thereof or governmental agency.
"Producer Approvals" means the regulatory approvals, registrations,
------------------
permits, licenses, authorizations, waivers or consents required under state and
local alcoholic beverage control laws for the Institutional Investor to be
permitted to consummate both its financing for the Purchaser as contemplated by
the Institutional Investor Agreement and its financing for the Producer (as
defined below in "Special Regulatory Event") as contemplated by the
------------------------
Institutional Investor Agreement.
"Special Regulatory Event" means (i) the failure to obtain one or more of
------------------------
the Pre-Closing License Approvals because of the proposed investment by the
Institutional Investor in a manufacturer of alcoholic beverages (the "Producer")
--------
on the terms set forth on Exhibit A to the Institutional Investor Agreement or
---------
(ii) the determination by the Institutional Investor that, even if it has made
or would make commercially reasonable efforts to do so, it will not be able to
obtain all of the Producer Approvals.
"Subsidiary" means, with respect to any Person, any corporation a majority
----------
(by number of votes) of the outstanding shares of any class or classes of which
shall at the time be owned by such Person or by a Subsidiary of such Person, if
the holders of the shares of such class or classes (a) are ordinarily, in the
absence of contingencies, entitled to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof, even
though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time entitled, as such holders, to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, whether or not the right so to vote exists by
reason of the happening of a contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
--- -- -----
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll,
41
license, employee, or other tax or levy, of any kind whatsoever, including any
interest, penalties, or additions to tax in respect of the foregoing.
ARTICLE VIII
MISCELLANEOUS
8.1 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by rule of law or public policy,
all other conditions 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 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 to the end that
transactions contemplated hereby are fulfilled to the extent possible.
8.2 Notices. All notices and other communications given or made pursuant
-------
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered if sent via telecopier or delivered personally
(including, without limitation, delivery by commercial carrier warranting next-
day delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by similar notice, except that notices
of changes of address shall be effective upon receipt):
(a) If to Company:
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: President
Telecopier No.: 000-000-0000
With copies to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxx and
Xxxx Xxxxxx
Telecopier No.: (000) 000-0000
(b) If to Parent or Purchaser:
c/o Combined Properties, Inc.
0000 X Xxxxxx, X.X.
Xxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
42
Attention: Xxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
With copies to:
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxxxx
Telecopier No.: (000) 000-0000
8.3 Headings. The headings contained in this Agreement are for reference
--------
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.4 Representations and Warranties, etc. The respective representations
-----------------------------------
and warranties of the Company, Parent and Purchaser contained herein shall
survive until, and shall expire with, and be terminated and extinguished upon
the earlier to occur of (a) the termination of this Agreement pursuant to
Section 6.1 and (b) the Closing Date. This Section 8.4 shall have no effect
upon any other obligation of the parties hereto, whether to be performed before
or after the consummation of the Merger.
8.5 Miscellaneous. This Agreement, the documents delivered pursuant
-------------
hereto or in connection herewith and the July Agreement (i) constitute the
entire agreement and supersede all other prior agreements and undertakings, both
written and oral (including, without limitation, any agreement or proposed
agreement relating to the timing of execution of this Agreement and the payment
of any amount in connection therewith), among the parties, or any of them, with
respect to the subject matter hereof, (ii) are not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder, other
than Section 4.8 (which is intended for the benefit of the present and former
directors, officers, employees and agents of the Company and may be enforced by
any such indemnified persons), (iii) the Purchaser and the Parent may assign
this Agreement to their lenders as collateral security; provided, however, that
-----------------
no such assignment shall relieve the assignor of its obligations hereunder, and
(iv) shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without reference to choice of law rules). This
Agreement may be executed in one or more counterparts which together shall
constitute a single agreement.
8.6 Nature of Obligation. All obligations of the Parent and Purchaser in
--------------------
this Agreement are joint and several, whether or not so expressed.
43
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
LIQUID HOLDINGS INC.
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxx X. Xxxx
Title: President
LIQUID ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxx X. Xxxx
Title: President
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
and Treasurer
XXXXXXXXX & XXXX, INC.
By: /s/ Xxx X. Xxxx
-------------------------------------
Name: Xxx X. Xxxx
Title: President
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President and Treasurer
44
EXHIBIT A
STOCKHOLDER AGREEMENT
---------------------
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and entered into as
---------
of September 27, 1999, by and among Liquid Holdings Inc., a Delaware corporation
("Parent"), Xxxx Xxxxxxxxx ("Xx. Xxxxxxxxx") and Xxxxxxx X. Xxxx ("Xx. Xxxx,"
------ --- --------- --- ----
and together with Xx. Xxxxxxxxx, the "Stockholders," and each singly, a
------------
"Stockholder").
-----------
WHEREAS, the Stockholders desire that Parent, Liquid Acquisition Corp., a
Massachusetts corporation and wholly owned subsidiary of Parent ("Sub"), and
---
Xxxxxxxxx & Xxxx, Inc., a Massachusetts corporation (the "Company"), enter into
-------
an Agreement and Plan of Merger, dated as of the date hereof (as the same may be
amended or supplemented, the "Merger Agreement") with respect to the merger of
----------------
Sub with and into the Company (the "Merger"); and
------
WHEREAS, the Stockholders are executing this Agreement as an inducement to
Parent to enter into and execute, and to cause Sub to enter into and execute,
the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by Parent
and Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder represents and
warrants to Parent as follows:
(a) The Stockholder is the record and beneficial owner of the number
of shares (the "Stockholder's Shares") of capital stock, $0.01 par value,
--------------------
of the Company ("Company Capital Stock") set forth below such Stockholder's
---------------------
name on the signature page hereof. The Stockholder's Shares of Xx. Xxxx
are subject to a Pledge Agreement dated July 27, 1997 (the "Pledge
------
Agreement") between the Stockholder and BankBoston, N.A. This Agreement
---------
has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, the Stockholder, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application respecting creditors' rights and by general equitable
principles. In the case of Xx. Xxxx, Xx. Xxxx has delivered to the Parent
a true and correct copy of the Pledge Agreement as in effect on the date
hereof.
45
(b) Except for the obligations of Xx. Xxxx pursuant to the Pledge
Agreement, neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or to
which the Stockholder's Shares are subject. If the Stockholder is married
and the Stockholder's Shares constitute community property, this Agreement
has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, the Stockholder's spouse, enforceable
against such person in accordance with its terms. Consummation by the
Stockholder of the transactions contemplated hereby will not violate, or
require any consent, approval, or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to the
Stockholder or the Stockholder's Shares.
(c) Except for the security interest in the Stockholder's Shares of
Xx. Xxxx under the Pledge Agreement, the Stockholder's Shares and the
certificates representing the Stockholder's Shares are now, and at all
times during the term hereof will be, held by the Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of
all liens, security interests, proxies, voting trusts or voting agreements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder.
(d) No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Stockholder.
(e) The Stockholder understands and acknowledges that Parent is
entering into, and causing Sub to enter into, the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this Agreement.
The Stockholder acknowledges that the irrevocable proxy set forth in
Section 4 and, in the case of Xx. Xxxxxxxxx only, the option in Section 5,
are granted in consideration for the execution and delivery of the Merger
Agreement by Parent and Sub.
2. Voting Agreements. Each Stockholder agrees with, and covenants to,
Parent as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought (the
"Stockholders' Meeting"), the Stockholder shall vote (or cause to be voted)
----------------------
the Stockholder's Shares in favor of the Merger, the execution and delivery
by Company of the Merger Agreement, and the approval of the terms thereof
and each of the other
46
transactions contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which their vote,
consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Stockholder's Shares against (i) any merger agreement or
merger (other than the Merger Agreement and the Merger), consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or (ii) any
amendment of the Company's Articles of Organization or Bylaws or other
proposal or transaction involving the Company or any of its subsidiaries
which amendment or other proposal or transaction would in any manner
impede, frustrate, prevent or nullify the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger Agreement (each of
the foregoing in clause (i) or (ii) above, a "Competing Transaction").
---------------------
3. Covenants.
(a) Xx. Xxxxxxxxx agrees with and covenants to Parent, and Parent
agrees with and covenants to Xx. Xxxxxxxxx, that, in the event of the exercise
of the Option pursuant to the terms hereof, Xx. Xxxxxxxxx shall cooperate with
the Company and Parent, and Parent shall cooperate with Xx. Xxxxxxxxx and the
Company, at the request of the Company, in the preparation of any necessary
filings with regulatory authorities concerning the Alcoholic Beverage Licenses
(as defined in the Merger Agreement), including amendments to existing filings,
and any related requests for approvals.
(b) Except, in the case of Xx. Xxxx, in accordance with the Pledge
Agreement, each Stockholder agrees with, and covenants to, Parent that such
Stockholder shall not, except as expressly permitted by Section 4.5 of the
Merger Agreement, (i) transfer (which term shall include, without limitation,
for the purposes of this Agreement, any sale, gift, pledge or other
disposition), or consent to any transfer of, any or all of the Stockholder's
Shares or any interest therein, except pursuant to the Merger; (ii) enter into
any contract, option or other agreement or understanding with respect to any
transfer of any or all of the Stockholder's Shares or any interest therein;
(iii) grant any proxy, power of attorney or other authorization in or with
respect to such shares, except for this Agreement; (iv) deposit such shares into
a voting trust or enter into a voting agreement or arrangement with respect to
such shares; (v) initiate, solicit or request, or take any action to facilitate
the making of, any offer or proposal which constitutes or is reasonably likely
to lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement); or (vi) in the event of any unsolicited proposed Acquisition
Proposal, engage in negotiations with or discussions with, or provide any
information or data to, any person or entity (other than Parent, any of its
affiliates or representatives) relating to any Acquisition Proposal; provided,
---------
that the Stockholder may transfer (as defined above) any of the Stockholder's
----
Shares to any other person or entity who is on the date hereof, or to any family
member of a person or to any charitable institution which prior to the
Stockholders Meeting and prior to such transfer becomes, a
47
party to this Agreement bound by all the obligations of the "Stockholder"
hereunder.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each Stockholder hereby irrevocably grants to, and appoints,
Parent and Xxxxxx X. Xxxx, Chief Executive Officer of Parent, and Xxxxx X.
Xxxxxxxx, Chief Financial Officer of Parent, in their respective capacities as
officers of Parent, and any individual who shall hereafter succeed to any such
office of Parent, and each of them individually, the Stockholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of the Stockholder, to vote the Stockholder's Shares, or grant a
consent or approval in respect of the Stockholder's Shares (i) in favor of the
Merger, the execution and delivery of the Merger Agreement and approval of the
terms thereof and each of the other transactions contemplated by the Merger
Agreement, and (ii) against any Competing Transaction.
(b) Each Stockholder represents that any proxies heretofore given in
respect of the Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Each Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Stockholder under this Agreement. Each Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest
sufficient in law to support an irrevocable power and may under no circumstances
be revoked. Each Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such
irrevocable proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 41 of the Massachusetts Business Corporation Law.
5. Option to Acquire Shares. In the event that the Merger Agreement is
terminated by the Sub in accordance with Section 6.1(c) of the Merger Agreement
or by the Company in accordance with Section 6.1(d) of the Merger Agreement, at
the option of the Parent, Xx. Xxxxxxxxx shall sell to the Parent or an Affiliate
(as defined in the Merger Agreement) of the Parent that number of Stockholder's
Shares of Xx. Xxxxxxxxx set forth on the signature page hereof (the "Option
------
Shares"), at a purchase price equal to the Per Share Merger Consideration (as
------
defined in the Merger Agreement). This right of the Parent to acquire shares of
Company Capital Stock is sometimes referred to in this Agreement as the "Option"
------
and the entity purchasing such shares is sometimes referred to as the "Option
------
Share Purchaser". In the event that the Parent is entitled to and wishes to
---------------
purchase all or some of the Option Shares, the Parent shall give Xx. Xxxxxxxxx
written notice (the date of which being herein referred to as the "Notice Date")
------ ----
within fifteen (15) days of the termination of the Merger Agreement specifying
(i) the total number of Option Shares it will purchase, and (ii) a place and
date not earlier than three (3) business days nor later than sixty (60) business
days from the Notice Date for the closing of such purchase (the "Closing");
-------
provided that if prior notification to or approval of any
--------
48
regulatory agency is required in connection with such purchase, the Parent and
Xx. Xxxxxxxxx shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed; and provided further, that the Parent may, in the written notice
--------------------
referred to above, make the sale and purchase of the Option Shares and other
securities referred to above contingent on the occurrence of the consummation of
the transaction that is the subject of the Acquisition Proposal (as defined in
the Merger Agreement) or Superior Proposal (as defined in the Merger Agreement)
relating to any termination pursuant to Section 6.1(c) or Section 6.1(d) of the
Merger Agreement, in which case (i) the Parent may defer the sale and purchase
referred to above up to the time immediately prior to the consummation of such
other transaction and (ii) such Option shall expire on the one year anniversary
of the termination of the Merger Agreement. The term "business day" for purposes
------------
of this Agreement means any day, excluding Saturdays, Sundays and any other day
that is a legal holiday in the Commonwealth of Massachusetts or a day on which
banking institutions in the Commonwealth of Massachusetts are authorized by law
or executive order to close. At the Closing, the Option Share Purchaser shall
pay to Xx. Xxxxxxxxx the aggregate purchase price for the Option Shares
purchased from Xx. Xxxxxxxxx pursuant to this Section 5 in immediately available
funds by a wire transfer to a bank account designated by Xx. Xxxxxxxxx. At such
Closing, simultaneously with the delivery of immediately available funds as
provided in this Section 5, Xx. Xxxxxxxxx shall deliver to the Option Share
Purchaser the certificate or certificates representing the number of Option
Shares being sold at such Closing and any other documents reasonably requested
by the Parent to effect the transfer of the Option Shares from Xx. Xxxxxxxxx to
the Parent.
6. Voting. The Parent agrees that if it or any of its Affiliates acquire
any Option Shares pursuant to Section 5 of this Agreement, and if any vote or
consent is requested in connection with any Acquisition Proposal or Superior
Proposal relating to the termination of the Merger Agreement that caused the
Option to become exercisable, then the Option Share Purchaser will vote the
Option Shares as directed by Xx. Xxxxxxxxx.
7. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Parent hereby irrevocably grants to, and appoints, the
Company and Xxx X. Xxxx, Chief Executive Officer of the Company, and Xxxxx X.
Xxxxxx, Chief Financial Officer of the Company, in their respective capacities
as officers of the Company, and any individual who shall hereafter succeed to
any such office of the Company, and each of them individually, the proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of the Option Share Purchaser, to vote the Option Shares, or grant a
consent or approval in respect of the Option Shares, as provided in Section 6.
49
(b) The Parent represents that any proxies heretofore given in
respect of the Option Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) The Parent hereby affirms that the irrevocable proxy set forth in
this Section 7 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Parent and any other Option Share Holder under this Agreement.
The Parent hereby further affirms that the irrevocable proxy is coupled with an
interest sufficient in law to support an irrevocable power and may under no
circumstances be revoked. The Parent hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such
irrevocable proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 41 of the Massachusetts Business Corporation Law.
8. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of any
or all of the Stockholder's Shares shall pass, whether by operation of law or
otherwise, including without limitation the Stockholder's successors or assigns.
In the event of any stock split, stock dividend, merger, reorganization,
recapitalization or other change in the capital structure of the Company
affecting the Company Capital Stock, or the acquisition of additional shares of
Company Capital Stock or other voting securities of the Company by any
Stockholder, the number of the Stockholder's Shares subject to the terms of this
Agreement shall be adjusted appropriately and this Agreement and the obligations
hereunder shall attach to any additional shares of Company Capital Stock or
other voting securities of Company issued to or acquired by the Stockholder. In
addition, each Stockholder agrees that in the event that Xx. Xxxx enters into an
agreement with Parent, at any time after the date hereof and prior to the
closing under the Merger Agreement, pursuant to which Xx. Xxxx grants an option
(the "Xxxx Option") to Parent to purchase Stockholder's Shares of Xx. Xxxx on
---- ------
terms identical to those for the Option granted by Xx. Xxxxxxxxx hereunder, and
either free of the restrictions imposed by the Pledge Agreement or requiring the
pledgee under the Pledge Agreement to observe the terms of the Xxxx Option in a
form satisfactory to the Parent, then the number of Stockholder's Shares of Xx.
Xxxxxxxxx subject to the Option hereunder shall be reduced by the number of
Stockholder's Shares subject to the Xxxx Option.
9. Legends. Each Stockholder agrees that at the request of the Purchaser
such Stockholder will place a legend, referring to this Agreement and in a form
reasonably satisfactory to the Parent, on the certificates representing such
Stockholder's Shares.
10. Further Assurances. Each Stockholder shall, upon request of Parent,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by Parent to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote the Stockholder's Shares as
contemplated by Section 4 in Parent and the other irrevocable proxies described
therein at the expense of Parent.
50
11. Termination. This Agreement, and all rights and obligations of the
parties hereunder shall terminate, and the Option shall expire, upon the
termination of the Merger Agreement pursuant to and in accordance with Section
6.1(a), (b), (e), (f), (g) or (h) thereof or upon consummation of the Merger (as
defined in the Merger Agreement). In the event of a termination of the Merger
Agreement pursuant to Section 6.1(c) or Section 6.1(d) thereof, (i) this
Agreement and the rights and obligations of the parties hereunder shall
terminate if the Option is not timely exercised pursuant to Section 5, (ii) this
Agreement and the rights and obligations of the parties hereunder, other than
the Stockholders' obligations under Sections 2, 3(b) and 4, shall survive and
remain in full force and effect if the Option is timely exercised pursuant to
Section 5 and (iii) the obligations of the Stockholders under Sections 2, 3(b)
and 4 shall terminate effective upon such termination of the Merger Agreement.
12. Enforcement Costs. If any party institutes an action for the
enforcement of this Agreement, the prevailing party shall be entitled to
reimbursement on demand of all costs and expenses of such action including
reasonable legal fees.
13. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to them in the Merger
Agreement.
(b) All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice): (i) if to Parent, to the address provided in
the Merger Agreement; and (ii) if to a Stockholder, to its address shown below
its signature on the last page hereof.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, each
of which shall be considered an original hereof and one and the same agreement.
(e) This Agreement (including the documents and instruments referred
to herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
51
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties, except as expressly contemplated by the proviso to
Section 3(b). Any assignment in violation of the foregoing shall be void.
(h) Each Stockholder agrees that irreparable damage would occur and
that Parent would not have any adequate remedy at law in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that Parent
shall be entitled to an injunction or injunctions to prevent breaches by any
Stockholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit such party to the personal jurisdiction of
any Federal court located in the Commonwealth of Massachusetts or any
Commonwealth of Massachusetts state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (ii) agrees that
such party will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and (iii) agrees that such
party will not bring any action relating to this Agreement or any of the
transactions contemplated hereby in any court other than a Federal court sitting
in the Commonwealth of Massachusetts or a Massachusetts state court. The
foregoing remedies are in addition to, and not in lieu of, any payment required
to be made by the Company pursuant to the terms of the Merger Agreement.
(i) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
14. Special Covenant. Each of the Stockholders agrees that, effective
upon consummation of the Merger, (i) the Company shall be released from any
obligation it may have to provide medical and dental coverage to the
Stockholders and their families and (ii) such Stockholder will indemnify the
Parent, the Sub and the Company from any and all claims by such Stockholder or
any member of his family with respect to the medical and dental coverage
referred to above.
52
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement as of the day and year first above written.
LIQUID HOLDINGS INC.
By:
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
and Chief Financial Officer
STOCKHOLDERS:
----------------------------------------
Name: Xxxx Xxxxxxxxx
Address: 000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Number of Shares:
Beneficially Owned: 864,000
Number of Shares
Subject to Option: 543,333, subject to
adjustment as provided
in Section 8 of this
Agreement
----------------------------------------
Name: Xxxxxxx X. Xxxx
Address: 00 Xxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Number of Shares
Beneficially Owned: 450,000
Number of Shares
Subject to Option: none (0)
53
EXHIBIT B
COMPANY OPTION AGREEMENT
------------------------
THIS COMPANY OPTION AGREEMENT (this "Agreement") is made and entered into
---------
as of September 27, 1999, by and among Liquid Holdings Inc., a Delaware
corporation ("Parent"), and Xxxxxxxxx & Xxxx, Inc., a Massachusetts corporation
------
(the "Company").
-------
WHEREAS, the Stockholders desire that Parent, Liquid Acquisition Corp., a
Massachusetts corporation and wholly owned subsidiary of Parent ("Sub"), and the
---
Company enter into an Agreement and Plan of Merger, dated as of the date hereof
(as the same may be amended or supplemented, the "Merger Agreement") with
----------------
respect to the merger of Sub with and into the Company (the "Merger"); and
------
WHEREAS, the Company is executing this Agreement as an inducement to Parent
to enter into and execute, and to cause Sub to enter into and execute, the
Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by Parent
and Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
1. Representations and Warranties. The Company represents and warrants to
Parent as follows:
(a) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application respecting creditors' rights and
by general equitable principles.
(b) Neither the execution and delivery of this Agreement nor the
consummation by the Company of the transactions contemplated hereby will
result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Company is a party or bound or to
which the Option Shares (as defined in Section 2) are subject.
Consummation by the Company of the transactions contemplated hereby will
not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or regulation
applicable to the Company or the Option Shares, except as may be noted in
Section 2.5 of the Company Disclosure Letter (as defined in the Merger
Agreement).
(c) The Company has taken all necessary corporate action to authorize
54
and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option (as
defined in Section 2), that number of shares of the Company's Common Stock,
par value $.01 per share ("Common Stock"), equal to the maximum number of
------------
shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be duly
authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
2. Option to Acquire Shares. (a) In the event that the Merger Agreement
is terminated by the Sub in accordance with Section 6.1(c) of the Merger
Agreement or by the Company in accordance with Section 6.1(d) of the Merger
Agreement, at the option of the Parent, the Company shall issue to the Parent or
any Affiliate (as defined in the Merger Agreement) of the Parent 271,667 shares
of Common Stock (the "Option Shares") at a purchase price equal to the Per Share
-------------
Merger Consideration (as defined in the Merger Agreement). This right of the
Parent to acquire shares of Common Stock is sometimes referred to in this
Agreement as the "Option" and the entity purchasing such Option Shares is
------
sometimes referred to as the "Option Share Purchaser". In the event that the
----------------------
Parent is entitled to and wishes to purchase all or some of the Option Shares,
the Parent shall give the Company written notice (the date of which being herein
referred to as the "Notice Date") within fifteen (15) days of the termination of
------ ----
the Merger Agreement specifying (i) the total number of Option Shares it will
purchase, and (ii) a place and date not earlier than three (3) business days nor
later than sixty (60) business days from the Notice Date for the closing of such
purchase (the "Closing"); provided that if prior notification to or approval of
------- --------
any regulatory agency is required in connection with such purchase, the Parent
and the Company shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed; and provided further, that the Parent may, in the written notice
--- ----------------
referred to above, make the sale and purchase of the Option Shares contingent on
the occurrence of the consummation of the transaction that is the subject of the
Acquisition Proposal (as defined in the Merger Agreement) or Superior Proposal
(as defined in the Merger Agreement) relating to any termination pursuant to
Section 6.1(c) or Section 6.1(d) of the Merger Agreement, in which case (i) the
Parent may defer the sale and purchase referred to above up to the time
immediately prior to the consummation of such other transaction and (ii) such
Option shall expire on the one year anniversary of the termination of the Merger
Agreement. The term "business day" for purposes of this Agreement means any
------------
day, excluding Saturdays, Sundays and any other day that is a legal holiday in
the Commonwealth of Massachusetts or a day on which banking institutions in the
Commonwealth of Massachusetts are authorized by law or executive order to close.
At the Closing, the Option Share Purchaser shall pay to the Company the
aggregate purchase price for the Shares purchased from the Company pursuant to
this Section 2 in immediately available funds by a wire transfer to a bank
account designated by the
55
Option Share Purchaser. At such Closing, simultaneously with the delivery of
immediately available funds as provided in this Section 2, the Company shall
deliver to the Option Share Purchaser the certificate or certificates
representing the number of Option Shares to be purchased and any other documents
reasonably requested by the Option Share Purchaser to effect the issuance of the
Option Shares to the Option Share Purchaser. Upon the giving by the Parent to
the Company of the written notice of exercise of the Option and the tender of
the applicable purchase price in immediately available funds, the Option Share
Purchaser shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Option Share
Purchaser. The Company shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Option Share Purchaser or its assignee,
transferee or designee.
(b) Certificates for Option Shares delivered at the Closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The voting of the shares represented by this certificate is subject to
certain provisions of an agreement between the original holder hereof and
the Company and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of the Company and will be provided to the holder hereof without
charge upon receipt by the Company of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
---- ---
shall be removed by delivery of substitute certificate(s) without such reference
if the Option Share Purchaser (or its transferee) shall have delivered to the
Company a copy of a letter from the staff of the Securities and Exchange
Commission ("SEC"), or an opinion of counsel, in form and substance reasonably
---
satisfactory to the Company, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Option Shares have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances that do
not require the retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other legend
as may be required by law.
(c) The Company agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
56
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed hereunder
by the Company; and (iii) promptly to take all action as may from time to time
be required (including complying with all premerger notification, reporting and
waiting period requirements specified in 15 U.S.C. Sec. 18a and regulations
promulgated thereunder or to any other federal or state regulatory authority
that is necessary before the Option may be exercised, cooperating fully with the
Parent in preparing such applications or notices and providing such information
to such federal or state regulatory authority as they may require) of the
Company as issuer in order to permit the Option Share Purchaser to exercise the
Option and in order to permit the Company to duly and effectively issue shares
of Common Stock pursuant hereto.
(d) The number of shares of Common Stock purchasable upon the exercise of
the Option and the purchase price for the Option Shares shall be subject to
adjustment from time to time as provided in this paragraph (d). In the event of
any change in, or distributions in respect of, the Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or in respect
of the Common Stock that would be prohibited under the terms of the Merger
Agreement (whether or not then in effect), or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the purchase price
for the Option Shares shall be appropriately adjusted in such manner as shall
fully preserve the economic benefits provided hereunder and proper provision
shall be made in any agreement governing any such transaction to provide for
such proper adjustment and the full satisfaction of the Company's obligations
hereunder.
(e) Parent agrees with and covenants to the Company that, in the event of
the exercise of the Option pursuant to the terms hereof, Parent shall cooperate
with the Company in the preparation of any necessary filings with regulatory
authorities concerning the Alcoholic Beverage Licenses (as defined in the Merger
Agreement), including amendments to existing filings, and any related requests
for approvals.
3. Registration.
------------
(a) As used in this Agreement, "Registrable Securities" means each of the
----------------------
Option Shares issued to the Option Share Purchaser hereunder or shares of Common
Stock acquired upon exercise of the option granted pursuant to the Stockholder
Agreement (as defined in the Merger Agreement) and any other securities issued
in exchange for, or issued as dividends or otherwise on or in respect of, any of
such Option Shares or such other shares of Common Stock.
(b) At any time or from time to time within three years of the first
Closing, the Option Share Purchaser may make a written request to the Company
for registration under and in accordance with the provisions of the 1933 Act
with respect to all or any part of the Registrable Securities (a "Demand
------
Registration"). As soon as reasonably practicable after the Option Share
------------
Purchaser's request for a Demand Registration, the Company shall file one or
more registration statements on any appropriate form with
57
respect to all of the Registrable Securities requested to be so registered;
provided that the Company will not be required to file any such registration
statement during any period of time (not to exceed 60 days after such request in
the case of clause (i) below or 90 days in the case of clauses (ii) or (iii)
below) when (i) the Company is in possession of material non-public information
which it reasonably believes would be detrimental to be disclosed at such time
and, in the written opinion of outside counsel to the Company, such information
would have to be disclosed if a registration statement were filed at that time,
(ii) the Company is required under the 1933 Act to include audited financial
statements for any period in such registration statement that are not yet
available for inclusion therein, or (iii) the Company determines, in its
reasonable judgment, that such registration would interfere with any financing,
acquisition or other material transaction involving the Company or any of its
affiliates. The Company shall use its best efforts to have the Demand
Registration declared effective as soon as reasonably practicable after such
filing and to keep the Demand Registration continuously effective for a period
of at least ninety days following the date on which the Demand Registration is
declared effective; provided that, if for any reason the effectiveness of any
Demand Registration is suspended, the required period of effectiveness shall be
extended by the aggregate number of days of each such suspension; and provided,
further, that the effectiveness of any Demand Registration may be terminated if
and when all of the Registrable Securities covered thereby shall have been sold.
The Option Share Purchaser shall be entitled to two Demand Registrations. The
Option Share Purchaser shall have the right to select the managing underwriter,
if any, which shall be reasonably acceptable to the Company and the Company
shall enter into an underwriting agreement in customary form.
(c) If at any time within three years of the first Closing, the Company
proposes to file a registration statement under the 1933 Act with respect to any
shares of any class of its equity securities to be sold for the account of the
Company, and the registration form to be used may be used for the registration
of Registrable Securities, the Company shall in each case give written notice of
such proposed filing to the Option Share Purchaser at least twenty days before
the anticipated filing date, and the Option Share Purchaser shall have the right
to include in such registration such number of Registrable Securities as the
Option Share Purchaser may request (such request to be made by written notice to
the Company within fifteen days following the Option Share Purchaser's receipt
from the Company of such notice of proposed filing). The Company shall use its
best efforts to cause the managing underwriter of any proposed underwritten
offering to permit the Option Share Purchaser to be included in such offering on
the same terms and conditions as any similar securities of the Company included
therein. Notwithstanding the foregoing, if the managing underwriter of such
offering advises the Company that, in the reasonable opinion of such
underwriter, the amount of Registrable Securities which the Option Share
Purchaser requests to be included in such offering would materially and
adversely affect the success of such offering, then the amount of Registrable
Securities to be offered shall be reduced to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such underwriter; provided, however, that if the amount of
Registrable Securities shall be so reduced, the Company shall not be permitted
to include in such registration any
58
securities of the Company other than securities to be issued by the Company and
Registrable Securities.
(d) In the event that Registrable Securities are included in a "piggyback"
registration statement pursuant to paragraph (c) hereof, the Option Share
Purchaser agrees not to effect any public sale or distribution of the issue
being registered or a similar security of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 under the 1933 Act, during the ten business days prior
to, and during the 90-day period beginning on, the effective date of such
registration statement (except as part of such registration), if and to the
extent timely notified in writing by the managing underwriter. In the event
that the Option Share Purchaser requests a Demand Registration or if Registrable
Securities are included in a "piggyback" registration pursuant to paragraph (c)
hereof, the Option Share Purchaser and Company agree not to effect any public
sale or distribution of the issue being registered or a similar security of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the period from such request until 90 days after the
effective date of such registration statement (except as part of such
registration statement or pursuant to a registration of securities on Form S-4
or Form S-8 or any successor form).
(e) The registrations effected under this Section 3 shall be effected at
the Company's expense except for underwriting commissions allocable to the
Registrable Securities. The Company shall indemnify and hold harmless the
Option Share Purchaser, its affiliates and controlling persons and their
respective officers, directors, agents and representatives from and against any
and all losses, claims, damages, liabilities and expenses (including, without
limitation, all out-of-pocket expenses, investigative expenses, expenses
incurred with respect to any judgment and fees and disbursements of counsel and
accountants) arising out of or based upon any statements contained in or
omission or alleged omissions from, each registration statement (and related
prospectus) filed pursuant to this Section 3; provided, however, that the
-----------------
Company shall not be liable in any such case to the Option Share Purchaser or
any affiliate or controlling person of the Option Share Purchaser or any of
their respective officers, directors, agents or representatives to the extent
that any such loss, claim, damage, liability (or action or preceding in respect
thereof) or expense arises out of or is based upon an untrue statement or
omission or alleged omission made in such registration statement or prospectus
in reliance upon, and in conformity with, written information furnished to the
Company specifically for use in the preparation thereof by the Option Share
Purchaser, such affiliate, controlling person, officer, director, agent or
representative, as the case may be.
4. Voting. The Parent agrees that if it or any of its Affiliates acquire
any Option Shares pursuant to Section 2 of this Agreement, and if any vote or
consent is requested in connection with any Acquisition Proposal or Superior
Proposal relating to the termination of the Merger Agreement that caused the
Option to become exercisable, then the Option Share Purchaser will vote the
Option Shares as directed by the Board of Directors of the Company.
59
5. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Parent hereby irrevocably grants to, and appoints, the Company and
Xxx X. Xxxx, Chief Executive Officer of the Company, and Xxxxx X. Xxxxxx, Chief
Financial Officer of the Company, in their respective capacities as officers of
the Company, and any individual who shall hereafter succeed to any such office
of the Company, and each of them individually, the proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of the
Option Share Purchaser, to vote the Option Shares, or grant a consent or
approval in respect of the Option Shares as provided in Section 4.
(b) The Parent represents that any proxies heretofore given in respect of
the Option Shares are not irrevocable, and that any such proxies are hereby
revoked.
(c) The Parent hereby affirms that the irrevocable proxy set forth in this
Section 4 is given in connection with the execution of the Merger Agreement, and
that such irrevocable proxy is given to secure the performance of the duties of
the Parent and any other Option Share Holder under this Agreement. The Parent
hereby further affirms that the irrevocable proxy is coupled with an interest
sufficient in law to support an irrevocable power and may under no circumstances
be revoked. The Parent hereby ratifies and confirms all that such irrevocable
proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 41 of the Massachusetts Business Corporation Law.
6. Further Assurances. The Company shall, upon request of Parent,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by Parent to be necessary or desirable to carry out the
provisions of this Agreement.
7. Termination. This Agreement, and all rights and obligations of the
parties hereunder shall terminate, and the Option shall expire, upon the
termination of the Merger Agreement pursuant to and in accordance with Section
6.1(a), (b), (e), (f), (g) or (h) thereof or upon consummation of the Merger (as
defined in the Merger Agreement). In the event of a termination of the Merger
Agreement pursuant to Section 6.1(c) or Section 6.1(d) thereof, (i) this
Agreement and the rights and obligations of the parties hereunder shall
terminate if the Option is not timely exercised pursuant to Section 2 and (ii)
this Agreement and the rights and obligations of the parties hereunder shall
survive and remain in full force and effect if the Option is timely exercised
pursuant to Section 2.
8. Enforcement Costs. If any party institutes an action for the
enforcement of this Agreement, the prevailing party shall be entitled to
reimbursement on delivered of all costs and expenses of such action including
reasonable legal fees.
9. Miscellaneous.
60
(a) Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to them in the Merger Agreement.
(b) All notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice).
(c) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(d) This Agreement may be executed in two or more counterparts, each of
which shall be considered an original hereof and one and the same agreement.
(e) This Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and shall inure to
the benefit of the parties' respective successors and assigns.
(f) This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise, by any of the parties without the prior written consent of the
other parties, except that the rights of an Option Share Purchaser may be
assigned in connection with a transfer of the Option Shares. Any assignment in
violation of the foregoing shall be void.
(h) The Company agrees that irreparable damage would occur and that Parent
would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that Parent
shall be entitled to an injunction or injunctions to prevent breaches by the
Company of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of any
Federal court located in the Commonwealth of Massachusetts or any Commonwealth
of Massachusetts state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to
61
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court and (iii) agrees that such party will not bring any action
relating to this Agreement or any of the transactions contemplated hereby in any
court other than a Federal court sitting in the Commonwealth of Massachusetts or
a Massachusetts state court. The foregoing remedies are in addition to, and not
in lieu of, any payment required to be made by the Company pursuant to the terms
of the Merger Agreement.
(i) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
62
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement as of the day and year first above written.
LIQUID HOLDINGS INC.
By:
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
and Treasurer
XXXXXXXXX & XXXX, INC.:
By:
----------------------------------------
Name: Xxx X. Xxxx
Address: 000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
63
FEDERAL IDENTIFICATION FEDERAL IDENTIFICATION
NO. 00-0000000 NO. 00-0000000
---------- ----------
Exhibit C
---------
The COMMONWEALTH of MASSACHUSETTS
Xxxxxxx Xxxxxxx Xxxxxx
Secretary of the Commonwealth
Xxx Xxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000-0000
ARTICLES OF *MERGER
(General Laws, Chapter 156B, Section 78)
*merger of Xxxxxxxxx & Xxxx, Inc.
----------------------------------
and Liquid Acquisition Corp.
----------------------------------
----------------------------------
----------------------------------
----------------------------------
the constituent corporations, inc.
Xxxxxxxxx & Xxxx, Inc.
----------------------------------
*one of the constituent corporations
The undersigned officers of each of the constituent corporations certify under
the penalties of perjury as follows:
1. An agreement of *merger has been duly adopted in compliance with the
requirements of General Laws, Chapter 156B, Section 78, and will be kept as
provided by Subsection (d) thereof. The *surviving corporation will furnish a
copy of said agreement to any of its stockholders, or to any person who was a
stockholder of any constituent corporation, upon written request and without
charge.
2. The effective date of the *merger determined pursuant to the agreement of
*merger shall be the date approved and filed by the Secretary of the
Commonwealth. If a later effective date is desired, specify such date which
shall not be more than thirty days after the date of filing:
3. (For a merger)
*The following amendments to the Articles of Organization of the surviving
corporation have been effected pursuant to the agreement of merger:
[To be completed prior to the Effective Time pursuant to Section 1.4
of the Merger Agreement.]
*Delete the inapplicable word. **If there are no provisions state "None".
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper with a left margin of at least 1 inch. Additions to more than one article
may be made on a single sheet as long as each article requiring each addition is
clearly indicated.
(For a consolidation)
(a) The purpose of the resulting corporation is to engage in the following
business activities:
(b) State the total number of shares and the par value, if any, of each class of
stock which the resulting corporation is authorized to issue.
--------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
--------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
--------------------------------------------------------------------------------
Common: Common:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Preferred: Preferred:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
**(c) If more than one class of stock is authorized, state a distinguishing
designation for each class and provide a description of the preferences, voting
powers, qualifications, and special or relative rights or privileges of each
class and of each series then established.
**(d) The restrictions, if any, on the transfer of stock contained in the
agreement of consolidation are:
**(e) Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
**If there are no provisions state "None".
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF *MERGER
(General Laws, Chapter 156B, Section 78)
===============================================
I hereby approve the within Articles of *Merger
and, the filing fee in the amount of $________,
having been paid, said articles are deemed to
have been filed with me this _________
day of ______________________, 19____.
Effective date:__________________________
XXXXXXX XXXXXXX XXXXXX
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
[To be completed]
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
Telephone:
-------------------------------------
4. The information contained in Item 4 is not a permanent part of the Articles
of Organization of the *surviving corporation.
(a) The street address of the *surviving corporation in Massachusetts is: (post
office boxes are not acceptable)
000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000
(b) The name, residential address, and post office address of each director and
officer of the *surviving corporation is:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President:
Treasurer: [To be updated prior to the Effective Time]
Clerk:
Directors:
(c) The fiscal year (i.e. tax year) of the *surviving corporation shall end on
the last day of the month of:
December
(d) The name and business address of the resident agent, if any, of the
*surviving corporation is:
None
The undersigned officers of the several constituent corporations listed above
further state under the penalties of perjury as to their respective
corporations that the agreement of *merger has been duly executed on behalf of
such corporation and duly approved by the stockholders of such corporation in
the manner required by General Laws, Chapter 156B, Section 78.
-------------------------------------------------, *President/*Vice President,
----------------------------------------------------, *Clerk/*Assistant Clerk,
of Xxxxxxxxx & Xxxx, Inc.
-----------------------------------------------------------------------------
(Name of constituent corporation)
-------------------------------------------------, *President/*Vice President,
----------------------------------------------------, *Clerk/*Assistant Clerk,
of Liquid Acquisition Corp.
-----------------------------------------------------------------------------
(Name of constituent corporation)
*Delete the inapplicable words.
Exhibit D to
Merger Agreement
----------------
ALCOHOL BEVERAGE LICENSING REQUIREMENTS
---------------------------------------
PRE-CLOSING LICENSE APPROVALS
-----------------------------
For each of the following states, a new license/permit or approval of
change of ownership will have to be obtained from the applicable licensing
authority or authorities prior to closing; provided, however, that a conditional
-------- -------
approval may be obtained in those states in which a final approval prior to
closing is not permitted under applicable law, so long as the only condition for
final approval is the consummation of the closing under the Merger Agreement:
Arizona
California
Connecticut
Colorado
Florida
Illinois
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Texas
Xxxxxxxx
Xxxxxxxxxx State
Processing of license applications may take as much as 90 days from the
date of filing. The parties will work to make the required filing within 10 to
14 days after signing the Merger Agreement, with follow-up amendments as
required.
POST-CLOSING
------------
Appropriate notices or registration forms will have to be filed post-
closing in the following states to update information to permit continued
shipment into those states:
Louisiana
New Hampshire
Oregon
Rhode Island
68
