17(c)(12)
EARNOUT AGREEMENT
Earnout Agreement, dated as of June 9, 2000, between Saratoga
Beverage Group, Inc., a Delaware corporation (the "Company"), and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ (the "Stockholder").
WHEREAS, the Company and the Stockholder are parties to the
Stockholders Agreement, dated as of January 5, 2000 (as amended from time to
time, the "Stockholders Agreement"; capitalized terms used herein without
definition shall have the meanings set forth in the Stockholders Agreement),
setting forth certain corporate governance provisions of the Company and certain
rights and obligations that attach to the ownership of common stock, par value
$0.01 per share (the "Common Stock") of the Company;
WHEREAS, the Company and the Stockholder are also parties to the
Registration Rights Agreement, dated as of January 5, 2000 (as amended from time
to time, the "Registration Rights Agreement"), pursuant to which the Stockholder
is entitled to certain registration rights; and
WHEREAS, the Company and the Stockholder desire to set forth certain
additional rights and obligations that shall attach to the ownership of certain
of the Common Stock held by the Stockholder;
NOW THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Rollover Shares. The Shareholder and the Company agree that
143,393 of the Shareholder's 205,000 Rollover Shares (as defined herein) will be
subject to an earn out as provided in this Agreement.
2. Legend. The Stockholder acknowledges that the certificate or
certificates representing the Rollover Shares will bear a legend as set forth in
the Stockholders Agreement and that, such legend will be modified to add
reference to this Agreement.
3. Purchase Right. (a) Immediately prior to the occurrence of the
first NCP Liquidity Event, the Company shall purchase from the Stockholder, and
the Stockholder shall sell to the Company, the Callable Shares owned by the
Stockholder at a per share price of $0.01. The Company shall not be required to
purchase from the Stockholder, and the Stockholder shall not be required to sell
to the Company, any Callable Shares owned by the Stockholder upon the occurrence
of any subsequent NCP Liquidity Event.
(b) The closing for the purchase and sale of the Callable Shares
shall take place immediately prior to the closing of the first NCP Liquidity
Event, at such place and such time as shall be designated by the Company. At
such closing, the Stockholder shall deliver to the Company, in exchange for the
payment by the Company of the purchase price in respect of each Callable Share
owned by the Stockholder, the certificate or certificates representing the
Callable Shares.
(c) "Callable Shares" means 143,393 Rollover Shares.
(d) "Rollover Shares" shall mean the shares of Common Stock held by
the Stockholder immediately after the Closing.
(e) An "NCP Liquidity Event" means any Change of Control, Exit Event
or Public Offering that upon consummation thereof would result in the North
Castle Partners II, L.P. (the "Fund") realizing an internal rate of return on
the portion of its indirect equity investment (the "IRR") in the Company that is
disposed of by the Fund or any partnership controlled by the Fund (a "Controlled
Partnership") or, in the event of a share exchange pursuant to Section 5 (a
"Share Exchange"), the portion of its indirect equity investment in the top tier
holding company for investments by the Fund in the refrigerated juice industry
("Holdco") that does not equal or exceed 25% compounded annually. For purposes
of the foregoing, the IRR shall be measured from the date of such Controlled
Partnership's investment in such disposed-of portion of the equity in (i) the
Company or, (ii) in the event of a Share Exchange, Holdco, which date shall be
deemed to be the date on which such Controlled Partnership invested in any
company that is a constituent part of Holdco, to the date such Controlled
Partnership receives the proceeds of the NCP Liquidity Event. The IRR shall be
calculated, with respect to shares of the Company or Holdco, as the case may be,
by applying a first-in, first-out convention. For purposes of this calculation,
in the event of a Share Exchange in which M. H. Zeiglers and Sons, Inc.
("Zeiglers") becomes Holdco, convertible subordinated debt of Zeiglers shall be
deemed equity that was invested immediately after the Controlled Partnership
acquired common stock of Zeiglers. The Fund's IRR shall be determined in good
faith by the Fund at least 10 days in advance of such Change of Control, Exit
Event or Public Offering, provided that if a majority of the Rollover
Stockholders disagree with such determination, then the Fund's IRR shall be
determined by an independent investment bank or valuation firm (the "Valuation
Firm") selected by the Company and the Rollover Stockholders. If the Company and
the Rollover Stockholders cannot agree on the Valuation Firm within five days of
the date of determination of the Fund's IRR, then the Valuation Firm shall be
chosen by the two valuation firms selected by the Company and the Rollover
Stockholders. The fees and expenses of the Valuation Firm shall be borne equally
by the Company and the Rollover Stockholders. The Company and the Stockholder
agree that the determination of the Valuation Firm shall be final and binding.
2
4. Other Agreements. (a) The Stockholder and the Rollover Shares
shall be subject to the rights and obligations of the Stockholders Agreement and
the Registration Rights Agreement, provided that in the event of a conflict
between the between the provisions of such agreements and this Earnout
Agreement, the terms of this Earnout Agreement shall control.
(b) The Stockholder may not sell, transfer, pledge, encumber or
otherwise dispose of any Covered Security except in accordance with the
Stockholders Agreement and the Registration Rights Agreement and provided that
the transferee of such Covered Security agrees in writing to be bound by this
Earnout Agreement. Any sale, transfer, pledge, encumbrance or other disposition
of any Covered Security other than as permitted by this Earnout Agreement shall
be void ab initio and of no effect.
5. Share Exchange. At the request of NCP-SBG, the Stockholder shall
exchange his Rollover Shares for shares of capital stock of an equivalent value
of Holdco. Upon any Share Exchange, Holdco shall succeed to the rights and
obligations of the Company hereunder and under the Stockholders Agreement and
the Registration Rights Agreement. The Company will endeavor to effect any Share
Exchange in a manner that is tax efficient for all of its stockholders.
6. Board Composition. Notwithstanding anything to the contrary
contained in the Stockholders Agreement, so long as there are 800,000 Callable
Shares (such number to be adjusted for any share exchange or conversion, stock
dividend or stock split) outstanding, then the Rollover Stockholders shall be
entitled to nominate at least one director to the board of directors of the
Company or its successor Holdco, as the case may be, and the applicable
Controlled Partnership shall vote its shares of Common Stock to elect such
nominee.
7. Tax Withholding. Whenever any cash payment is to be made
hereunder, the Company shall have the power to withhold, or require the
Stockholder to remit to the Company, an amount sufficient to satisfy the
statutory minimum amount of all Federal, state, and local withholding tax
requirements relating to such transaction, and the Company may defer payment of
cash until such requirements are satisfied.
8. Effectiveness of Agreement; Termination. This Agreement will
become effective upon the occurrence of the Closing under the Recapitalization
Agreement. Once effective, this Agreement may be terminated by either the
Stockholder or the Company by written notice to the other on the first occurring
Change of Control, Exit Event or Public Offering, in each case, that does not
give rise to an NCP Liquidity Event. Upon termination, this Agreement will be of
no further force or effect.
3
9. Miscellaneous. This Earnout Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York, without giving effect to the conflict of laws
rules thereof to the extent any such rules would require or permit the
application of the laws of any other jurisdiction, except to the extent that the
corporate law of the state of incorporation of the Company specifically and
mandatorily applies.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Earnout Agreement as of the date first written above.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: CEO
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
4
