Exhibit 10.1
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AGREEMENT AND PLAN OF MERGER
by and between
THE HAIN CELESTIAL GROUP, INC.
and
SPECTRUM ORGANIC PRODUCTS, INC.
dated as of
August 23, 2005
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TABLE OF CONTENTS
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Page
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ARTICLE I.
MERGER
SECTION 1.1. Formation of Parent Subsidiary..................................1
SECTION 1.2. The Merger......................................................2
SECTION 1.3. Closing.........................................................2
SECTION 1.4. Filing..........................................................2
SECTION 1.5. Effective Time of the Merger....................................2
SECTION 1.6. Plan of Reorganization..........................................2
ARTICLE II.
ARTICLES OF ORGANIZATION; BY-LAWS; MANAGERS AND OFFICERS
SECTION 2.1. Articles of Organization........................................2
SECTION 2.2. Operating Agreement.............................................2
SECTION 2.3. Managers and Officers of the Surviving Company..................3
ARTICLE III.
EFFECT OF THE MERGER; CONVERSION OF SHARES
SECTION 3.1. Effect on Capital Stock.........................................3
(a) Parent Subsidiary Membership Interests..........................3
(b) Conversion of Company Shares....................................3
(c) Company Stock Options...........................................4
(d) Company Warrant.................................................4
(e) Dissenting Shares...............................................4
(f) Anti-Dilution...................................................5
(g) Stock Transfer Books............................................5
SECTION 3.2. Exchange of Certificates.................................5
(a) Exchange Agent..................................................5
(b) Exchange Procedures.............................................6
(c) Exchange of Certificates........................................6
(d) Distributions with Respect to Unsurrendered Certificates........6
(e) No Fractional Shares............................................7
(f) No Liability....................................................7
(g) Withholding Rights..............................................7
(h) Lost Certificates...............................................7
(i) Termination of Exchange Fund....................................8
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ARTICLE IV.
CERTAIN EFFECTS OF THE MERGER
SECTION 4.1. Effect of the Merger............................................8
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.1. Organization and Qualification..................................8
SECTION 5.2. No Subsidiaries.................................................9
SECTION 5.3. Capitalization; Options.........................................9
SECTION 5.4. Authority Relative to This Agreement...........................10
SECTION 5.5. No Violations, etc.............................................10
SECTION 5.6. Opinion of Financial Advisor...................................11
SECTION 5.7. Board Recommendation...........................................11
SECTION 5.8. Finders or Brokers.............................................11
SECTION 5.9. Commission Filings; Financial Statements.......................11
SECTION 5.10. Absence of Undisclosed Liabilities.............................12
SECTION 5.11. Absence of Changes or Events...................................12
SECTION 5.12. Litigation.....................................................13
SECTION 5.13. Contracts......................................................14
SECTION 5.14. Real Property..................................................15
SECTION 5.15. Tangible Assets................................................16
SECTION 5.16. Labor Matters..................................................16
SECTION 5.17. Compliance with Law............................................16
SECTION 5.18. Permits, Licenses and Franchises...............................17
SECTION 5.19. Intellectual Property..........................................17
SECTION 5.20. Taxes..........................................................17
SECTION 5.21. Employee Benefit Plans; ERISA..................................19
SECTION 5.22. Environmental Matters..........................................20
SECTION 5.23. Bank Accounts; Indebtedness....................................22
SECTION 5.24. Customers and Suppliers........................................22
SECTION 5.25. Accounts Receivable............................................22
SECTION 5.26. Inventory......................................................22
SECTION 5.27. Product Warranty...............................................23
SECTION 5.28. Product Recalls................................................23
SECTION 5.29. Insurance......................................................23
SECTION 5.30. Reorganization.................................................23
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 6.1. Organization and Qualification.................................24
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SECTION 6.2. Capitalization.................................................24
SECTION 6.3. Authority Relative to This Agreement...........................24
SECTION 6.4. No Violations, etc.............................................25
SECTION 6.5. Commission Filings; Financial Statements.......................26
SECTION 6.6. Reorganization.................................................26
SECTION 6.7. Absence of Parent Material Adverse Effect......................26
ARTICLE VII.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.1. Conduct of Business of the Company Pending the Merger..........26
SECTION 7.2. Conduct of Business of Parent Pending the Merger...............29
ARTICLE VIII.
COVENANTS AND AGREEMENTS
SECTION 8.1. Preparation of the Registration Statement;
Shareholder Meeting...........................................29
SECTION 8.2. SEC Reports....................................................30
SECTION 8.3. Additional Agreements; Cooperation.............................31
SECTION 8.4. Publicity......................................................31
SECTION 8.5. No Solicitation................................................32
SECTION 8.6. Access to Information..........................................34
SECTION 8.7. Notification of Certain Matters................................34
SECTION 8.8. Indemnification and Insurance..................................34
SECTION 8.9. Fees and Expenses..............................................35
SECTION 8.10. Affiliate Letters..............................................35
SECTION 8.11. Nasdaq Listing.................................................35
SECTION 8.12. Shareholder Litigation.........................................35
SECTION 8.13. Company Employees..............................................36
SECTION 8.14. Tax Treatment..................................................36
SECTION 8.15. Assignment of Life Insurance...................................36
ARTICLE IX.
CONDITIONS TO CLOSING
SECTION 9.1. Conditions to Each Party's Obligation to Effect the Merger.....36
(a) Company Shareholder Approval...................................36
(b) No Injunctions or Restraints...................................36
(c) Nasdaq Listing.................................................37
SECTION 9.2. Conditions to Obligations of Parent............................37
(a) Representations and Warranties.................................37
(b) Performance of Obligations of the Company......................37
(c) No Company Material Adverse Effect.............................37
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(d) Dissenters' Rights.............................................37
(e) Consents and Approvals.........................................37
(f) Payoff Letters.................................................38
(g) Tax Opinion....................................................38
SECTION 9.3. Conditions to Obligations of the Company.......................38
(a) Representations and Warranties.................................38
(b) Performance of Obligations of Parent and Parent Subsidiary.....38
(c) Consents and Approvals.........................................38
(d) Dissenters' Rights.............................................38
(e) Tax Opinion....................................................38
(f) No Parent Material Adverse Effect..............................39
ARTICLE X.
TERMINATION
SECTION 10.1. Termination by Mutual Consent.................................39
SECTION 10.2. Termination by Either Parent or the Company...................39
SECTION 10.3. Termination by Parent.........................................39
SECTION 10.4. Termination by the Company....................................40
SECTION 10.5. Effect of Termination.........................................41
SECTION 10.6. Payments Following Termination................................41
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. Nonsurvival of Representations and Warranties.................41
SECTION 11.2. Waiver........................................................41
SECTION 11.3. Notices.......................................................42
SECTION 11.4. Counterparts..................................................43
SECTION 11.5. Interpretation................................................43
SECTION 11.6. Amendment.....................................................47
SECTION 11.7. No Third Party Beneficiaries..................................47
SECTION 11.8. Governing Law.................................................47
SECTION 11.9. Enforcement...................................................47
SECTION 11.10. Entire Agreement..............................................47
SECTION 11.11. No Recourse Against Others....................................47
SECTION 11.12. Validity......................................................47
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EXHIBITS
EXHIBIT A -- Form of Company Affiliate Letter
EXHIBIT B -- Form of Tax Representation Letters
EXHIBIT C -- Form of Legal Opinions
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 23, 2005, by and between
The Hain Celestial Group, Inc., a Delaware corporation ("Parent"), and Spectrum
Organic Products, Inc., a California corporation (the "Company"). Certain terms
used herein are defined in Section 11.5 below.
W I T N E S S E T H :
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WHEREAS, the Boards of Directors of each of Parent and the Company have
approved the merger (the "Merger") of the Company with and into a wholly owned
direct subsidiary of Parent, to be formed for the purpose thereof ("Parent
Subsidiary"), upon the terms and subject to the conditions set forth herein and
in accordance with the California General Corporation Law ("CGCL") and the
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Limited Liability Company Act ("CLLCA") of the state of
California;
WHEREAS, in furtherance thereof it is proposed that each outstanding share
of common stock, without par value, of the Company (the "Company Shares") will
be converted into the right to receive the Merger Consideration upon the terms
and conditions set forth in this Agreement;
WHEREAS, as inducements to the Company and Parent entering into this
Agreement and incurring the obligations set forth herein, and contemporaneously
with the execution and delivery of this Agreement, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ has
agreed to enter into a voting agreement pursuant to which, among other things,
he will vote certain of his Company Shares in favor of this Agreement and to
approve the principal terms of the Merger and will agree to restrictions on
transfer of their Company Shares;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I.
MERGER
SECTION 1.1. Formation of Parent Subsidiary. Parent shall cause Parent
Subsidiary to be formed as a limited liability company under the CLLCA. Parent
Subsidiary will be formed solely to facilitate the Merger and the transactions
contemplated thereby and will conduct no business or activity, and have no
assets or liabilities, other than in connection with the Merger. Parent will
cause Parent Subsidiary to execute and deliver a joinder to this Agreement
pursuant to Section 1113 of the CGCL and Section 17551 of the CLLCA and will
cause a written consent of the sole member of Parent Subsidiary, to be executed
approving the execution, delivery and performance of this Agreement by Parent
Subsidiary.
SECTION 1.2. The Merger. At the Effective Time, the Company shall be merged
with and into Parent Subsidiary as provided herein. Thereupon, the existence of
Parent Subsidiary, with all its purposes, powers and objects, shall continue
unaffected and unimpaired by the Merger, and the corporate identity and
existence, with all the purposes, powers and objects, of the Company shall be
merged with and into Parent Subsidiary and Parent Subsidiary as the limited
liability company surviving the Merger (hereinafter sometimes referred to as the
"Surviving Company") shall continue its existence under the laws of the State of
California.
SECTION 1.3. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., California time, on the later of October 11, 2005, or the
date that is no later than the second business day after satisfaction or waiver
of all the conditions set forth in Article IX, unless another time or date is
agreed to in writing by the parties hereto (the "Closing Date"). The Closing
will be held at the offices of ▇▇▇▇▇▇ Godward LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place is agreed to in writing
by the parties hereto.
SECTION 1.4. Filing. Subject to the provisions of this Agreement, on the
Closing Date, the parties hereto will cause to be filed with the office of the
Secretary of State of the State of California, a certificate of merger (the
"Certificate of Merger"), in such form as required by, and executed in
accordance with, the relevant provisions of the CGCL and CLLCA.
SECTION 1.5. Effective Time of the Merger. The Merger shall be effective at
the time of the filing of the Certificate of Merger, or at such later time
specified in such Certificate of Merger, which time is herein sometimes referred
to as the "Effective Time" and the date thereof is herein sometimes referred to
as the "Effective Date."
SECTION 1.6. Plan of Reorganization. This Agreement constitutes a "plan of
reorganization" within the meaning of Treasury Regulation Section 1.368-2(g).
ARTICLE II.
ARTICLES OF ORGANIZATION; BY-LAWS; MANAGERS AND OFFICERS
SECTION 2.1. Articles of Organization. At the Effective Time, the Articles
of Organization of Parent Subsidiary shall be the Articles of Organization of
the Surviving Company (other than the name of the Surviving Company, which shall
be amended to be "Spectrum Organic Products, LLC" or such other name as Parent
may select), until the same shall thereafter be altered or amended in accordance
with the laws of the State of California.
SECTION 2.2. Operating Agreement. At the Effective Time, the operating
agreement of Parent Subsidiary shall be the operating agreement of the Surviving
Company until the same shall thereafter be altered, amended or repealed in
accordance with the laws of the State of California, the Articles of
Organization of the Surviving Company or said operating agreement.
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SECTION 2.3. Managers and Officers of the Surviving Company. At the Effective
Time, the managers of Parent Subsidiary immediately prior to the Effective Time
shall be the managers of the Surviving Company, each to hold office in
accordance with the Certificate of Formation and Operating Agreement of the
Surviving Company and until their respective successors are duly elected or
appointed and qualified. At the Effective Time, the officers of Parent
Subsidiary immediately prior to the Effective Time shall be the officers of the
Surviving Company, each to hold office in accordance with the Certificate of
Formation and Operating Agreement of the Surviving Company and until their
respective successors are duly elected or appointed and qualified.
ARTICLE III.
EFFECT OF THE MERGER; CONVERSION OF SHARES
SECTION 3.1. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holders of Company
Shares or any shares of capital stock of Parent Subsidiary:
(a) Parent Subsidiary Membership Interests. Each membership interest in
Parent Subsidiary issued and outstanding immediately prior to the
Effective Time shall remain unchanged and shall not be affected by the
Merger.
(b) Conversion of Company Shares. Each issued and outstanding Company
Share (other than Dissenting Shares) (collectively, the "Exchanging
Company Shares") shall be converted into the right to receive the
Merger Consideration. The "Merger Consideration" shall mean an amount
equal to:
(i) an amount of cash (the "Cash Consideration") equal to $0.355
minus the quotient of: (x) any Excess Company Expenses divided by
(y) the aggregate number of Shares represented by the Exchanging
Company Shares, any outstanding Company Stock Options and any
outstanding Company Warrant; and
(ii) a fraction of a share of common stock, par value $.01 per share,
of Parent (the "Parent Common Stock"), valued at the Parent
Common Stock Market Price, worth $0.355 (the "Stock
Consideration"). For purposes of this Agreement, the "Parent
Common Stock Market Price" shall mean $19.80; provided that, if
the average closing sales price for Parent Common Stock for the
ten consecutive business days during which Parent Common Stock is
traded on the Nasdaq National Market (each a "Trading Day"),
beginning 12 Trading Days prior to the Effective Date (the "Ten
Day Average"), is less than $19.80, Parent Common Stock Market
Price shall equal the greater of (i) the Ten Day Average and (ii)
$17.424.
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As of the Effective Time, all such Exchanging Company Shares
shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of
a certificate representing any Exchanging Company Shares shall
cease to have any rights with respect thereto, except the right
to receive, without interest, the Merger Consideration and any
cash in lieu of fractional shares of Parent Common Stock to be
issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 3.2.
(c) Company Stock Options. The Company shall take all requisite action so
that, immediately prior to the Effective Time, each option to acquire
Company Shares (each, a "Company Stock Option"), outstanding
immediately prior to the Effective Time, whether or not then
exercisable or vested, without any action on the part of the Company
or the holder of that Company Stock Option, shall be converted into
the right to receive an amount, without interest, equal to the Stock
Option Consideration multiplied by the aggregate number of Company
Shares, as applicable in respect of such options, immediately prior to
the Effective Time. "Stock Option Consideration" means the excess, if
any, of the Merger Consideration over the per share exercise or
purchase price of the applicable Company Stock Option. The payment of
the Stock Option Consideration shall be payable in Merger
Consideration consisting of the same proportion of Cash Consideration
and Stock Consideration as is paid to holders of Company Shares, and
any cash in lieu of fractional shares of Parent Common Stock to be
issued or paid in consideration therefor in accordance with Section
3.2. The payment of the Stock Option Consideration to the holder of a
Company Stock Option shall be reduced (first from the cash portion of
the Stock Option Consideration, then from the stock portion) by any
income or employment Tax withholding required under (i) the Code, (ii)
any applicable state, local or foreign Tax Laws or (iii) any other
applicable Laws. To the extent that any amounts are so withheld, those
amounts shall be treated as having been paid to the holder of that
Company Stock Option for all purposes under this Agreement. All
Company Stock Options shall be cancelled and all Company Stock Option
plans shall terminate at the Effective Time.
(d) Company Warrant. Immediately prior to the Effective Time, the
outstanding warrant to acquire shares of Company Common Stock (the
"Company Warrant") shall be exchanged for the right to receive an
amount, without interest, equal to the Warrant Consideration
multiplied by the aggregate number of shares of Company Common Stock
covered by the Warrant. "Warrant Consideration" means the excess, if
any, of the Merger Consideration over the per share exercise or
purchase price of the Warrant. The payment of the Warrant
Consideration shall be payable in Merger Consideration consisting of
the same proportion of Cash Consideration and Stock Consideration as
is paid to holders of Company Shares, and any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in
consideration therefor in accordance with Section 3.2.
(e) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding Company Shares held by a person
entitled to vote on the Merger who has neither voted in favor of the
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Merger nor consented in writing thereto (each, a "Dissenting
Shareholder") and who otherwise complies with all the applicable
provisions of the CGCL concerning the rights of holders of Company
Shares to dissent from the Merger and require purchase by the Company
of their Company Shares (the "Dissenting Shares") shall not be
canceled as described in Section 3.1(b) but shall become the right to
receive such payment as may be determined to be due to such Dissenting
Shareholder pursuant to the CGCL. If, after the Effective Time, such
Dissenting Shareholder withdraws his, her or its demand for purchase
of the Dissenting Shares (with the Company's consent) or fails to
perfect or otherwise loses his, her or its status as a Dissenting
Shareholder, in any case pursuant to the CGCL, each of his, her or its
Company Shares shall be deemed to be canceled as of the Effective Time
and converted into the right to receive the Merger Consideration, in
the manner contemplated by Section 3.1(b) without interest thereon.
The notice to be sent to Company Shareholders pursuant to CGCL ss.1301
shall designate the closing price of Company Shares on the OTC
Bulletin Board System on the trading day prior to the date of this
Agreement as the fair market value of the Dissenting Shares. The
Company shall give Parent (i) prompt notice of any written demand for
purchase of the Dissenting Shares received by the Company pursuant to
the applicable provisions of the CGCL and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent
of Parent, make an offer of any payment or make any payment with
respect to any such demands or offer to settle or settle any such
demands. Any communication to be made by the Company to any
shareholder, court or appraiser with respect to such demands shall be
submitted to Parent sufficiently in advance for Parent to review such
communication and shall not be presented to any shareholder, court or
appraiser without Parent's written consent.
(f) Anti-Dilution. The Stock Consideration shall be adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into
Company Shares or Parent Common Stock, as applicable), extraordinary
dividend, reorganization, recapitalization or any other like change
with respect to Company Shares or Parent Common Stock with an
effective date or record date, as the case may be, occurring after the
date hereof and prior to the Effective Time. References to the Stock
Consideration elsewhere in this Agreement shall be deemed to refer to
the Stock Consideration as it may have been adjusted pursuant to this
Section 3.1(f).
(g) Stock Transfer Books(h) . At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further
registration of transfers of Company Shares thereafter on the records
of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason shall be
converted into the applicable Merger Consideration and Additional
Payments, if any.
SECTION 3.2. Exchange of Certificates.
(a) Exchange Agent. No later than the Effective Time, Parent shall (i)
make available to Continental Stock Transfer & Trust Company or such
other bank or trust company of comparable standing designated by
Parent (the "Exchange Agent"), for the benefit of the holders of
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Company Shares, for exchange in accordance with this Article III
through the Exchange Agent, certificates evidencing a sufficient
number of shares of Parent Common Stock issuable to holders of Company
Shares to satisfy the requirements set forth in Section 3.1 relating
to the Stock Consideration and any Additional Payments payable
pursuant to Section 3.2(c) below and (ii) provide funds to the
Exchange Agent in amounts necessary for the payment of the aggregate
Cash Consideration payable under Section 3.1 (such shares of Parent
Common Stock, together with any cash deposited with the Exchange Agent
for payment of the Cash Consideration or relating to Additional
Payments being hereinafter referred to as the "Exchange Fund"). As
promptly as practicable after the Effective Time, the Exchange Agent
shall deliver the Merger Consideration and Additional Payments, if
any, contemplated to be issued pursuant to Section 3.1 out of the
Exchange Fund in accordance with the procedures specified in this
Section 3.2. Except as contemplated by Section 3.2(g) hereof, the
Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each record
holder of a certificate or certificates which immediately prior to the
Effective Time represented outstanding Company Shares (the
"Certificates") (i) a letter of transmittal (which shall be in
customary form and shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration.
(c) Exchange of Certificates. Upon surrender to the Exchange Agent of a
Certificate for cancellation, together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may be reasonably
required pursuant to such instructions, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock, if
any, constituting Stock Consideration plus cash constituting Cash
Consideration to which such holder is entitled pursuant to this
Article III (including any cash in lieu of any fractional shares of
Parent Common Stock to which such holder is entitled pursuant to
Section 3.2(e) and any dividends or other distributions to which such
holder is entitled pursuant to Section 3.2(d) (together, the
"Additional Payments")) less any required withholding of Taxes, and
the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Company Shares which is not
registered in the transfer records of the Company, the applicable
Stock Consideration, Additional Payments, if any, and Cash
Consideration may be issued and paid to a transferee if the
Certificate representing such Company Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by
this Section 3.2, each Certificate shall be deemed at all times after
the Effective Time to represent only the right to receive upon such
surrender the applicable Merger Consideration with respect to the
Company Shares formerly represented thereby and Additional Payments,
if any.
(d) Distributions with Respect to Unsurrendered Certificates. No dividends
or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with
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respect to Parent Common Stock the holder thereof is entitled to
receive upon surrender thereof, no cash payment and no cash payment in
lieu of any fractional shares shall be paid to any such holder
pursuant to Section 3.2(e), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of escheat, tax or
other applicable Laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) promptly, the amount of any cash payable with
respect to fractional Parent Common Stock to which such holder is
entitled pursuant to Section 3.2(e) and the amount of dividends or
other distributions with a record date after the Effective Time and
theretofore paid with respect to such whole shares of Parent Common
Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such whole Parent Common
Stock.
(e) No Fractional Shares. No fractional shares of Parent Common Stock
shall be issued in the Merger. In lieu of any such fractional shares,
each holder of Company Shares, who would otherwise have been entitled
to a fraction of Parent Common Stock pursuant to this Article III,
will be entitled to receive an amount of cash rounded to the nearest
cent (without interest) determined by multiplying the Parent Common
Stock Market Price by the fractional share interest to which such
holder would otherwise have been entitled. The parties acknowledge
that payment of the cash consideration in lieu of issuing fractional
shares was not separately bargained for consideration but merely
represents a mechanical rounding for purposes of simplifying the
corporate and accounting complexities which would otherwise be caused
to Parent by the issuance of fractional shares.
(f) No Liability. None of the Exchange Agent, Parent or the Surviving
Company shall be liable to any holder of Certificates for any shares
of Parent Common Stock (or dividends or distributions with respect
thereto), or cash delivered to a public official pursuant to any
abandoned property, escheat or similar Law.
(g) Withholding Rights. Each of the Surviving Company and Parent shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement such amounts as it is required to
deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by the Surviving Company or
Parent, as the case may be, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the person in
respect of which such deduction and withholding was made by the
Surviving Company or Parent, as the case may be.
(h) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if
required by the Exchange Agent or Parent, the posting by such person
of a bond, in such reasonable amount as the Exchange Agent or Parent
may direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the applicable
Merger Consideration and Additional Payments, if any.
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(i) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Shares for three
months after the Effective Time shall be delivered to Parent (who
shall thereafter act as Exchange Agent), upon demand, and any holders
of Company Shares who have not theretofore complied with this Article
III shall thereafter look only to Parent for the applicable Merger
Consideration and any Additional Payments to which they are entitled.
ARTICLE IV.
CERTAIN EFFECTS OF THE MERGER
SECTION 4.1. Effect of the Merger. The effects and consequences of the
Merger shall be as set forth in Section 1113(i) of the CGCL and Section 17554 of
the CLLCA. Without limiting the generality of the foregoing, on and after the
Effective Time and pursuant to the CGCL and the CLLCA, the Surviving Company
shall possess all the rights, privileges, immunities, powers, and purposes of
each of Parent Subsidiary and the Company; all the property, real and personal,
including subscriptions to shares, causes of action and every other asset
(including books and records) of Parent Subsidiary and the Company shall vest in
the Surviving Company without further act or deed; and the Surviving Company
shall assume and be liable for all the liabilities, obligations and penalties of
Parent Subsidiary and the Company. No liability or obligation due or to become
due and no claim or demand for any cause existing against either Parent
Subsidiary or the Company, or any shareholder, member, officer or director
thereof, shall be released or impaired by the Merger, and no action or
proceeding, whether civil or criminal, then pending by or against Parent
Subsidiary or the Company, or any stockholder, member, officer or director
thereof, shall ▇▇▇▇▇ or be discontinued by the Merger, but may be enforced,
prosecuted, settled or compromised as if the Merger had not occurred, and the
Surviving Company may be substituted in any such action or proceeding in place
of Parent Subsidiary or the Company.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Letter (in the section or
subsections thereof corresponding to the section or subsection of this Agreement
and with respect to any other representation and warranty to the extent that it
is reasonably apparent from the face of any such disclosure in the Company
Disclosure Letter that such disclosure should qualify such other representation
and warranty) delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Letter"), the Company represents and warrants
to Parent as follows:
SECTION 5.1. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
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qualification necessary, except for such failures to be so qualified or in good
standing which would not, individually or in the aggregate, reasonably be
expected to have or result in a Company Material Adverse Effect. A "Company
Material Adverse Effect" means any state of facts, circumstance, change,
development, effect, condition or occurrence that, when taken together with all
other states of fact, circumstances, changes, developments, effects, conditions
and occurrences (i) has a material and adverse effect on the financial
condition, business, assets, liabilities or results of operations of the
Company, or (ii) prevents or materially impedes or delays the performance by the
Company of its obligations under this Agreement or the consummation of the
Merger or the other transactions expressly contemplated by this Agreement;
provided, however, that with respect to clause (i), Company Material Adverse
Effect will be deemed not to include any state of facts, circumstance, change,
development, effect, condition or occurrence to the extent resulting from: (a)
any change in the market price or trading volume of Company's stock after the
date hereof; (b) the announcement of the pendency of the Merger (including
cancellations of or delays in customer orders, reductions in sales, disruptions
in supplier, distributor, partner or similar relationships or losses of
employees, in each case resulting from such announcement); (c) the payment of
any amounts due to, or the provision of any other benefits (including benefits
relating to acceleration of stock options) to, any officers or employees under
employment contracts, non-competition agreements, employee benefit plans,
severance arrangements or other arrangements in existence as of the date of this
Agreement and specifically identified in the Company Disclosure Letter; (d) the
payment of out-of-pocket fees and expenses incurred in connection with the
transactions contemplated by this Agreement; or (e) compliance with the express
terms of, or the taking of any action expressly required by, this Agreement.
Section 5.1 of the Company Disclosure Letter sets forth each of the
jurisdictions in which the Company is incorporated or qualified or otherwise
licensed as a foreign corporation to do business. The Company is not currently
in violation of any of the provisions of its articles of incorporation or
by-laws. The Company has delivered to Parent accurate and complete copies of the
articles of incorporation and by-laws, as currently in effect, of the Company,
and has made available to Parent accurate and complete copies of its minute
books.
SECTION 5.2. No Subsidiaries. The Company does not own, directly or
indirectly, any capital stock or other equity interest of, or any other
securities convertible or exchangeable into or exercisable for capital stock or
other equity interest of, any person.
SECTION 5.3. Capitalization; Options. The authorized capital stock of the
Company consists of 60,000,000 Company Shares, and 5,000,000 shares of preferred
stock, without par value. As of August 18, 2005, 46,444,693 Company Shares are
issued and outstanding and no shares of preferred stock are issued and
outstanding. All of such issued and outstanding Company Shares are validly
issued, fully paid and nonassessable and were issued free of preemptive rights.
Section 5.3 of the Company Disclosure Letter sets forth as of the date of this
Agreement all outstanding options, warrants or other rights, whether or not
exercisable, to acquire any shares of Company capital stock or any other
equitable interest in the Company, the holders thereof, the exercise or
conversion prices thereof, the expiration or termination dates, if any, thereof,
and, in the case of outstanding options, identifies the Company stock plan or
other Company benefit plan under which such options were granted. The Company is
not a party to any agreement or understanding, oral or written, which (a) grants
a right of first refusal or other such similar right upon the sale of Company
Shares or (b) restricts or affects the voting rights of Company Shares. There is
no liability for dividends declared or accumulated but unpaid with respect to
any Company Shares or Company preferred stock.
-9-
SECTION 5.4. Authority Relative to This Agreement. The Company has
corporate power and authority to execute and deliver this Agreement and to
consummate the Merger and other transactions expressly contemplated hereby. The
execution and delivery of this Agreement and the consummation of the Merger and
other transactions expressly contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Merger or other transactions expressly contemplated hereby
(other than as contemplated by this Agreement and the approval of the principal
terms of the Merger by the affirmative vote of a majority of the outstanding
Company Shares entitled to vote pursuant to the CGCL (the "Requisite Company
Vote")). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
Parent, constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable or fiduciary principles.
SECTION 5.5. No Violations, etc.
(a) Assuming that all filings, permits, authorizations, consents and
approvals or waivers thereof have been duly made or obtained as
contemplated by Section 5.5(b) hereof, neither the execution and
delivery of this Agreement by the Company nor the consummation of the
Merger or other transactions expressly contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i)
violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the
termination or suspension of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under,
any of the terms, conditions or provisions of (x) its articles of
incorporation or by-laws, (y) any note, bond, mortgage, indenture or
deed of trust to which it is a party or to which it or any of its
properties or assets may be subject, or (z) any license, Contract or
other instrument or obligation to which the Company is a party or to
which it or any of its properties or assets may be subject, or (ii)
violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its
properties or assets, except, in the case of clause (i)(z) above, for
such violations, conflicts, breaches, defaults, terminations,
suspensions, accelerations, rights of termination or acceleration or
creations of liens, security interests, charges or encumbrances which
would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.
(b) No filing or registration with, notification to and no permit,
authorization, consent or approval of any governmental entity
(including, without limitation, any federal, state, local or foreign
regulatory authority or agency) is required by the Company in
connection with the execution and delivery of this Agreement or the
consummation by the Company of the Merger or other transactions
-10-
contemplated hereby, except (i) the filing of the Certificate of
Merger, (ii) the approval of the Company's shareholders pursuant to
the CGCL, (iii) filings with the Securities and Exchange Commission
(the "SEC") and (iv) the government filings and third party consents
identified in Section 5.5(b) of the Company Disclosure Letter.
SECTION 5.6. Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinion (the "Company Fairness Opinion") of ▇.▇. ▇▇▇▇▇▇
& Co., Inc., dated the date of this Agreement, to the effect that, as of such
date, the Merger Consideration is fair from a financial point of view to the
holders of Company Shares.]
SECTION 5.7. Board Recommendation. The Board of Directors of the Company
has, by unanimous vote at a meeting of such board duly held on August 21, 2005,
approved and adopted this Agreement and the Merger, determined that the Merger
is fair to the shareholders of the Company and recommended that the shareholders
of the Company approve the principal terms of the Merger.
SECTION 5.8. Finders or Brokers. None of the Company, the Board of
Directors of the Company or any member of the Board of Directors of the Company
has employed any investment banker, broker, finder or intermediary in connection
with the transactions contemplated hereby who might be entitled to a fee or any
commission in connection with the Merger, and Section 5.8 of the Company
Disclosure Letter sets forth the maximum consideration (present and future)
agreed to be paid to each such party.
SECTION 5.9. Commission Filings; Financial Statements.
(a) The Company has filed all required forms, reports and documents with
the SEC since December 31, 2002, including, if applicable, in the form
filed with the SEC, together with any amendments thereto, (i) its
Annual Report on Form 10-K for the fiscal year ended December 31, 2004
(the "Company 10-K"), (ii) all proxy statements relating to the
Company's meetings of shareholders (whether annual or special) held
since December 31, 2004 (the "Company Current Proxies"), (iii) its
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
2005 and June 30, 2005 (the "Company June 2005 10-Q" and, together
with the Company 10-K and the Company Current Proxies, the "Company
Current SEC Reports") and (iv) all other reports or registration
statements filed by the Company with the SEC since December 31, 2002
(collectively, the "Company SEC Reports") with the SEC, all of which
complied when filed in all material respects with all applicable
requirements of the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act") and the
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"). Except to the extent that
information contained in any Company SEC Report was revised or
superseded by a later filed Company SEC Report, none of the Company
SEC Reports contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company
has provided to Parent copies of all correspondence sent to or
received from the SEC by the Company since December 31, 2002 (other
than routine cover letters).
-11-
(b) The audited financial statements and unaudited quarterly interim
financial statements of the Company included or incorporated by
reference in the Company SEC Reports were prepared in accordance with
generally accepted accounting principles in the United States ("GAAP")
applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto and except as otherwise
permitted by the applicable provisions of Regulation S-X under the
Securities Act) and present fairly, in all material respects, the
financial position and results of operations and cash flows of the
Company as at the respective dates and for the respective periods
indicated (and in the case of all such financial statements that are
interim quarterly financial statements, contain all adjustments that
are necessary in order to make the financial statements not
misleading).
(c) The Company has provided to Parent true and complete copies of the
unaudited balance sheet of the Company at July 31, 2005 (the "July
Balance Sheet") and the unaudited statements of income and cash flow
of the Company for the period from March 31, 2005 through July 31,
2005 (collectively, the "July Financials"). The July Financials fairly
present, in all material respects, the financial position of the
Company at July 31, 2005 and the results of operations and cash flow
of the Company for the period then ended, and have been prepared in
accordance with GAAP applied on a consistent basis, except that such
financial statements do not include all footnote disclosures that
might otherwise be required to be included by GAAP, and are subject to
normal non-recurring year-end audit adjustments. The July Balance
Sheet reflects all liabilities of the Company, whether absolute,
accrued or contingent, as of the date thereof of the type required to
be reflected or disclosed on a balance sheet prepared in accordance
with GAAP (applied in a manner consistent with the notes of the
financial statements included in the Company 10-K), except that the
July Balance Sheet does not include any footnote disclosures that
might otherwise be required to be included by GAAP.
SECTION 5.10. Absence of Undisclosed Liabilities. Except as disclosed in
the Company Current SEC Reports, the Company has no liabilities or obligations
of any nature, whether absolute, accrued, unmatured, contingent or otherwise, or
any unsatisfied judgments or any leases of personalty or realty or unusual or
extraordinary commitments, except the liabilities recorded on the Company's
balance sheet included in the Company June 2005 10-Q and any notes thereto, and
except for liabilities or obligations incurred in the ordinary course of
business consistent with past practice since June 30, 2005 that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
SECTION 5.11. Absence of Changes or Events. Since December 31, 2004:
(a) there has not been, and there would not reasonably be expected to be,
a Company Material Adverse Effect;
(b) there has not been any direct or indirect redemption, purchase or
other acquisition of any shares of capital stock, options, warrants,
or other rights to acquire shares of capital stock, of the Company, or
any declaration, setting aside or payment of any dividend or other
distribution by the Company in respect of its capital stock;
(c) except in the ordinary course of its business consistent with past
practice, the Company has not incurred any indebtedness for borrowed
money, or assumed, guaranteed, endorsed or otherwise as an
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accommodation become responsible for the obligations of any other
individual, firm or corporation, or made any loans or advances to any
other individual, firm or corporation;
(d) there has not been any change in the financial or the accounting
methods, principles or practices of the Company, except as may be
required by GAAP;
(e) except in the ordinary course of business consistent with past
practice and for amounts which are not material, there has not been
any revaluation by the Company of any of its assets, including,
without limitation, writing down the value of inventory or writing off
notes or accounts receivables;
(f) there has not been any damage, destruction or loss, whether covered by
insurance or not, except for such damages, destruction or loss as
would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect;
(g) the Company has not entered into any agreement or transaction with any
director, officer or holder of more than 5% of Company Shares or any
family member or affiliate of any of the foregoing;
(h) the Company has not offered any trade or consumer promotion programs
except as disclosed in Section 5.11(h) of the Company Disclosure
Letter and, except as disclosed in Section 5.11(h) of the Company
Disclosure Letter, the Company has not (at any time) offered any trade
or consumer promotions extending beyond December 31, 2005; and
(i) there has not been any agreement by the Company to (i) do any of the
things described in the preceding clauses (a) through (h) other than
as expressly contemplated or provided for in this Agreement or (ii)
take, whether in writing or otherwise, any action which, if taken
prior to the date of this Agreement, would have made any
representation or warranty in this Article V untrue or incorrect.
SECTION 5.12. Litigation. There is no (i) claim, action, suit or proceeding
pending or, to the best knowledge of the Company, threatened against or relating
to the Company before any court or governmental or regulatory authority or body
or arbitration tribunal, or (ii) outstanding judgment, order, writ, injunction
or decree, or application, request or motion therefor, of any court,
governmental agency or arbitration tribunal in a proceeding to which the Company
or any of its assets was or is a party, except in the case of (i) and (ii), for
such matters as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Section 5.12 of the Company
Disclosure Letter contains a description of each of the matters as of the date
of this Agreement described in clauses (i) and (ii) of the preceding sentence
(without giving effect to the Company Material Adverse Effect qualifier).
-13-
SECTION 5.13. Contracts.
(a) Section 5.13(a) of the Company Disclosure Letter contains a list of
each contract, agreement, license, note, bond, mortgage, indenture,
commitment, lease or other instrument or obligation ("Contracts") to
which the Company is a party or by which the Company or any of its
properties or assets are bound as of the date of this Agreement
described in the following clauses:
(i) any lease of personal property providing for annual rentals of
$50,000 or more and any lease of real property;
(ii) any Contract for the purchase of materials, supplies, goods,
services, equipment or other assets that is not terminable
without penalty on 90 days notice by the Company and that
provides for or is reasonably likely to require either (A) annual
payments to or from the Company of $50,000 or more, or (B)
aggregate payments to or from the Company of $250,000 or more;
(iii) any partnership, limited liability company agreement, joint
venture or other similar agreement or arrangement relating to the
formation, creation, operation, management or control of any
partnership or joint venture;
(iv) any Contract under which Indebtedness is outstanding or may be
incurred or pursuant to which any property or asset with a fair
market value of $25,000 or more is mortgaged, pledged or
otherwise subject to a Lien (other than statutory growers' liens
which are incurred in the ordinary course of business, which are
not in dispute and for which payment is not more than 30 days
past due), or any Contract restricting the incurrence of
Indebtedness or restricting the payment of dividends or the
transfer of any Property (except, with respect to the transfer of
Properties, restrictions contained in the Lease Documents);
(v) any Contract required to be filed as an exhibit to the Company's
Annual Report on Form 10-K;
(vi) any Contract that purports to limit in any material respect the
right of the Company (A) to engage in any business or line of
business (including the scope thereof and any geographic
limitations on the Company's activities), or (B) to compete with
any person or operate in any location;
(vii) any Contract providing for the sale or exchange of, or option to
sell or exchange, any Property;
(viii) any Contract for the acquisition or disposition, directly or
indirectly (by merger or otherwise), of assets (other than
Contracts referenced in clauses (ii) and (vii) of this Section
5.13(a)) or capital stock or other equity interests of another
person for aggregate consideration in excess of $100,000;
-14-
(ix) any advertising or other promotional Contract providing for
payment by the Company of $25,000 or more;
(x) any Contract pursuant to which the Company obtains or grants any
rights under (including payment rights), or which by their terms
restrict the right to use or practice, any Intellectual Property;
(xi) any Contract that contains (i) either (A) any exclusivity
obligation to purchase supplies/services from a single source or
(B) any minimum purchase threshold guarantee or requirement in
excess of $50,000 and (ii) a term in excess of one year and which
cannot be terminated without cause or penalty within 90 days;
(xii) any Contract where payments by the Company are based on units
sold, sales, profits or any other item of income;
(xiii) any Contract with any past or present officer, director or
employee or, to the best knowledge of the Company, any entity
affiliated with any past or present officer, director or employee
other than those included as exhibits in the Company SEC Reports
and other than the agreements executed by employees generally,
the forms of which have been delivered to Parent. Notwithstanding
the foregoing, Section 5.13(a)(xiii) of the Company Disclosure
Letter identifies (a) any such agreement containing an agreement
with respect to any change of control, severance or termination
benefit or any obligation on the part of the Company that could
be triggered by the Merger and (b) the amount payable under any
such agreements as a result of this Agreement and the
transactions expressly contemplated hereby; or
(xiv) any Contract (other than Contracts referenced in clauses (i)
through (xiii) of this Section 5.13(a)) which by its terms calls
for payments by the Company in excess of $50,000 (the Contracts
described in clauses (i) through (xiii) and those required to be
identified in Section 5.13 of the Company Disclosure Letter, in
each case together with all exhibits and schedules thereto being,
the "Material Contracts").
(b) (i) The Company is not and, to the best knowledge of the Company, no
other party is in breach or violation of, or default under, any
Material Contract, (ii) the Company has not received any claim of
default under any such agreement and (iii) to the best knowledge of
the Company, no event has occurred which would result in a breach or
violation of, or a default under, any Material Contract (in each case,
with or without notice or lapse of time or both), except in the case
of (i), (ii) or (iii), for such breaches, violations or defaults as do
not constitute a material breach, violation or default under any such
agreement. Each Material Contract is valid, binding and enforceable in
accordance with its terms and is in full force and effect, as against
the Company, and, to the best knowledge of the Company, as against the
other party thereto, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally or by general equitable or fiduciary
principles. The Company has made available to Parent true and complete
copies of all Material Contracts, including any amendments, waivers or
modifications thereto.
-15-
SECTION 5.14. Real Property.
(a) The Company does not own any real property.
(b) Section 5.14(b) of the Company Disclosure Letter lists each parcel of
real property currently leased or subleased by the Company (such real
property, together with all plants, buildings, and improvements
thereon and all rights, title, privileges and appurtenances pertaining
thereto, collectively, the "Properties" or individually, a
"Property"), the date of the lease and each material amendment thereto
(collectively, the "Lease Documents"). The Company owns a valid
leasehold interest in the Properties, free and clear of all Liens
other than Permitted Liens. True, correct and complete copies of all
Lease Documents have been made available to Parent. Each of the Lease
Documents is valid, binding and in full force and effect as against
the Company and, to the best knowledge of the Company, as against the
other party thereto, in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or
other laws affecting the enforcement of creditor's rights generally or
by general equitable or fiduciary principles.
(c) The Company has not and, to the best knowledge of the Company, the
other parties thereto have not, defaulted under the Lease Documents,
and there are no facts that would now or with the giving of notice or
the passage of time or both be a default under any term, covenant or
condition of the Lease Documents which default is, individually or in
the aggregate, reasonably expected to have a material adverse effect
on the value or use by the Company of any Property.
SECTION 5.15. Tangible Assets. The Company owns, and has good title to, or
leases, all buildings, machinery, equipment and other tangible assets necessary
for the conduct of its business as presently conducted, in each case free and
clear of all Liens. Each such tangible asset is free from material defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
SECTION 5.16. Labor Matters. The Company is in compliance in all material
respects with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and the
Company is not engaged in any unfair labor practice which would, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. There is no labor strike, material slowdown or material stoppage pending
(or, to the best knowledge of the Company, any labor strike or stoppage
threatened) against or affecting the Company. No petition for certification has
been filed and is pending before the National Labor Relations Board with respect
to any employees of the Company who are not currently organized. No employee of
the Company is represented by a labor union or similar organization and, to the
best knowledge of the Company, there exist no ongoing discussions between the
employees of the Company and any labor union or similar organization relating to
the representation of such employees by such labor union or similar
organization.
SECTION 5.17. Compliance with Law. The Company has been and is in material
compliance with all statutes, laws, ordinances, regulations, rules and orders of
any foreign, federal, state or local government or any other governmental
department or agency (including, without limitation, any required by the Food
and Drug Administration (the "FDA"), the Nutrition Labeling and Education Act of
-16-
1990, the Public Health Security and Bioterrorism Preparedness and
Responsiveness Act of 2002, the Dietary Supplement Health and Education Act of
1994 and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, including all rules and regulations of
the SEC promulgated pursuant thereto), or any judgment, decree or order of any
court, applicable to its business or operations, except where any such
violations or failures to comply would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
SECTION 5.18. Permits, Licenses and Franchises. Section 5.18 of the Company
Disclosure Letter sets forth as of the date of this Agreement all of the
Company's permits, licenses and franchises which are all permits, licenses and
franchises from governmental agencies required to conduct its business as now
being conducted. The Company has been and is in material compliance with all
such permits, licenses and franchises and all such permits, licenses and
franchises are in full force and effect.
SECTION 5.19. Intellectual Property. Section 5.19 of the Company Disclosure
Letter sets forth as of the date of this Agreement a complete and accurate list
of all of the trademarks (whether or not registered), and trademark
registrations and applications therefor, used by the Company. Except for such
defects as would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect, the Company has or owns, directly or
indirectly, all right, title and interest in and to the trademarks (whether or
not registered) and trademark registrations and applications, service marks,
service ▇▇▇▇ registrations and applications, trade dress and trade and product
names and all goodwill in all of the foregoing, patents and patent applications,
registered copyrights, copyright applications, and all rights of copyright in
tangible original works, product formulations, trade secrets, know how,
inventions, and other proprietary information throughout the world for the full
term thereof, including all renewals (collectively, the "Intellectual Property")
used by the Company. Except for such defects as would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect,
(i) the Company has or owns, directly or indirectly, all right, title and
interest in and to such Intellectual Property or has the perpetual right to use
such Intellectual Property without consideration; (ii) none of the rights of the
Company in or use of such Intellectual Property has been or is currently being
or, to the best knowledge of the Company, is threatened to be infringed or
challenged; (iii) all of the patents, trademark registrations, service ▇▇▇▇
registrations, trade name registrations and copyright registrations included in
such Intellectual Property have been duly issued and have not been canceled,
abandoned or otherwise terminated; (iv) all of the patent applications,
trademark applications, service ▇▇▇▇ applications, trade name applications and
copyright applications included in such Intellectual Property have been duly
filed; and (v) the Company owns or has adequate licenses or other rights to use
all Intellectual Property, know-how and technical information required for its
operation.
SECTION 5.20. Taxes. (i) The Company has prepared and timely filed or will
timely file with the appropriate governmental agencies all material Tax Returns
required to be filed through the Effective Time, taking into account any
extension of time to file granted to or obtained on behalf of the Company, and
each such Tax Return is complete and accurate in all material respects; (ii) the
Company has timely paid or will timely pay all material Taxes due and payable by
-17-
it through the Effective Time and has made or will make adequate accruals in
accordance with GAAP for any Taxes attributable to any taxable period or portion
thereof of the Company ending on or prior to the Effective Time that are not yet
due and payable; (iii) all material claims, asserted deficiencies or assessments
resulting from examinations of any Tax Returns filed by the Company have been
paid in full or finally settled and no issue previously raised by any taxing
authority reasonably could be expected to result in a proposed deficiency or
assessment for any prior, parallel or subsequent period (including periods
subsequent to the Effective Date); (iv) no audit or examination of the Company
is ongoing, pending or, to the best knowledge of the Company, threatened by any
taxing authority; (v) no extension of the period for assessment or collection of
any Tax of the Company is currently in effect and no extension of time within
which to file any Tax Return has been requested, which Tax Return has not since
been filed; (vi) no liens have been filed with respect to any Taxes of the
Company other than in respect of property taxes that are not yet due and
payable; (vii) the Company has not made, and is not and will not be required to
make, any adjustment (including with respect to any period after the Merger) by
reason of a change in its accounting methods for any period (or portion thereof)
ending on or before the Effective Time; (viii) the Company has made timely
payments of all material Taxes required to be deducted and withheld from the
wages paid to its employees and from all other amounts paid to independent
contractors creditors, stockholders or other third parties; (ix) the Company is
not a party to any tax sharing, tax matters, tax indemnification or similar
agreement; (x) the Company does not own any interest in any "controlled foreign
corporation" (within the meaning of Section 957 of the Code), "passive foreign
investment company" (within the meaning of Section 1296 of the Code) or other
entity the income of which may be required to be included in the income of the
Company whether or not distributed; (xi) the Company has not made an election
under Section 341(f) of the Code; (xii) no claim has ever been made by an
authority in a jurisdiction where the Company does not file Tax Returns that
such entity is or may be subject to taxation by that jurisdiction; (xiii) the
Company has no liability for the Taxes of any person under United States
Treasury Regulation ("Treas. Reg.") ss. 1.1502-6 (or any similar provision of
state, local or foreign Law), as a transferee or successor, by contract or
otherwise; (xiv) the Company has never had any "undistributed personal holding
company income" (as defined in Section 545 of the Code); (xv) none of the assets
of the Company (a) is "tax-exempt use property" (as defined in Section 168(h)(1)
of the Code), (b) may be treated as owned by any other person pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954 (as in effect immediately
prior to the enactment of the Tax Reform Act of 1986), (c) is property used
predominantly outside the United States within the meaning of proposed Treas.
Reg. Section 1168-2(g) (5) or (d) is "tax exempt" and financed property within
the meaning of Section 168(g)(5) of the Code; (xvi) the Company has not
requested a ruling from, or entered into a closing agreement with, the IRS or
any other taxing authority; (xvii) the Company has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662; (xviii) the Company has not entered into any transfer pricing
agreements with any taxing authority; (xix) the Company is not a party to any
"reportable transaction" within the meaning of Treas. Reg. Section 1.6011-4
other than solely as a result of a book tax difference; and (xx) the Company has
previously delivered to Parent true and complete copies of (a) all federal,
state, local and foreign income or franchise Tax Returns filed by the Company
for the last three taxable years ending prior to the date hereof (except for
those Tax Returns that have not yet been filed) and (b) any audit reports issued
within the last three years by the IRS or any other taxing authority.
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For all purposes of this Agreement, "Tax" or "Taxes" means (i) all federal,
state, local or foreign taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, alternative minimum,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or
other additional amounts imposed by any taxing authority in connection with any
item described in clause (i) and (iii) all transferee, successor, joint and
several, contractual or other liability (including, without limitation,
liability pursuant to Treas. Reg. ss. 1.1502-6 (or any similar state, local or
foreign provision)) in respect of any items described in clause (i) or (ii).
For all purposes of this Agreement, "Tax Return" means all returns,
declarations, reports, estimates, information returns and statements required to
be filed in respect of any Taxes.
SECTION 5.21. Employee Benefit Plans; ERISA.
(a) Section 5.21 of the Company Disclosure Letter contains as of the date
of this Agreement a correct and complete list identifying each
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and each
other bonus, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock appreciation,
restricted stock, stock option, phantom stock, performance,
retirement, vacation, severance, termination, disability, death
benefit, employment, consulting, independent contractor, director,
retention, hospitalization, fringe benefit, sick leave, salary
continuation, medical, dental, vision, or other employee benefit plan,
program or arrangement which is maintained or contributed to or
required to be contributed to by the Company or any Company ERISA
Affiliate or as to which the Company or any Company ERISA Affiliate
has any direct or indirect, actual or contingent liability ("Benefit
Plans"). The Company has delivered or made available to Parent true
and complete copies of (i) each Benefit Plan (including all amendments
since the last restatement), (ii) the annual report (Form 5500-series)
filed with respect to each Benefit Plan (if such report was required)
for each of the three most recent plan years for which such reports
were filed, (iii) the most recent summary plan description (and any
summary of material modifications since the most recent summary plan
description), if any, for each Benefit Plan, (iv) the most recent
determination letter (or, if such plan is a prototype or volume
submitter plan document that has been pre-approved by the Internal
Revenue Service, an opinion letter) issued to each Benefit Plan that
is intended to be qualified under Section 401(a) of the Code, and (v)
each trust agreement or insurance contract with respect to each
Benefit Plan.
(b) No Benefit Plans are subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any person which is (or at the relevant time was) a member
of a "controlled group of corporations" with, "under common control"
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with, or a member of an "affiliated service group" with the Company as
such terms are defined in Section 414(b), (c), (m) or (o) of the Code
("Company ERISA Affiliate") has ever maintained or contributed to or
been required to contribute to, or had any direct or indirect, actual
or contingent liability with respect to any plan subject to Title IV
of ERISA.
(c) (i) The Company and all Benefit Plans are in material compliance with
the applicable provisions of ERISA and the Code; (ii) each Benefit
Plan has been operated and administered in all material respects in
accordance with its terms and applicable Law; (iii) with respect to
each Benefit Plan, all contributions to, and payments from, such
Benefit Plan that are required to have been made under the terms of
the Benefit Plan or applicable Law have been timely made, and no such
plan has incurred an accumulated funding deficiency, whether or not
waived; (iv) with respect to all Benefit Plans, there are no
investigations by governmental entities or claims pending or, to the
best knowledge of the Company, threatened (other than routine claims
for benefits); (v) there have been no prohibited transactions under
the Code or ERISA with respect to any Benefit Plans; (vi) with respect
to all Benefit Plans that are welfare plans (as defined in ERISA
Section 3(1)), all such plans have complied with the COBRA
continuation coverage requirements of Code Section 4980B (to the
extent applicable); (vii) there are no lawsuits, actions or
proceedings pending or, to the best knowledge of the Company,
threatened, against or involving any Benefit Plan, and (viii) with
respect to each Benefit Plan, all reports, returns and similar
documents required to be filed with any governmental entity or
distributed to any Benefit Plan participant, beneficiary or alternate
payee have been duly and timely filed or distributed.
(d) Each Benefit Plan intended to qualify under Section 401 of the Code,
is so qualified.
(e) The Company has no liability with respect to any plans providing
benefits on a voluntary basis with respect to employees employed
outside the U.S.
(f) No Benefit Plan provides for medical, life insurance or other welfare
benefits following retirement or other termination of employment
(other than COBRA coverage and any similar coverage mandated by state
law).
(g) The consummation of the transactions contemplated by this Agreement
will not: (i) entitle any individual to severance pay, (ii) increase
or accelerate compensation due to any individual or (iii) result in or
satisfy a condition to the payment of compensation that would, in
combination with any other payment, result in an "excess parachute
payment" within the meaning of Section 280G(b) of the Code.
SECTION 5.22. Environmental Matters.
(a) The Company has obtained all material Environmental Permits required
in connection with its business and operations and has no knowledge
that any of them will be revoked prior to their expiration, modified
or will not be renewed, and has made all material registrations and
given all material notifications that are required under Environmental
Laws.
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(b) There is no Environmental Claim pending, or, to the best knowledge of
the Company, threatened against the Company under Environmental Laws.
(c) The Company is in material compliance with and has no liability under,
Environmental Laws, including, without limitation, all of its
Environmental Permits.
(d) The Company has not assumed, by contract or otherwise, any liabilities
or obligations arising under Environmental Laws.
(e) There are no past or present actions, activities, conditions,
occurrences or events, including, without limitation, the Release or
threatened Release of Hazardous Materials, which could reasonably be
expected to prevent material compliance by the Company with
Environmental Laws, or to result in any material liability of the
Company under Environmental Laws.
(f) No Lien has been recorded under Environmental Laws with respect to any
property, facility or other asset currently owned or leased by the
Company arising from operations of or on behalf of the Company.
(g) The Company has not received any notification that Hazardous Materials
that it or any of its predecessors in interest used, generated,
stored, treated, handled, transported or disposed of have been found
at any site at which any person is conducting, plans or is obligated
to conduct any investigation, remediation, removal, response or other
action pursuant to Environmental Laws.
(h) There is no friable asbestos or asbestos containing material in, on or
at any property, facility or equipment currently owned, operated or
leased by the Company.
(i) No property now or previously owned, operated or leased by the Company
or any of its predecessors in interest, is (i) listed or proposed for
listing on the National Priorities List promulgated pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA") or (ii) listed on the Comprehensive
Environmental Response, Compensation, and Liability Information System
List promulgated pursuant to CERCLA, or on any comparable list
relating to the Release of Hazardous Materials established under
Environmental Laws arising from operations of or on behalf of the
Company.
(j) No underground or above ground storage tank or related piping, or any
surface impoundment, lagoon, landfill or other disposal area
containing Hazardous Materials arising from operations of or on behalf
of the Company is located at, under or on any property currently
owned, operated or leased by the Company or, to the best knowledge of
the Company, any of its predecessors in interest, nor has any of them
been removed from or decommissioned or abandoned at any such property.
-21-
(k) The Company has made available for inspection to Parent copies of any
investigations, studies, reports, assessments, evaluations and audits
in its possession, custody or control of Hazardous Materials at, in,
beneath, emanating from or adjacent to any properties or facilities
now or formerly owned, leased, operated or used by it or any of its
predecessors in interest, or of compliance by any of them with, or
liability of any of them under, Environmental Laws.
SECTION 5.23. Bank Accounts; Indebtedness.
(a) Section 5.23(a) of the Company Disclosure Letter contains a complete
and accurate list of the name of each bank in which the Company has an
account or safe deposit box, the account number thereof and the names
of all persons authorized to draw thereon or to have access thereto.
(b) Section 5.23(b) of the Company Disclosure Letter contains a complete
and accurate list of all indebtedness for borrowed money of the
Company showing the aggregate amount by way of principal and interest
which was outstanding as of a date not more than seven days prior to
the date of this Agreement and, by the terms of agreements governing
such indebtedness, is expected to be outstanding on the Closing Date.
(c) Section 5.23(c) of the Company Disclosure Letter contains a complete
and accurate list of all outstanding Indebtedness by the Company that
will become due, go into default or give the lenders or other holders
of debt instruments the right to require the Company to repay all or a
portion of such loans or borrowings, in each case as a result of this
Agreement, the Merger or the other transactions expressly contemplated
hereby.
SECTION 5.24. Customers and Suppliers. Since December 31, 2004, there has
been no termination, cancellation or material curtailment of the business
relationship of the Company with any material customer or supplier or group of
affiliated customers or suppliers of the Company nor, to the best knowledge of
the Company, any notice of intent or threat to so terminate, cancel or
materially curtail any such business relationship.
SECTION 5.25. Accounts Receivable. All accounts receivable of the Company
reflect bona fide transactions and have been reduced by sufficient reserves, in
accordance with GAAP, for bad debts, returns, allowances, cash discounts and
customer promotional allowances reflected in the Company's financial statements.
SECTION 5.26. Inventory. (a) All inventory of the Company is valued on the
Company's books and records at the lower of cost or market; (b) obsolete items,
items whose date code has expired and items of below standard quality have been
written off or written down to their net realizable value on the books and
records of the Company; and (c) the Company has fully written off on its books
and records (i) all inventory of the Company of any type of product or
ingredient for which the Company has not had any sales for the past six months,
(ii) all inventory of the Company which the Company, in its ordinary course of
business consistent with past practice, would not sell due to the proximity of
the expiration of the item's or product's useful life and (iii) all inventory of
organic products of the Company that does not conform to the National Organic
Program standards. All such inventory of the Company consisting of raw materials
-22-
or packaging is usable in the ordinary course of business consistent with past
practice, and all such inventory consisting of finished goods of the Company is,
and all such inventory consisting of work in process of the Company will upon
completion be, of merchantable quality, meeting all contractual, FDA, USDA and
Nutrition Labeling and Education Act of 1990 requirements, and is, or in the
case of work in process, will be, saleable in the ordinary course of business
consistent with past practice.
SECTION 5.27. Product Warranty. (a) The Company has not made any express
warranties to third parties with respect to any products created, manufactured,
sold, distributed or licensed, or any services rendered, by the Company except
as contained in the Material Contracts; (b) to the best knowledge of the Company
there are no warranties (express or implied) outstanding with respect to any
such product or products or services other than any such implied by law or the
Company's customer purchase order or contract forms, or the Company's order
information forms or as contained in the Material Contracts; (c) there are no
material design, manufacturing or other defects, latent or otherwise, with
respect to any such products; and (d) such products are nontoxic. The Company
has not modified or expanded its warranty obligation to any customer except as
contained in the Material Contracts. No products have been sold or distributed
by the Company under an understanding that such products would be returnable
other than in accordance with the Company's written standard returns policy.
SECTION 5.28. Product Recalls. Since December 31, 2003, there have not been
any recalls, whether voluntary, required by any governmental authority or agency
or otherwise, of products manufactured, distributed or sold by the Company.
SECTION 5.29. Insurance. Section 5.29 of the Company Disclosure Letter sets
forth as of the date of this Agreement in detail a listing of the type of
insurance coverage, deductibles, coverages and other material terms of the
insurance carried by the Company, which are in such amounts and covering such
risks as is reasonable and customary for businesses of the type conducted by the
Company.
SECTION 5.30. Reorganization. Neither the Company nor, to the best
knowledge of the Company, any of its affiliates has taken, agreed to take, or
will take any action that would prevent the Merger from constituting a
reorganization within the meaning of Section 368(a) of the Code. Neither the
Company nor, to the best knowledge of the Company, any of its affiliates is
aware of any agreement, plan or other circumstance that would prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the Parent Disclosure Letter (in the section or
subsections thereof corresponding to the section or subsection of this Agreement
and with respect to any other representation and warranty to the extent that it
is reasonably apparent from the face of any such disclosure in the Parent
Disclosure Letter that such disclosure should qualify such other representation
and warranty) delivered by Parent to the Company prior to the execution of this
Agreement (the "Parent Disclosure Letter"), Parent represents and warrants to
the Company that:
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SECTION 6.1. Organization and Qualification. Parent 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, lease and operate its properties and to carry on its business
as now being conducted. Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified or in good
standing which would not, individually or in the aggregate, reasonably be
expected to have or result in a Parent Material Adverse Effect. A "Parent
Material Adverse Effect" means any state of facts, circumstance, change,
development, effect, condition or occurrence that, when taken together with all
other states of fact, circumstances, changes, developments, effects, conditions
and occurrences (i) has a material and adverse effect on the financial
condition, business, assets, liabilities or results of operations of the Parent,
or (ii) prevents or materially impedes or delays the performance by the Parent
of its obligations under this Agreement or the consummation of the Merger or the
other transactions expressly contemplated by this Agreement; provided, however,
that with respect to clause (i), Parent Material Adverse Effect will be deemed
not to include any state of facts, circumstance, change, development, effect,
condition or occurrence to the extent resulting from: (a) any change in the
market price or trading volume of Parent's stock after the date hereof; (b) the
announcement of the pendency of the Merger (including cancellations of or delays
in customer orders, reductions in sales, disruptions in supplier, distributor,
partner or similar relationships or losses of employees, in each case resulting
from such announcement); or (c) compliance with the express terms of, or the
taking of any action expressly required by, this Agreement. Parent is not in
violation of any of the provisions of its certificate of incorporation or
by-laws. Parent has delivered to the Company accurate and complete copies of its
certificate of incorporation and by-laws, as currently in effect.
SECTION 6.2. Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share. As of August 17, 2005, 37,286,132
shares of Parent Common Stock are issued and outstanding, 100,000 shares are
issued and held as treasury shares and no shares of preferred stock were issued
and outstanding. All of such issued and outstanding shares are, and any shares
of Parent Common Stock to be issued in connection with this Agreement, the
Merger and the transactions contemplated hereby will be, validly issued, fully
paid and nonassessable and free of preemptive rights. Other than the
transactions contemplated by this Agreement, neither Parent nor any of its
subsidiaries is a party to any agreement or understanding, oral or written,
which (a) grants a right of first refusal or other such similar right upon the
sale of Parent Common Stock, or (b) restricts or affects the voting rights of
Parent Common Stock. There is no liability for dividends declared or accumulated
but unpaid with respect to any Parent Common Stock.
SECTION 6.3. Authority Relative to This Agreement. Parent has corporate
power and authority to execute and deliver this Agreement and to consummate the
Merger and other transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the Merger and other transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Parent and no other corporate proceedings on the part of Parent are
necessary to authorize this Agreement or to consummate the Merger or other
-24-
transactions contemplated hereby (other than as contemplated by this Agreement).
This Agreement has been duly and validly executed and delivered by Parent and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a valid and binding agreement of Parent, enforceable against Parent
in accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable or fiduciary principles.
SECTION 6.4. No Violations, etc.
(a) Assuming that all filings, permits, authorizations, consents and
approvals or waivers thereof have been duly made or obtained as
contemplated by Section 6.4(b) hereof, neither the execution and
delivery of this Agreement by Parent nor the consummation of the
Merger or other transactions contemplated hereby nor compliance by
Parent with any of the provisions hereof will (i) violate, conflict
with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or
suspension of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of Parent or any of its subsidiaries
under, any of the terms, conditions or provisions of (x) their
respective certificate or articles of incorporation or organization or
by-laws, (y) any note, bond, mortgage, indenture or deed of trust, or
(z) any license, lease, agreement or other instrument or obligation,
to which Parent or any such subsidiary is a party or to which they or
any of their respective properties or assets may be subject, or (ii)
violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its
subsidiaries or any of their respective properties or assets, except,
in the case of clauses (i)(y) and (i)(z) above, for such violations,
conflicts, breaches, defaults, terminations, suspensions,
accelerations, rights of termination or acceleration or creations of
liens, security interests, charges or encumbrances which would not,
individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
(b) No filing or registration with, notification to and no permit,
authorization, consent or approval of any governmental entity
(including, without limitation, any federal, state or local regulatory
authority or agency) is required by Parent, Parent Subsidiary or any
of Parent's other subsidiaries in connection with the execution and
delivery of this Agreement or the consummation by Parent of the Merger
or other transactions contemplated hereby, except (i) the filing of
the Certificate of Merger, (ii) filings with The Nasdaq Stock Market,
Inc. and (iii) filings with the SEC and state securities
administrators.
(c) As of the date hereof, Parent and its subsidiaries are not in
violation of or default under (x) their respective certificates or
articles of incorporation or organization or by-laws, (y) any note,
bond, mortgage, indenture or deed of trust, or (z) any license, lease,
agreement or other instrument or obligation to which Parent or any
such subsidiary is a party or to which they or any of their respective
properties or assets may be subject, except, in the case of clauses
(y) and (z) above, for such violations or defaults which would not,
individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
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SECTION 6.5. Commission Filings; Financial Statements. Parent has filed all
required forms, reports and documents with the SEC since June 30, 2002,
including, in the form filed with the SEC together with any amendments thereto,
(i) its Annual Report on Form 10-K for the fiscal year ended June 30, 2004 (the
"Parent 10-K"), (ii) all proxy statements relating to Parent's meetings of
stockholders (whether annual or special) held since June 30, 2004 (the "Parent
Current Proxies"), (iii) its Quarterly Reports on Form 10-Q for the fiscal
quarters ended September 30, 2004, December 31, 2004 and March 31, 2005 (the
"Parent Current 10-Qs" and, together with the Parent 10-K and the Parent Current
Proxies, the "Parent Current SEC Reports") and (iv) all other reports or
registration statements filed by Parent with the SEC since June 30, 2002
(collectively, the "Parent SEC Reports"), all of which complied when filed in
all material respects with all applicable requirements of the Securities Act and
the Exchange Act. The audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent and its subsidiaries
included or incorporated by reference in such Parent SEC Reports were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and present fairly,
in all material respects, the financial position and results of operations and
cash flows of Parent and its subsidiaries on a consolidated basis at the
respective dates and for the respective periods indicated (and in the case of
all such financial statements that are interim financial statements, contain all
adjustments so to present fairly). Except to the extent that information
contained in any Parent SEC Report was revised or superseded by a later filed
Parent SEC Report, none of the Parent SEC Reports contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
SECTION 6.6. Reorganization. None of Parent, Parent Subsidiary or any
affiliate of Parent has taken, agreed to take, or will take any action that
would prevent the Merger from constituting a reorganization within the meaning
of Section 368(a) of the Code. None of Parent, Parent Subsidiary or any
affiliate of Parent is aware of any agreement, plan or other circumstance that
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
SECTION 6.7. Absence of Parent Material Adverse Effect. Since June 30,
2004, there has not been, and there would not reasonably be expected to be, a
Parent Material Adverse Effect.
ARTICLE VII.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.1. Conduct of Business of the Company Pending the Merger. Except
as expressly contemplated by this Agreement or as expressly agreed to in writing
by Parent, during the period from the date of this Agreement to the Effective
Time, the Company will conduct its operations according to its ordinary course
of business consistent with past practice, and will use all commercially
reasonable efforts to keep intact its business organization, to keep available
the services of its officers and employees and to maintain satisfactory
relationships with suppliers, distributors, customers and others having business
-26-
relationships with it and will take no action which would impair the ability of
the parties to consummate the Merger or the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time, the
Company will not, without the prior written consent of Parent, which consent
shall not be unreasonably withheld or delayed:
(a) amend its articles of incorporation or by-laws;
(b) authorize for issuance, issue, sell, deliver, grant any warrants,
options or other rights for, or otherwise agree or commit to issue,
sell or deliver any shares of any class of its capital stock or any
securities convertible into shares of any class of its capital stock
(except for the exercise of currently outstanding stock options);
(c) split, combine or reclassify any shares of its capital stock, 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 or purchase, redeem or otherwise acquire any shares of
its own capital stock or of any of its subsidiaries, except as
otherwise expressly provided in this Agreement;
(d) (i) create, incur, assume, maintain or permit to exist any debt for
borrowed money other than under existing lines of credit in the
ordinary course of business consistent with past practice; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other person in the ordinary course of business consistent with
past practices; (iii) make any loans or advances (except in the
ordinary course of business consistent with past practice) to, capital
contributions to, or investments in, any other person; or (iv) pledge
or otherwise encumber shares of capital stock of the Company;
(e) (i) increase in any manner the compensation of (x) except under the
terms of any agreement in existence on the date hereof, any of its
directors or officers or (y) any other employee except in the ordinary
course of business consistent with past practice; (ii) pay or agree to
pay any pension, retirement allowance or other employee benefit not
required, or enter into or agree to enter into any agreement or
arrangement with such director or officer or employee, whether past or
present, relating to any such pension, retirement allowance or other
employee benefit, except as required under currently existing
agreements, plans or arrangements or to extend employee benefits upon
termination in the ordinary course of business consistent with past
practice; (iii) grant any severance or termination pay to, or enter
into any employment or severance agreement with, (x) except under the
terms of any agreement or policy in existence on the date hereof, any
of its directors or officers or (y) any other employee except in the
ordinary course of business consistent with past practice; or (iv)
except as may be required to comply with applicable law, become
obligated under any new pension plan, welfare plan, multiemployer
plan, employee benefit plan, benefit arrangement, or similar plan or
arrangement, which was not in existence on the date hereof, including
any bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay,
retirement or other benefit plan, agreement or arrangement, or
employment or consulting agreement with or for the benefit of any
person, or amend any of such plans or any of such agreements in
existence on the date hereof;
-27-
(f) enter into any agreement or transaction with any director, officer or
holder of more than 5% of Company Shares or any family member or
affiliate of any of the foregoing;
(g) except as set forth in Section 7.1(g) of the Company Disclosure
Letter, enter into any other agreements, commitments or contracts in
excess of $50,000 in the aggregate, except agreements, commitments or
contracts in the ordinary course of business consistent with past
practice and agreements, commitments or contracts for third party
services in connection with the Merger;
(h) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution, any
acquisition of a material amount of assets (other than in the ordinary
course of business consistent with past practice) or securities, any
sale, transfer, lease, license, pledge, mortgage, or other disposition
or encumbrance of a material amount of assets (other than in the
ordinary course of business consistent with past practice) or
securities or any material change in its capitalization, or any entry
into a material contract or any amendment or modification of any
material contract or any release or relinquishment of any material
contract rights;
(i) authorize any new capital expenditure or expenditures in excess of
$50,000 in the aggregate, other than expenditures that were (a)
included in the Company's capital expenditure budget for the current
fiscal year, which is set forth in Section 7.1(i) of the Company
Disclosure Letter or (b) incurred as a result of the transactions
contemplated by this Agreement;
(j) make any change in the accounting methods or accounting practices
followed by the Company, except changes required by Law or by GAAP;
(k) settle or compromise any material federal, state, local or foreign Tax
liability, make any new material Tax election, revoke or modify any
existing Tax election, or request or consent to a change in any method
of Tax accounting;
(l) take, cause or permit to be taken any action, whether before or after
the Effective Date, that could reasonably be expected to prevent the
Merger from constituting a "reorganization" within the meaning of
Section 368(a) of the Code;
(m) create or acquire any subsidiary;
(n) knowingly do any act or omit to do any act that would result in a
breach of any representation by the Company set forth in this
Agreement;
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(o) make any increase in the Company's trade or consumer promotions from
those reflected in the Company Budget, or consumer promotions
extending beyond December 31, 2005 without Parent's written approval;
or
(p) agree to do any of the foregoing.
SECTION 7.2. Conduct of Business of Parent Pending the Merger. Except as
contemplated by this Agreement or as expressly agreed to in writing by the
Company or as previously publicly disclosed, during the period from the date of
this Agreement to the Effective Time, each of Parent and its subsidiaries will
use all commercially reasonable efforts to keep substantially intact its
business, properties and business relationships and will take no action which
would materially adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement.
ARTICLE VIII.
COVENANTS AND AGREEMENTS
SECTION 8.1. Preparation of the Registration Statement; Shareholder
Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC a registration
statement in connection with the issuance of shares of Parent Common
Stock in the Merger (the "Registration Statement") including a proxy
statement/prospectus, in definitive form, relating to the Company
Shareholder Meeting, the related proxy and notice of meeting, and
soliciting material used in connection therewith (referred to herein
collectively as the "Proxy Statement"). Each of the Company and Parent
shall use commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing. The Proxy Statement shall include the
recommendation of the Board of Directors of the Company in favor of
approval and adoption of this Agreement and the Merger (the "Company
Board Recommendation"), except to the extent the Board of Directors of
the Company shall have withdrawn or modified its approval or
recommendation of this Agreement or the Merger as permitted by Section
8.5. The Company shall use commercially reasonable efforts to cause
the Proxy Statement to be mailed to its shareholders as promptly as
practicable after the Registration Statement becomes effective.
(b) The Company and Parent shall make all necessary filings with respect
to the Merger and the transactions contemplated thereby under the
Securities Act and the Exchange Act and applicable state blue sky laws
and the rules and regulations thereunder. Parent shall also take any
commercially reasonable action required to be taken under any
applicable state securities laws in connection with the issuance of
Parent Common Stock in the Merger. No filing of, or amendment or
supplement to, the Registration Statement will be made by Parent
without providing the Company and its counsel the opportunity to
review and comment thereon. No filing of, or amendment or supplement
to, the Proxy Statement will be made by the Company without providing
Parent and its counsel the opportunity to review and comment thereon.
Parent will advise the Company, promptly after it receives notice
thereof, of the time when the Registration Statement has become
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effective or any supplement or amendment has been filed, the issuance
of any stop order, the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the SEC for amendment of
the Registration Statement or comments thereon and responses thereto
or requests by the SEC for additional information. If at any time
prior to the Effective Time any information relating to the Company or
Parent, or any of their respective affiliates, officers or directors,
should be discovered by the Company or Parent which should be set
forth in an amendment or supplement to any of the Registration
Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other
parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the
extent required by Law, disseminated to the shareholders of the
Company.
(c) None of the information supplied or to be supplied by or on behalf of
the Company for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by
or on behalf of the Parent for inclusion or incorporation by reference
in the Proxy Statement will, at the dates mailed to shareholders and
at the time of the Company Shareholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
are made, not misleading. Each party will promptly inform the other
party of the occurrence of any event prior to the Effective Time which
would render such information so provided incorrect in any material
respect or require the amendment of the Proxy Statement or the
Registration Statement. The Proxy Statement (except for information
relating solely to Parent and Parent Subsidiary) will comply as to
form in all material respects with the provisions of the Securities
Act and the Exchange Act.
(d) The Company shall duly call, give notice of, and, as soon as
practicable following the effectiveness of the Registration Statement,
convene and hold a meeting of its shareholders (the "Company
Shareholder Meeting") for the purpose of obtaining the Requisite
Company Vote and shall, through its Board of Directors, recommend to
its shareholders the approval and adoption of this Agreement and the
Merger, and shall use all commercially reasonable efforts to solicit
from its shareholders proxies in favor of approval and adoption of
this Agreement and the Merger; provided, however, that such
recommendation is subject to Section 8.5 hereof.
SECTION 8.2. SEC Reports. Until the Closing Date, the Company will timely
file with the SEC all required forms, reports and documents required by
applicable Law, rule or regulation to be filed therewith, all of which will
comply in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and which will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
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SECTION 8.3. Additional Agreements; Cooperation.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use commercially reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this
Agreement, to vest the Surviving Company with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of either of Parent Subsidiary or the Company and to
cooperate with each other in connection with the foregoing, including
using commercially reasonable efforts (i) to obtain all necessary
waivers, consents and approvals from other parties to loan agreements,
material leases and other material contracts that are specified in
Section 5.5(a) or 5.5(b) of the Company Disclosure Letter, (ii) to
obtain all necessary consents, approvals and authorizations as are
required to be obtained under any federal, state or foreign Law or
regulations, (iii) to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions
contemplated hereby, (iv) to 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) to
effect all necessary registrations and filings, including, but not
limited to, submissions of information requested by governmental
authorities, (vi) provide all necessary information for the
Registration Statement and (vii) to fulfill all conditions to this
Agreement.
(b) Each of the parties hereto agrees to furnish to the other party hereto
such necessary information and reasonable assistance as such other
party may request in connection with its preparation of necessary
filings or submissions to any regulatory or governmental agency or
authority.
(c) Within 20 business days of the end of each calendar month, the Company
will provide to Parent true and complete copies of an unaudited
balance sheet and statement of income for the Company for the previous
month (collectively, the "Monthly Financials"). The Monthly Financials
will fairly present, in all material respects, the financial position
of the Company at, as of and for the periods therein indicated, and
will be prepared in accordance with GAAP applied on a consistent
basis, except that such financial statements will not include any
footnote disclosures that might otherwise be required to be included
by GAAP, and are subject to normal non-recurring year-end audit
adjustments.
(d) The Company will provide to Parent the weekly sales reports generated
by the Company.
SECTION 8.4. Publicity. The Company and Parent agree to consult with each
other in issuing any press release and with respect to the general content of
other public statements with respect to the transactions contemplated hereby,
and shall not issue any such press release prior to such consultation, except as
may be required by Law.
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SECTION 8.5. No Solicitation.
(a) From the date of this Agreement until the Effective Time, except as
specifically permitted in 8.5(d), the Company shall not, and shall
direct its Representatives not to, directly or indirectly:
(i) solicit, initiate, facilitate or knowingly encourage any
inquiries, offers or proposals relating to a Takeover Proposal;
(ii) engage in discussions or negotiations with, or furnish or
disclose any non-public information relating to the Company to,
any person that has made or has indicated an intention or to make
or is considering making a Takeover Proposal;
(iii) withdraw, modify or amend the Company Board Recommendation in
any manner adverse to Parent;
(iv) approve, endorse or recommend any Takeover Proposal; or
(v) enter into any agreement in principle, arrangement, understanding
or Contract relating to a Takeover Proposal.
(b) The Company shall, and shall direct its Representatives to,
immediately cease any existing solicitations, discussions or
negotiations with any person that has made or indicated an intention
to make a Takeover Proposal. The Company shall promptly request that
each person who has executed a confidentiality agreement with the
Company in connection with that person's consideration of a Takeover
Proposal return or destroy all non-public information furnished to
that person by or on behalf of the Company. The Company shall promptly
inform its Representatives of the Company's obligations under this
Section 8.5.
(c) The Company shall notify Parent promptly upon receipt of (i) any
Takeover Proposal or indication by any person that it is considering
making any Takeover Proposal or (ii) any request for non-public
information relating to the Company other than requests for
information in the ordinary course of business consistent with past
practice and unrelated to a Takeover Proposal. The Company shall
provide Parent promptly with the identity of such person and a copy of
such Takeover Proposal, indication or request (or, where no such copy
is available, a written description of such Takeover Proposal). The
Company shall keep Parent reasonably informed on a prompt basis of the
status of any such Takeover Proposal, indication or request, and any
related communications to or by the Company or its Representatives.
(d) Subject to the Company's compliance with the provisions of this
Section 8.5 and based on written advise of its outside counsel, and
only until the Requisite Company Vote is obtained, the Company and its
Board of Directors shall be permitted to:
(i) engage in discussions with a person who has made a written
Takeover Proposal not solicited in violation of this Section 8.5
solely to clarify the terms of such Takeover Proposal, or engage
in discussions or negotiations with a person who has made a
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written Takeover Proposal not solicited in violation of this
Section 8.5 if the Board of Directors of the Company determines
that such Takeover Proposal is reasonably likely to result in a
Superior Proposal;
(ii) furnish or disclose any non-public information relating to the
Company to a person who has made a written Takeover Proposal not
solicited in violation of this Section 8.5 if the Board of
Directors of the Company determines that such Takeover Proposal
is reasonably likely to result in a Superior Proposal, but only
so long as the Company (A) has caused such person to enter into a
confidentiality agreement with the Company on terms and
conditions substantially the same as those contained in the
Confidentiality Agreement entered into with Parent (the
"Confidentiality Agreement") and (B) concurrently discloses the
same such non-public information to Parent if not previously
disclosed;
(iii) withdraw, modify or amend the Company Board Recommendation in a
manner adverse to Parent, if the Board of Directors of the
Company has determined, based on the advice of outside legal
counsel, that such action is necessary to comply with its
fiduciary obligations to the shareholders of the Company under
applicable Laws; or
(iv) subject to compliance with Section 10.4(a), enter into an
agreement providing for the implementation of a Superior
Proposal.
(e) Notwithstanding the foregoing, the Board of Directors of the Company
shall be permitted to (i) disclose to the shareholders of the Company
a position contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated
under the Exchange Act and (ii) make such other public disclosure that
it determines, based on the advice of outside legal counsel, is
required under applicable Law.
(f) "Superior Proposal" means a Takeover Proposal (i) which the Board of
Directors of the Company determines is on terms and conditions
materially more favorable from a financial point of view to the
shareholders of the Company than those contemplated by this Agreement
(based on advice received from financial advisors), (ii) the
conditions to the consummation of which are all reasonably capable of
being satisfied without undue delay, and (iii) for which financing, to
the extent required, is then committed or, in the judgment of the
Board of Directors of the Company, is reasonably likely to be
available.
(g) "Takeover Proposal" means any proposal or offer relating to (i) a
merger, consolidation, share exchange or business combination
involving the Company representing 20% or more of the assets of the
Company, (ii) a sale, lease, exchange, mortgage, transfer or other
disposition, in a single transaction or series of related
transactions, of 20% or more of the assets of the Company, (iii) a
purchase or sale of shares of capital stock or other securities, in a
single transaction or series of related transactions, representing 20%
or more of the voting power of the capital stock of Company, including
by way of a tender offer or exchange offer, (iv) a reorganization,
recapitalization, liquidation or dissolution of the Company or (v) any
other transaction having a similar effect to those described in
clauses (i) - (iv), in each case other than the transactions
contemplated by this Agreement.
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SECTION 8.6. Access to Information.
(a) From the date of this Agreement until the Effective Time, the Company,
after reasonable notice, will give Parent and its authorized
representatives (including counsel, environmental and other
consultants, accountants and auditors) reasonable access during normal
business hours to all owned and leased properties, facilities,
co-packaging facilities (to the extent the Company has or can arrange
such access), personnel and operations and to all of its books and
records, will permit Parent to make such inspections, investigations
and assessments as it may reasonably require and will cause its
officers, employees and agents after reasonable notice, to furnish
Parent with such financial and operating data and other information
with respect to its business and properties as Parent may from time to
time reasonably request, including, without limitation, any documents
or information required by the lenders under Parent's credit facility.
Notwithstanding the foregoing, nothing in this Section 8.6 shall
require the Company to provide access or information if withholding
such disclosure is reasonably determined by the Company's Board of
Directors to be required by fiduciary duties.
(b) All documents and information furnished pursuant to this agreement
shall be subject to the terms and conditions set forth in the
Confidentiality Agreement. This provision shall survive any
termination of this Agreement.
SECTION 8.7. Notification of Certain Matters. Prior to the Effective Time,
the Company or Parent, as the case may be, shall promptly notify the other of
(i) its obtaining of actual knowledge as to the matters set forth in clauses (x)
and (y) below, or (ii) the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be likely to cause (x) any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time, or (y)
any material failure of the Company or Parent, 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, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
SECTION 8.8. Indemnification and Insurance. For a period of six (6) years
after the Effective Time:
(a) Parent and the Surviving Company shall maintain in effect, and Parent
shall cause the Surviving Company to comply with and shall comply
with, the provisions regarding indemnification of officers and
directors contained in the articles of incorporation and by-laws of
the Company and any directors, officers or employees indemnification
agreements of the Company as in effect on the date hereof and listed
in Section 8.8 of the Company Disclosure Letter;
(b) Parent and the Surviving Company shall maintain in effect the current
policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by the Company (provided that Parent
may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate,
no less advantageous to the insured in any material respect) with
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respect to claims arising from facts or events which occurred on or
before the Effective Time; provided that in satisfying its obligation
under this Section 8.8(b), the Surviving Company and Parent shall not
be obligated to pay premiums in excess of 200% of the amount per annum
that the Company has paid in its last full fiscal year, which amount
the Company has disclosed to Parent, prior to the date hereof (the
"Maximum Annual Premium"); provided, further, that if the annual
premiums of such insurance coverage exceed such amount, the Surviving
Company and Parent shall be obligated to obtain a policy with the
greatest coverage available for the costs not exceeding such Maximum
Annual Premium; and
(c) Parent and the Surviving Company shall indemnify the directors and
officers of the Company to the fullest extent to which Parent or the
Surviving Company is permitted to indemnify such officers and
directors under its certificate of formation and operating agreement
and the CLLCA.
SECTION 8.9. Fees and Expenses.
(a) Subject to Section 10.1, whether or not the Merger is consummated, the
Company, the Company's shareholders and Parent shall bear their
respective expenses incurred in connection with the Merger, including,
without limitation, the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, and all fees and
expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants.
(b) If the Merger is consummated, Parent shall assume the Company's
expenses incurred in connection with the Merger; provided that to the
extent that such expenses for third party services and fees to outside
directors, in each case incurred after March 31, 2005, and payments to
be made by Parent under the Non-Competition Agreement between Parent
and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ dated as of the date hereof (collectively, the
"Company Expenses") exceed $725,000 in the aggregate, such excess (the
"Excess Company Expenses") shall result in a dollar-for-dollar
reduction in the aggregate Cash Consideration, as provided in Section
3.1 hereof. The Company shall provide Parent with a reasonably
detailed, good-faith estimate of the Company Expenses, including
related invoices, at least two business days prior to the Closing
Date.
SECTION 8.10. Affiliate Letters. The Company shall use commercially
reasonable efforts to cause each person who is, at the time this Agreement is
submitted for adoption by the shareholders of the Company, an "affiliate" of the
Company for purposes of Rule 145 under the Securities Act, to deliver to Parent
as of the Closing Date, a written agreement substantially in the form attached
as Exhibit A hereto.
SECTION 8.11. Nasdaq Listing. Parent shall cause the Stock Consideration to
be approved for listing on the National Market System of The Nasdaq Stock
Market, Inc., subject to official notice of issuance, prior to the Closing Date.
SECTION 8.12. Shareholder Litigation. Each of the Company and Parent shall
give the other the reasonable opportunity to participate in the defense of any
shareholder litigation against or in the name of the Company or Parent, as
applicable, and/or their respective directors relating to the transactions
contemplated by this Agreement.
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SECTION 8.13. Company Employees.
(a) From and after the Effective Time, Parent and the Surviving Company
will honor and assume, in accordance with their terms, all existing
written employment agreements between the Company and any officer,
director, or employee of the Company disclosed in Section
5.13(a)(xiii) of the Company Disclosure Letter. Parent shall treat
employment by the Company prior to the Effective Time the same as
employment with Parent for purposes of vesting and eligibility under
any employment benefit plan of Parent and its subsidiaries, including
the Surviving Company.
(b) From and after the Effective Time, Parent may pay severance and/or
retention to terminated Company employees.
SECTION 8.14. Tax Treatment. Unless otherwise required by law (including
the good faith resolution of a tax audit), each of Parent and the Company shall
treat the Merger as a reorganization under the provisions of Section 368 of the
Code on its Tax Returns. At or prior to Closing, each of Parent and the Company
shall execute and deliver to ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP and to ▇▇▇▇▇▇ Godward
LLP tax representation letters relating to the Merger substantially in the form
attached as Exhibit B hereto (the "Tax Representation Letters"). Following
delivery of such tax representation letters, each of Parent and the Company
shall use reasonable efforts to cause ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇
Godward LLP, respectively, to deliver to it a tax opinion that the Merger shall
qualify as a reorganization under the provisions of Section 368(a) of the Code,
substantially in the form attached as Exhibit C hereto.
SECTION 8.15. Assignment of Life Insurance. On or prior to the Closing
Date, the Company shall assign to ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ the Company's New York
Life whole life insurance policy (including any cash surrender value) on ▇▇.
▇▇▇▇▇▇▇▇' life.
ARTICLE IX.
CONDITIONS TO CLOSING
SECTION 9.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Shareholder Approval. The Requisite Company Vote shall have
been obtained.
(b) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule or regulation entered, enacted, promulgated,
enforced or issued by any court or other governmental entity of
competent jurisdiction or other legal restraint or prohibition
(collectively, "Restraints") shall be in effect preventing the
consummation of the Merger.
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(c) Nasdaq Listing. The shares of Parent Common Stock issuable to the
Company's shareholders as contemplated by this Agreement shall have
been approved for listing on the National Market System of The Nasdaq
Stock Market, Inc., subject to official notice of issuance.
SECTION 9.2. Conditions to Obligations of Parent. The obligation of Parent
to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in
all respects, without regard to any materiality or Company Material
Adverse Effect qualifications contained therein, as though made on and
as of the Closing Date (except for representations and warranties made
as of a specified date, the accuracy of which shall be determined as
of that specified date), except where the failure or failures of
representations and warranties to be true and correct in all respects
would not reasonably be expected to have a Company Material Adverse
Effect. In addition, the representations and warranties set forth in
Section 5.3 shall be true and correct in all respects as of the
Effective Time, as though made on as of the Effective Time (except to
the extent expressly made as of an earlier date, in which case as of
such earlier date). The Company shall have delivered to Parent an
officer's certificate, in form and substance satisfactory to Parent
and its counsel, to the effect of the matters stated in this Section
9.2(a) and in Sections 9.2(b) and 9.2(c).
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects (or, with respect to the Company's
obligations under Section 8.6 hereof as they relate to access to any
and all documents described or referred to in the Company Disclosure
Letter, in all respects) all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) No Company Material Adverse Effect. Since the date hereof, there shall
not have been, and there shall not reasonably be expected to be, any
Company Material Adverse Effect that is continuing.
(d) Dissenters' Rights. The holders of not more than 10% of the
outstanding Company Shares shall (i) immediately following the
Requisite Shareholder Vote, have demanded and maintained the right to
require, or have the continuing right to require, purchase of their
Company Shares for cash in accordance with Chapter 13 of the CGCL or
(ii) 30 days following the Requisite Shareholder Vote, have demanded
and maintained the right to require, or have the continuing right to
require, the purchase of their Company Shares for cash in accordance
with Chapter 13 of the CGCL.
(e) Consents and Approvals. The consents and approvals set forth in
Sections 5.5(a) and (b) of the Company Disclosure Letter shall have
been obtained.
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(f) Payoff Letters. The Company shall have delivered to Parent customary
payoff letters, in form and substance reasonably satisfactory to
Parent and its counsel, with respect to all Company Indebtedness
existing as of (or, as Parent may reasonably request, existing prior
to) the Effective Time.
(g) Tax Opinion. Parent shall have received from its counsel, ▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, an opinion substantially in the form attached as
Exhibit C hereto; provided that this condition shall be deemed waived
if the representations contained in the Tax Representation Letters are
true in all material respects.
SECTION 9.3. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent set forth in this Agreement shall be true and correct in all
respects, without regard to any materiality or Parent Material Adverse
Effect qualifications contained therein, as though made on and as of
the Closing Date (except for representations and warranties made as of
a specified date, the accuracy of which shall be determined as of that
specified date), except where the failure or failures of
representations and warranties to be true and correct in all respects
would not reasonably be expected to have a Parent Material Adverse
Effect. In addition, the representations and warranties set forth in
Section 6.2 shall be true and correct in all respects as of the
Effective Time, as though made on as of the Effective Time (except to
the extent expressly made as of an earlier date, in which case as of
such earlier date). Parent shall have delivered to the Company an
officer's certificate, in form and substance satisfactory to the
Company and its counsel, to the effect of the matters stated in this
Section 9.3(a) and in Section 9.3(b).
(b) Performance of Obligations of Parent and Parent Subsidiary. Parent and
Parent Subsidiary shall have performed in all material respects all
obligations required to be performed by them under this Agreement at
or prior to the Closing Date.
(c) Consents and Approvals. The consents and approvals set forth in
Sections 5.5(a) and (b) of the Company Disclosure Letter shall have
been obtained.
(d) Dissenters' Rights. The holders of not more than 20% of the
outstanding Company Shares shall (i) immediately following the
Requisite Shareholder Vote, have demanded and maintained the right to
require, or have the continuing right to require, purchase of their
Company Shares for cash in accordance with Chapter 13 of the CGCL or
(ii) 30 days following the Requisite Shareholder Vote, have demanded
and maintained the right to require, or have the continuing right to
require, the purchase of their Company Shares for cash in accordance
with Chapter 13 of the CGCL.
(e) Tax Opinion. The Company shall have received from its counsel, ▇▇▇▇▇▇
Godward LLP, an opinion substantially in the form attached as Exhibit
C hereto; provided that this condition shall be deemed waived if the
representations contained in the Tax Representation Letters are true
in all material respects.
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(f) No Parent Material Adverse Effect. Since the date hereof, there shall
not have been, and there shall not reasonably be expected to be, any
Parent Material Adverse Effect that is continuing.
ARTICLE X.
TERMINATION
SECTION 10.1. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time by mutual written consent of
Parent and the Company.
SECTION 10.2. Termination by Either Parent or the Company. This Agreement
may be terminated by either Parent or the Company at any time prior to the
Effective Time:
(a) if the Merger has not been consummated by December 31, 2005 (or, if
the SEC reviews the Registration Statement, by January 31, 2006)
except that the right to terminate this Agreement under this clause
(a) shall not be available to any party to this Agreement whose
failure to fulfill any of its obligations has been a principal cause
of, or resulted in, the failure to consummate the Merger by such date;
provided, that the deadlines in this clause (a) shall be extended for
an additional 30 calendar days if the condition described in Section
9.2(d)(i) is not met.
(b) if this Agreement has been submitted to the shareholders of the
Company for adoption at a duly convened Company Shareholder Meeting
(or adjournment or postponement thereof) and the Requisite Company
Vote is not obtained upon a vote taken thereon;
(c) if any Law prohibits consummation of the Merger; or
(d) if any Order restrains, enjoins or otherwise prohibits consummation of
the Merger, and such Order has become final and nonappealable.
SECTION 10.3. Termination by Parent. This Agreement may be terminated by
Parent at any time prior to the Effective Time:
(a) if the Board of Directors of the Company withdraws, modifies or amends
the Company Board Recommendation in any manner adverse to Parent;
(b) if (i) the Board of Directors of the Company approves, endorses or
recommends a Takeover Proposal, (ii) the Company enters into a
Contract relating to a Takeover Proposal, (iii) a tender offer or
exchange offer for any outstanding shares of capital stock of the
Company is commenced prior to obtaining the Requisite Company Vote and
the Board of Directors of the Company fails to recommend against
acceptance of such tender offer or exchange offer by its shareholders
(including, for these purposes, by taking no position with respect to
the acceptance of such tender offer or exchange offer by its
-39-
shareholders, which shall constitute a failure to recommend against
acceptance of such tender offer or exchange offer) within ten business
days after commencement, (iv) any person solicits proxies of
shareholders of the Company prior to obtaining the Requisite Company
Vote and the Board of Directors of the Company fails to recommend
against acceptance of such solicitation by its shareholders
(including, for these purposes, by taking no position with respect to
the acceptance of such solicitation by its shareholders, which shall
constitute a failure to recommend against acceptance of such
solicitation) within ten business days after commencement, or (v) the
Company or its Board of Directors publicly announces its intention to
do any of the foregoing; or
(c) if the Company breaches any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach (i)
would give rise to the failure of a condition set forth in Section
9.2(a), 9.2(b) or 9.2(c) and (ii) has not been cured by the Company
within ten business days after the Company's receipt of written notice
of such breach from Parent.
SECTION 10.4. Termination by the Company. This Agreement may be terminated
by the Company at any time prior to the Effective Time:
(a) if the Board of Directors of the Company approves, and authorizes the
Company to enter into, an agreement providing for the implementation
of a Superior Proposal, but only so long as:
(i) the Company Shareholder Meeting shall have been held,
stockholders of the Company shall have voted on adoption of this
Agreement and the Requisite Company Vote was not obtained;
(ii) the Company is not then and has not been in breach of any of its
obligations under Section 8.5 in any material respect;
(iii) the Board of Directors of the Company has determined, after
consulting with an independent financial advisor, that such
definitive agreement constitutes a Superior Proposal;
(iv) the Company has notified Parent in writing that it intends to
enter into such definitive agreement, attaching the most current
version of such definitive agreement (including any amendments,
supplements or modifications) to such notice; and
(v) during the eight business day period following Parent's receipt
of such notice, (A) the Company shall have offered to negotiate
with (and, if accepted, negotiated with), and shall have caused
its respective financial and legal advisors to offer to negotiate
with (and, if accepted, negotiate with), Parent in making such
commercially reasonable adjustments to the terms and conditions
of this Agreement as would enable the Company to proceed with the
Merger and the other transactions contemplated by this Agreement,
and (B) the Board of Directors of the Company shall have
determined, after considering the results of such negotiations
and the revised proposals made by Parent, if any, that the
Superior Proposal giving rise to such notice continues to be a
Superior Proposal; or
-40-
(b) if Parent breaches any of its representations, warranties, covenants
or agreements contained in this Agreement, which breach (i) would give
rise to the failure of a condition set forth in Section 9.3(a), 9.3(b)
or 9.3(c) and (ii) has not been cured by Parent within ten business
days after Parent's receipt of written notice of such breach from the
Company.
SECTION 10.5. Effect of Termination. If this Agreement is terminated
pursuant to this Article X, it shall become void and of no further force and
effect, with no liability on the part of any party to this Agreement (or any
shareholder, member, director, officer, employee, agent or representative of
such party), except that if such termination results from the willful (a)
failure of any party to perform its obligations or (b) breach by any party of
its representations or warranties contained in this Agreement, then such party
shall be fully liable for any liabilities incurred or suffered by the other
parties as a result of such failure or breach. The provisions of Section 8.5(b),
this Section 10.5 and Section 10.6 shall survive any termination of this
Agreement.
SECTION 10.6. Payments Following Termination. The Company shall pay, or
cause to be paid, to Parent by wire transfer of immediately available funds an
amount equal to $900,000 (the "Termination Fee"):
(a) if this Agreement is terminated by the Company pursuant to Section
10.4(a), in which case payment shall be made before or concurrently
with such termination and prior to entry into a Contract relating to a
Takeover Proposal;
(b) if this Agreement is terminated by Parent pursuant to Section 10.3(a)
or Section 10.3(b), in which case payment shall be made within two
business days of such termination; or
(c) if (A) a Takeover Proposal shall have been made or proposed to the
Company or otherwise publicly announced, (B) this Agreement is
terminated by either Parent or the Company pursuant to Section 10.2 or
by Parent pursuant to Section 10.3(c) and (C) within 18 months
following the date of such termination, the Company shall consummate
any Takeover Proposal (whether or not such Takeover Proposal was the
same Takeover Proposal referred to in the foregoing clause (A)), in
which case payment shall be made within two business days of the date
on which the Company consummates such Takeover Proposal.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 11.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 11.2. Waiver. At any time prior to the Effective Date, any party
hereto may (i) extend the time for the performance of any of the obligations or
-41-
other acts of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
duly authorized by and signed on behalf of such party.
SECTION 11.3. Notices.
(a) Any notice or communication to any party hereto shall be duly given if
in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), facsimile or
overnight air courier guaranteeing next day delivery, to such other
party's address.
If to Parent or Parent Subsidiary:
The Hain Celestial Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to the Company:
Spectrum Organic Products, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ Godward LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
-42-
(b) All notices and communications will be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, if mailed; when sent, if sent
by facsimile; and the next business day after timely delivery to the
courier, if sent by overnight air courier guaranteeing next day
delivery.
SECTION 11.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 11.5. Interpretation.
(a) The headings of articles and sections herein are for convenience of
reference, do not constitute a part of this Agreement, and shall not
be deemed to limit or affect any of the provisions hereof.
(b) As used in this Agreement:
(i) "Company Budget" means the Summary Comparative Income Statement
of Spectrum Organic Products, Inc. for January-December 2005 and
2004, dated May 27, 2005, as provided to Parent.
(ii) "Environment" means any surface water, ground water, drinking
water supply, land surface or subsurface strata, ambient air,
indoor air and any indoor location and all natural resources such
as flora, fauna and wetlands;
(iii) "Environmental Claim" means any notice, claim, demand,
complaint, suit or other communication by any person alleging
potential liability (including, without limitation, potential
liability for investigation, remediation, removal, response or
corrective action or damages to any person, property or natural
resources, and any fines or penalties) arising out of or relating
to (1) the Release or threatened Release of Hazardous Materials
or (2) any violation, or alleged violation, of, or failure or
alleged failure to comply with, Environmental Laws;
(iv) "Environmental Laws" means all federal, state, and local laws,
statutes, codes, rules, ordinances, regulations, judgments,
orders, decrees and the common law as now or previously in effect
relating to pollution or protection of human health or the
Environment, or occupational health or safety including, without
limitation, those relating to the generation, storage, treatment,
transport, handling or disposal or Release or threatened Release
of Hazardous Materials;
(v) "Environmental Permit" means a permit, identification number,
license, approval, consent or other written authorization issued
pursuant to Environmental Laws;
(vi) "Hazardous Materials" means pollutants, contaminants, substances,
constituents, compounds, chemicals, materials or wastes subject
to regulation or which can give rise to liability under
Environmental Laws including, without limitation, petroleum and
petroleum products and wastes, and all constituents thereof;
-43-
(vii) "Indebtedness" means (i) indebtedness for borrowed money
(excluding any interest thereon), secured or unsecured, (ii)
obligations under conditional sale or other title retention
Contracts relating to purchased property, (iii) any leases which
under GAAP are required to be treated as capital leases, (iv)
obligations under interest rate cap, swap, collar or similar
transactions or currency hedging transactions (valued at the
termination value thereof) and (v) guarantees of any of the
foregoing of any other person;
(viii) "Laws" means any binding domestic or foreign laws, statutes,
ordinances, rules, regulations, codes or executive orders
enacted, issued, adopted, promulgated or applied by any
governmental entity;
(ix) "Liens" means any liens, pledges, security interests, claims,
options, rights of first offer or refusal, charges or other
encumbrances;
(x) "Order" means any orders, judgments, injunctions, awards, decrees
or writes handed down, adopted or imposed by any governmental
authority;
(xi) "Permitted Liens" means (i) Liens for current taxes and
assessments not yet due and payable, (ii) inchoate mechanics' and
materialmen's Liens for construction in progress, (iii)
workmen's, repairmen's, warehousemen's and carriers' Liens
arising in the ordinary course of business consistent with past
practice and (iv) all Liens and other encumbrances that are
typical for the applicable property type and locality and which
do not materially interfere with the conduct of the business of
the Company or the use of the Property or materially impair the
value of the Property;
(xii) "person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof;
(xiii) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing in, into or through the Environment;
(xiv) "Representatives" means, when used with respect to Parent or the
Company, their respective directors, officers, employees,
consultants, accountants, legal counsel, investment bankers,
financing sources, agents and other representatives, as
applicable, and their respective Subsidiaries;
(xv) "subsidiary" of any person means (i) a corporation more than 50%
of the outstanding voting stock of which is owned, directly or
indirectly, by such person or by one or more other subsidiaries
of such person or by such person and one or more subsidiaries
thereof or (ii) any other person (other than a corporation) in
which such person, or one or more other subsidiaries of such
person or such person and one or more other subsidiaries thereof,
directly or indirectly, have at least a majority ownership and
voting power relating to the policies, management and affairs
thereof; and
-44-
(xvi) "voting stock" of any person means capital stock of such person
which ordinarily has voting power for the election of directors
(or persons performing similar functions) of such person, whether
at all times or only so long as no senior class of securities has
such voting power by reason of any contingency.
(c) In addition, the following terms are defined in the following
Sections:
Term Section
------------------------------------------------ -----------------------------
Additional Payments 3.2(c)
Benefit Plans 5.21(a)
Cash Consideration 3.1(b)
CERCLA 5.22(i)
Certificate of Merger 1.4
Certificates 3.2(b)
CGCL Preamble
CLLCA Preamble
Closing 1.3
Closing Date 1.3
Code Preamble
Company Preamble
Company Board Recommendation 8.1(a)
Company Current Proxies 5.9(a)
Company Current SEC Reports 5.9(a)
Company Disclosure Letter first paragraph of Article V
Company ERISA Affiliate 5.21(b)
Company Expenses 8.9(b)
Company Fairness Opinion 5.6
Company June 2005 10-Q 5.9(a)
Company Material Adverse Effect 5.1
Company SEC Reports 5.9(a)
Company Shareholder Meeting 8.1(d)
Company Shares Preamble
Company Stock Option 3.1(c)
Company 10-K 5.9(a)
Company Warrant 3.1(d)
Contracts 5.13(a)
Dissenting Shareholder 3.1(e)
Dissenting Shares 3.1(e)
Effective Date 1.5
Effective Time 1.5
ERISA 5.21(a)
Excess Company Expenses 8.9(b)
Exchange Act 5.9(a)
Exchange Agent 3.2(a)
Exchange Fund 3.2(a)
Exchanging Company Shares 3.1(b)
-▇▇-
▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------------ -----------------------------
FDA 5.17
GAAP 5.9(b)
Intellectual Property 5.19
July Balance Sheet 5.9(c)
July Financials 5.9(c)
Lease Documents 5.14(b)
Material Contracts 5.13(a)(xiv)
Maximum Annual Premium 8.8(b)
Merger Preamble
Merger Consideration 3.1(b)
Parent Preamble
Parent Common Stock 3.1(b)
Parent Common Stock Market Price 3.1(b)
Parent Current Proxies 6.5
Parent Current SEC Reports 6.5
Parent Current 10-Qs 6.5
Parent Disclosure Letter first paragraph of Article VI
Parent Material Adverse Effect 6.1
Parent SEC Reports 6.5
Parent Subsidiary Preamble
Parent 10-K 6.5
Property 5.14(b)
Properties 5.14(b)
Proxy Statement 8.1(a)
Registration Statement 8.1(a)
Requisite Company Vote 5.4
Restraints 9.1(b)
SEC 5.5(b)
Securities Act 5.9(a)
Stock Consideration 3.1(b)
Stock Option Consideration 3.1(c)
Superior Proposal 8.5(f)
Surviving Company 1.2
Takeover Proposal 8.5(g)
Tax 5.20
Taxes 5.20
Tax Representation Letters 8.14
Tax Return 5.20
Ten Day Average 3.1(b)
Termination Fee 10.6
Trading Day 3.1(b)
Treas. Reg. 5.20
Warrant Consideration 3.1(d)
-46-
SECTION 11.6. Amendment. This Agreement may be amended by the parties at
any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of each of Parent and the
Company; provided, however, that after any such approval, there shall not be
made any amendment that by Law requires further approval by such stockholders
without the further approval of such stockholders; and provided, further, that
this Agreement shall not be amended after the Effective Time. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties.
SECTION 11.7. No Third Party Beneficiaries. Except for the rights set forth
under Section 8.8, nothing in this Agreement shall confer any rights upon any
person or entity which is not a party or permitted assignee of a party to this
Agreement.
SECTION 11.8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to principles of conflicts of laws.
SECTION 11.9. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
The parties accordingly agree that the parties will be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 11.10. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
SECTION 11.11. No Recourse Against Others. No director, officer or
employee, as such, of Parent, Parent Subsidiary or the Company or any of their
respective subsidiaries shall have any liability for any obligations of Parent,
Parent Subsidiary or the Company, respectively, under this Agreement for any
claim based on, in respect of or by reasons of such obligations or their
creation.
SECTION 11.12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
-47
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to
be executed by their duly authorized officers all as of the day and year first
above written.
THE HAIN CELESTIAL GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer, President
and Chairman of the Board
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
S-1
SPECTRUM ORGANIC PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman of the Board
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
S-2
EXHIBIT A
---------
[FORM OF COMPANY AFFILIATE LETTER]
Ladies and Gentlemen:
I have been advised that I may be considered to be an "affiliate" of
Spectrum Organic Products, Inc. (the "Company") for purposes of Rule 145 under
the Securities Act of 1933, as amended (the "Securities Act").
The Hain Celestial Group, Inc. ("Parent") and the Company have entered into
an Agreement and Plan of Merger dated as of August 23, 2005 (the "Merger
Agreement"). Upon consummation of the transactions contemplated by the Merger
Agreement (the "Merger"), I will receive cash and shares of capital stock of
Parent for all of the shares of capital stock of the Company owned by me or as
to which I may be deemed a beneficial owner. I own ______ shares of common stock
of the Company. Such shares will be converted in the Merger into cash and shares
of common stock of Parent as described in the Merger Agreement. The shares of
Company capital stock and Parent capital stock owned by me or as to which I may
deem to be a beneficial owner prior to the Merger are hereinafter collectively
referred to as the "Pre-Merger Stock" and the shares of Parent capital stock
received by me in the Merger are hereinafter collectively referred to as the
"Exchange Stock." This agreement is hereinafter referred to as the "Letter
Agreement."
I represent and warrant to, and agree with, the Company and Parent that:
A. I have read this Letter Agreement and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Pre-Merger Stock and
Exchange Stock, to the extent I felt necessary, with my counsel or counsel
for the Company.
B. The shares of common stock of Parent that I shall receive in
exchange for my shares of common stock of the Company are not being
acquired by me with a view to their distribution except to the extent and
in the manner provided for in paragraph (d) of Rule 145 under the
Securities Act.
C. I agree with you not to dispose of any such shares of common stock
of Parent in any manner that would violate Rule 145.
I further agree with you that the certificate or certificates
representing such shares of common stock of Parent may bear a legend
referring to the restrictions on disposition thereof in accordance with the
provisions of the foregoing paragraph and that stop transfer instructions
may be filed with respect to such shares with the transfer agent for such
shares.
D. I understand that stop transfer instructions will be given to the
Company, Parent and their respective transfer agents, as the case may be,
with respect to the shares of Pre-Merger Stock and the Exchange Stock in
connection with the restrictions set forth herein.
A-1
It is understood and agreed that this Letter Agreement shall terminate and
be of no further force and effect if the Merger Agreement is terminated pursuant
to the terms thereof.
The agreements made by me in the foregoing paragraphs are on the
understanding and condition that you agree to deliver in exchange for the
certificate or certificates representing such shares a new certificate or
certificates representing such shares not bearing the legend and not subject to
the stop transfer instruction referred to in paragraph D above, and so long as I
hold shares of stock subject to the provisions of this agreement (but not for a
period in excess of two years from the date of consummation of the Merger) to
file with the Securities and Exchange Commission or otherwise make publicly
available all information about Parent, to the extent available to you without
unreasonable effort or expense, necessary to enable me to resell shares under
the provisions of paragraph (d) of Rule 145.
This Letter Agreement shall be binding on my heirs, legal representatives
and successors.
Very truly yours,
-------------------------------------------
[Name of Shareholder]
By: *
------------------------------------
Name:
Title:
*To be completed if the shareholder is an entity other than an individual.
A-2
EXHIBIT B
---------
FORM OF
COMPANY
TAX REPRESENTATION LETTER
In connection with the opinions to be delivered ▇▇▇▇▇▇ Godward LLP
("Cooley") and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇") concerning certain U.S.
federal income tax consequences of the merger (the "Merger") of Spectrum Organic
Products, Inc., a California corporation (the "Company"), with and into [______]
("Merger Sub"), a California limited liability company owned directly by The
Hain Celestial Group, Inc., a Delaware corporation ("Parent"), pursuant to an
Agreement and Plan of Merger by and between Parent and Company, dated as of
August 23, 2005 (such agreement, including all exhibits and schedules thereto,
hereinafter referred to as the "Merger Agreement"), and recognizing that Cooley
and ▇▇▇▇▇▇ will rely on this Certificate in delivering said opinions, the
undersigned officer of the Company hereby represents as of the Effective Time on
behalf of the Company that to the best knowledge and belief of such officer,
after due inquiry, the facts relating to the Merger, as such facts are set forth
in the Merger Agreement and the Registration Statement, and insofar as such
facts pertain to the Company, are true and complete.
For purposes of this Certificate, (1) capitalized terms, unless otherwise
defined herein, shall have the meanings ascribed to them in the Merger
Agreement, (2) "control" of a corporation means the direct ownership of stock of
such corporation possessing at least 80% of the total combined voting power of
all classes of stock of such corporation entitled to vote and at least 80% of
the total number of shares of each other class of such corporation's stock, (3)
a person (including an entity) will be considered to have sold or otherwise
disposed of an asset (including, without limitation, stock of a corporation) if
such person transfers a material portion of the risk of loss and a material
portion of the economic upside with respect to such asset (through a derivative
contract or otherwise), (4) a person will be considered to have purchased or
otherwise acquired an asset if such person bears a material portion of the
economic risk of loss with respect to, and is entitled to a material portion of
the economic upside with respect to, such asset and (5) a person will not be
considered as owning or holding an asset if such person has sold or disposed of
such asset within the meaning of clause (3) above.
The undersigned further represents as of the Effective Time on behalf of
the Company, to the best knowledge and belief of the undersigned, after due
inquiry, the following:
1. The formula for determining the Merger Consideration was the result of
arm's length bargaining between Parent and Company and represents an
arm's length price for the outstanding Company Shares.
2. Neither the Company nor any person related to the Company within the
meaning of Treas. Reg. ▇▇.▇▇. 1.368-1(e)(3), (e)(4) and (e)(5) has in
contemplation of the Merger (or otherwise as part of a plan of which
the Merger is a part) purchased, redeemed, or otherwise acquired
(directly or indirectly), or made any distributions (other than
regular, normal dividends unrelated to the Merger) with respect to,
any Company Shares. For purposes of the preceding sentence, Company
Shares repurchased by the Company in connection with a general stock
B-1
repurchase program shall be disregarded, provided that (i) such stock
repurchase program was not created or modified in contemplation of the
Merger or otherwise as part of a plan of which the Merger is a part
and (ii) the business purpose for such stock repurchase program is
entirely independent of the Merger.
3. Other than the Company Shares, the Company at no point during the five
year period ending at the Effective Time has had outstanding any
stock, indebtedness, options, warrants, or other debt or equity
securities or contract rights that have been or will be treated as
stock for U.S. federal income tax purposes.
4. The payment of cash in lieu of fractional shares of common stock of
Parent ("Parent Common Stock") does not represent separately
bargained-for consideration. The total cash consideration that will be
paid in the Merger to shareholders of the Company ("Company
Shareholders") in lieu of fractional shares of Parent Common Stock
will not exceed one percent of the total consideration that will be
issued in the Merger to Company Shareholders in exchange for their
Company Shares.
5. Throughout the five year period ending at the Effective Time, the
Company has been engaged in the business of manufacturing, marketing
and selling organic and natural oils (the Company's "historic
business"). Throughout such five year period, substantially all of the
Company's assets have been employed exclusively in the Company's
historic business and substantially all of the Company's revenue and
income have been derived from the Company's historic business. The
Company has not at any time during the five year period ending at the
Effective Time discontinued or contracted any material portion of its
historic business or sold or otherwise disposed of any material assets
used in its historic business, other than asset dispositions in the
ordinary course of business.
6. Except as expressly provided in Section 8.9 of the Merger Agreement,
the Company has paid and will pay its own expenses incurred in
connection with the Merger. Neither Company nor any person related to
Company within the meaning of Treasury Regulation ▇▇.▇▇.
1.368-1(e)(3), (4) and (5) has paid or assumed (directly or
indirectly) or will pay or assume (directly or indirectly) any expense
or other liability, whether fixed or contingent, of any Company
Shareholder. Neither Parent nor any person related to Parent within
the meaning of Treasury Regulation ▇▇.▇▇. 1.368-1(e)(3), (4) and (5)
has paid or assumed (directly or indirectly) or will pay or assume
(directly or indirectly) any expense or other liability, whether fixed
or contingent, of any Company Shareholder.
7. There is no indebtedness between Company (or any person related to
Company within the meaning of Treasury Regulation ▇▇.▇▇.
1.368-1(e)(3), (4) and (5)), on the one hand, and Parent (or any
person related to Parent within the meaning of Treasury Regulation
▇▇.▇▇. 1.368-1(e)(3), (4) and (5), including Merger Sub) on the other
hand, and there was no such indebtedness that was settled, cancelled
or repaid in contemplation of the Merger.
B-2
8. The fair market value of the Parent Common Stock issued in the Merger
to Company Shareholders (in the aggregate) will equal at least 40
percent of the fair market value of the total consideration issued in
the Merger to Company Shareholders (in the aggregate), each measured
at the Effective Time. For purposes of this calculation, the total
consideration issued in the Merger to Company Shareholders (in the
aggregate) will include amounts received by Company Shareholders in
respect of their dissenters' rights and cash received by Company
Shareholders in lieu of fractional shares of Parent Common Stock.
9. None of the cash or Parent Common Stock to be received in the Merger
by any Company Shareholder has been or will be separate consideration
for, or allocable to, past or future services or any employment or
consulting agreement or agreement not to compete or anything else
other than such Company Shareholder's Company Shares. Other than the
Merger Consideration, no consideration previously paid or to be paid
by Company, Parent or any person related (within the meaning of
Treasury Regulation ▇▇.▇▇. 1.368-1(e)(3), (4) and (5)) to Company or
Parent prior to or after the Effective Time (a "Company Affiliate or
Parent Affiliate") to any Company Shareholder employed (or to be
employed) or otherwise engaged (or to be engaged) by Company, Parent
or any Company Affiliate or Parent Affiliate was or will be separate
consideration for, or allocable to, such shareholder's Company Shares,
and such consideration was or will be for services actually rendered
in the ordinary course of his or her employment or engagement (or for
an agreement not to compete) and was or will be commensurate with
amounts paid to third parties bargaining at arm's length for similar
services (or agreements not to compete).
10. Company is not an investment company, as defined in Sections
368(a)(2)(F)(iii) and (iv) of the Code.
11. Company has not been a "United States real property holding
corporation" within the meaning of Section 897 of the Code at any time
during the five year period ending at the Effective Time.
12. All of the options and warrants to acquire Company Shares that have
been outstanding at any time during the five year period ending at the
Effective Time were issued with a per share exercise price of no less
than 100% of the fair market value of such share at the time of grant,
and the terms of such options and warrants have never been modified,
except for customary anti-dilution adjustments in connection with
stock splits. No option or warrant to acquire Company Shares
outstanding during such five year period was issued with a term of
more than 10 years.
13. Immediately prior to the Effective Time, the fair market value of the
assets of Company will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which its assets are subject.
B-3
14. The liabilities of Company assumed by Merger Sub and the liabilities
to which the transferred assets of Company are subject were incurred
by Company in the ordinary course of its business.
15. Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
16. Company has not taken any position on any federal, state, local or
foreign income or franchise tax return, or any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code.
17. The Merger Agreement represents and will represent the full and
complete agreement among Parent, Merger Sub, Company and the Company
Shareholders regarding the Merger, and there are and will be no other
written or oral agreements regarding the Merger.
IN WITNESS WHEREOF, I have signed this Certificate on this ___ day of
_______, 2005.
SPECTRUM ORGANIC PRODUCTS, INC.
By:
-----------------------------
Name:
Title:
B-4
FORM OF
PARENT
TAX REPRESENTATION LETTER
In connection with the opinions to be delivered ▇▇▇▇▇▇ Godward LLP
("Cooley") and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇") concerning certain U.S.
federal income tax consequences of the merger (the "Merger") of Spectrum Organic
Products, Inc., a California corporation (the "Company"), with and into [______]
("Merger Sub"), a California limited liability company owned directly by The
Hain Celestial Group, Inc., a Delaware corporation ("Parent"), pursuant to an
Agreement and Plan of Merger by and between Parent and Company, dated as of
August 23, 2005 (such agreement, including all exhibits and schedules thereto,
hereinafter referred to as the "Merger Agreement"), and recognizing that Cooley
and ▇▇▇▇▇▇ will rely on this Certificate in delivering said opinions, the
undersigned officer of Parent hereby represents as of the Effective Time on
behalf of Parent that to the best knowledge and belief of such officer, after
due inquiry, the facts relating to the Merger, as such facts are set forth in
the Merger Agreement and the Registration Statement, and insofar as such facts
pertain to Parent and Merger Sub, are true and complete.
For purposes of this Certificate, (1) capitalized terms, unless otherwise
defined herein, shall have the meanings ascribed to them in the Merger
Agreement, (2) "control" of a corporation means the direct ownership of stock of
such corporation possessing at least 80% of the total combined voting power of
all classes of stock of such corporation entitled to vote and at least 80% of
the total number of shares of each other class of such corporation's stock, (3)
a person (including an entity) will be considered to have sold or otherwise
disposed of an asset (including, without limitation, stock of a corporation) if
such person transfers a material portion of the risk of loss and a material
portion of the economic upside with respect to such asset (through a derivative
contract or otherwise), (4) a person will be considered to have purchased or
otherwise acquired an asset if such person bears a material portion of the
economic risk of loss with respect to, and is entitled to a material portion of
the economic upside with respect to, such asset and (5) a person will not be
considered as owning or holding an asset if such person has sold or disposed of
such asset within the meaning of clause (3) above.
The undersigned further represents as of the Effective Time on behalf of
Parent, to the best knowledge and belief of the undersigned, after due inquiry,
the following:
1. The formula for determining the Merger Consideration was the result of
arm's length bargaining between Parent and Company and represents an
arm's length price for the outstanding Company Shares.
2. From Merger Sub's inception through the Effective Time, Merger Sub has
been directly and wholly owned by Parent and properly treated as a
disregarded entity owned by parent for U.S. federal income tax
purposes. Merger Sub has no outstanding equity (including, without
limitation, options, warrants or other rights to acquire equity), debt
or contract rights, except for equity owned by Parent.
3. Parent has no plan or intention to take any action or cause or permit
the Merger Sub to take any action that would cause Merger Sub not to
remain a disregarded entity directly owned by Parent for U.S. federal
income tax purposes, except for transfers of all or part of the equity
of Merger Sub permitted by Section 368(a)(2)(C) of the Code.
B-5
4. Following the Merger, neither Parent nor any other person related to
Parent within the meaning of Treas. Reg. ▇▇.▇▇. 1.368-1(e)(3), (e)(4)
and (e)(5) will purchase, redeem or otherwise reacquire any of the
common stock of Parent ("Parent Common Stock") issued in the Merger,
other than through a general stock repurchase program under which
stock is repurchased by Parent solely through open market purchases,
provided that (i) such stock repurchase program was not, and will not
be, created or modified in contemplation of the Merger or otherwise as
part of a plan of which the Merger is a part, (ii) the business
purpose for such stock repurchase program is entirely independent of
the Merger and (iii) there is no understanding between the
shareholders of the Company (the "Company Shareholders") and Parent
that Company Shareholder's ownership of Parent Common Stock will be
transitory.
5. Parent has no plan or intention to liquidate Merger Sub, to merge
Merger Sub with or into another entity, to sell or otherwise dispose
of (whether by capital contribution, dividend distribution or
otherwise) the equity of Merger Sub, except for transfers of all or
part of the equity of Merger Sub permitted by Section 368(a)(2)(C) of
the Code, or to cause, suffer or permit Merger Sub to sell or
otherwise dispose of (whether by capital contribution, dividend
distribution or otherwise) any of its assets or any assets acquired
from the Company, except for dispositions made in the ordinary course
of business or transfers of all or part of the assets of Company
permitted by Section 368(a)(2)(C) of the Code.
6. Merger Sub is newly formed for the purpose of participating in the
Merger and at no time prior to the Effective Time had any assets
(other than nominal amounts of cash contributed upon the formation of
Merger Sub) or business operations.
7. Following the Merger, no dividends or distributions will be made to
former Company Shareholders with respect to their Parent Common Stock
other than regular, normal dividends or distributions made to all
holders of Parent Common Stock.
8. Following the Merger, Merger Sub will continue Company's "historic
business," or will use a "significant" portion of Company's "historic
business assets" in a business, as such terms are defined in Treas.
Reg. ss. 1.368-1(d). For purposes of this representation, the
Company's "historic business" is the business of manufacturing,
marketing and selling organic and natural oils.
9. Parent has paid and/or will pay its expenses, if any, incurred in
connection with the Merger, and neither Parent nor any person related
to Parent within the meaning of Treasury Regulation ▇▇.▇▇.
1.368-1(e)(3), (4) and (5) has paid or assumed (directly or
indirectly) or will pay or assume (directly or indirectly) any expense
or other liability, whether fixed or contingent, of the Company or any
B-6
of its affiliates, except as expressly provided in Section 8.9 of the
Merger Agreement. Further, no expenses or other liabilities, whether
fixed or contingent, of the Company Shareholders have been paid or
assumed (directly or indirectly) or will be paid or assumed (directly
or indirectly) by Parent or any person related to Parent within the
meaning of Treasury Regulation ▇▇.▇▇. 1.368-1(e)(3), (4) and (5) or,
by Company or any person related to Company within the meaning of
Treasury Regulation ▇▇.▇▇. 1.368-1(e)(3), (4) and (5).
10. There is no indebtedness existing between Company (or any person
related to Company within the meaning of Treasury Regulation ▇▇.▇▇.
1.368-1(e)(3), (4) and (5)), on the one hand, and Parent (or any
person related to Parent within the meaning of Treasury Regulation
▇▇.▇▇. 1.368-1(e)(3), (4) and (5), including Merger Sub) on the other
hand, and there was no such indebtedness that was settled, cancelled
or repaid in contemplation of the Merger.
11. Parent negotiated for the payment of cash in lieu of fractional shares
of Parent Common Stock solely for the purpose of avoiding the expense
and inconvenience to Parent of issuing fractional shares of Parent
Common Stock and such cash payments do not represent separately
bargained-for consideration. The total cash consideration that will be
paid in the Merger to Company Shareholders in lieu of fractional
shares of Parent Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to Company
Shareholders in exchange for their shares of Company Shares.
12. The fair market value of the Parent Common Stock issued in the Merger
to Company Shareholders (in the aggregate) will equal at least 40
percent of the fair market value of the total consideration issued in
the Merger to Company Shareholders (in the aggregate), each measured
at the Effective Time. For purposes of this calculation, the total
consideration issued in the Merger to Company Shareholders (in the
aggregate) will include amounts received by Company Shareholders in
respect of their dissenters' rights and cash received by Company
Shareholders in lieu of fractional shares of Parent Common Stock.
13. None of the cash or Parent Common Stock to be received in the Merger
by any Company Shareholder has been or will be separate consideration
for, or allocable to, past or future services or any employment or
consulting agreement or agreement not to compete or anything else
other than such Company Shareholder's Company Shares. Other than the
Merger Consideration, no consideration previously paid or to be paid
by Company, Parent or any person related (within the meaning of
Treasury Regulation ▇▇.▇▇. 1.368-1(e)(3), (4) and (5)) to Company or
Parent prior to or after the Effective Time (a "Company Affiliate or
Parent Affiliate") to any Company Shareholder employed (or to be
employed) or otherwise engaged (or to be engaged) by Company, Parent
or any Company Affiliate or Parent Affiliate was or will be separate
consideration for, or allocable to, such Company Shareholder's Company
Shares, and such consideration was or will be for services actually
B-7
rendered in the ordinary course of his or her employment or engagement
(or for an agreement not to compete) and was or will be commensurate
with amounts paid to third parties bargaining at arm's length for
similar services (or agreements not to compete).
14. None of Parent, Merger Sub or any person related to Parent within the
meaning of Treas. Reg. ▇▇.▇▇. 1.368-1(e)(3), (e)(4) and (e)(5)
beneficially owns or has owned at any time during the five year period
ending at the Effective Time any Company Shares, any options, warrants
or other rights to acquire Company Shares, or any securities
convertible into Company Shares.
15. Neither Parent nor Merger Sub is an investment company, as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
16. Immediately prior to the Effective Time, the fair market value of the
assets of Company will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which its assets are subject.
17. Neither Parent nor Merger Sub will take, or cause or permit Company to
take, any position on any federal, state, local or foreign income or
franchise tax return, or any other tax reporting position, that is
inconsistent with the treatment of the Merger as a "reorganization"
within the meaning of Section 368(a) of the Code, unless otherwise
required by a "determination" (as defined in Section 1313(a)(1) of the
Code) or by applicable federal, state, local or foreign tax law.
18. The Merger Agreement represents and will represent the full and
complete agreement among Parent, Merger Sub, Company and the Company
Shareholders regarding the Merger, and there are and will be no other
written or oral agreements regarding the Merger.
IN WITNESS WHEREOF, I have signed this Certificate on this ___ day of
_________, 2005.
THE HAIN CELESTIAL GROUP, INC.
By:
-------------------------------------
Name:
Title:
B-8
EXHIBIT C
---------
FORM OF
▇▇▇▇▇▇ GODWARD LLP
TAX OPINION
_________, 2005
Spectrum Organic Products, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
You have requested our opinion as to whether, for U.S. federal income tax
purposes, the proposed merger (the "Merger") of Spectrum Organic Products, Inc.,
a California corporation (the "Company"), with and into ___________________
("Merger Sub"), a California limited liability company owned directly by The
Hain Celestial Group, Inc., a Delaware corporation ("Acquiror") will constitute
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Any capitalized terms not defined herein
will have the meanings ascribed to them in the Agreement and Plan of Merger
dated as of August 23, 2005 (the "Reorganization Agreement"), by and between
Acquiror and the Company.
All section references, unless otherwise indicated, are to the Code.
Pursuant to the Reorganization Agreement, the Company will merge into Merger
Sub.
We have acted as counsel to the Company in connection with the Merger. As such,
and for the purpose of rendering this opinion, we have examined, and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in the following documents (including all exhibits and
schedules attached thereto):
(a) the Reorganization Agreement;
(b) the Registration Statement;
(c) the Certificates attached hereto as Exhibits A and B delivered to us
by Acquiror and Merger Sub and the Company, respectively, (the "Tax
Representation Letters"); and
(d) such other instruments and documents related to the formation,
organization and operation of Acquiror, Merger Sub and the Company and
to the consummation of the Merger and the other transactions
contemplated by the Reorganization Agreement as we have deemed
necessary or appropriate.
C-1
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that:
(a) Original documents submitted to us (including signatures thereto) are
authentic, documents submitted to us as copies conform to the original
documents, and that all such documents have been (or will be by the Effective
Time) duly and validly executed and delivered where due execution and delivery
are a prerequisite to the effectiveness thereof;
(b) All representations, warranties and statements made or agreed to by
Acquiror, Merger Sub and the Company, their managements, employees, officers,
directors and stockholders in connection with the Merger, including, but not
limited to, those set forth in the Reorganization Agreement (including the
exhibits thereto) and the Tax Representation Letters are true and accurate at
all relevant times;
(c) All covenants contained in the Reorganization Agreement (including
exhibits thereto) and the Tax Representation Letters are performed without
waiver or breach of any material provision thereof;
(d) The Merger will be consummated in accordance with the Reorganization
Agreement without any waiver, breach or amendment of any material provision
thereof, and the Merger will be effective under applicable state law;
(e) Any representation or statement made "to the knowledge of" or similarly
qualified is correct without such qualification; and
(f) The opinion dated ___________, 2005 rendered by ▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP, pursuant to Section 9.2(g) of the Reorganization Agreement has been
delivered and has not been withdrawn.
Based on our examination of the foregoing items and subject to the assumptions,
exceptions, limitations and qualifications set forth herein, we are of the
opinion that, for federal income tax purposes:
(i) the Merger will be a reorganization within the meaning of Section
368(a) of the Code;
(ii) with respect to a holder of Company Shares that, pursuant to the
Merger, exchanges Company Shares for Parent Common Stock and cash: (A) gain (if
any), but not loss, will be recognized on the exchange, but only to the extent
such gain does not exceed the amount of cash received (excluding any cash
received in lieu of fractional shares of Parent Common Stock), (B) the tax basis
of Parent Common Stock received in the Merger (including any fractional shares
of Parent Common Stock for which cash will be received) will be the same as the
tax basis of the Company Shares exchanged therefor, reduced by any cash received
in the Merger (excluding any cash received in lieu of fractional shares of
Parent Common Stock), and increased by any gain recognized in the Merger
(excluding any gain resulting from the receipt of cash in lieu of fractional
shares of Parent Common Stock as described below), and (C) the holding period of
the Parent Common Stock received in the exchange will include the holding period
of the Company Shares exchanged therefor;
C-2
(iii) holders of Company Shares who receive cash in lieu of a
fractional share of Parent Common Stock will be treated as if such fractional
share were issued and then immediately redeemed for cash in a separate
transaction and as a result, will recognize gain or loss equal to the difference
between the amount of cash received and the tax basis of such fractional share;
and
(iv) holders of Company Shares who exercise dissenters' rights will
generally recognize gain or loss equal to the difference between the amount of
cash received and the tax basis of their Company Shares.
This opinion does not address the various state, local or foreign tax
consequences that may result from the Merger or the other transactions
contemplated by the Reorganization Agreement and does not address the federal
tax consequences of any transaction other than the Merger as described in the
Reorganization Agreement. In addition, no opinion is expressed as to any federal
income tax consequence of the Merger or the other transactions contemplated by
the Reorganization Agreement except as specifically set forth herein, and this
opinion may not be relied upon except with respect to the consequences
specifically discussed herein.
No opinion is expressed as to any transaction whatsoever, including the Merger,
if any of the representations, warranties, statements and assumptions material
to our opinion and upon which we have relied are not accurate and complete in
all material respects at all relevant times.
This opinion only represents our best judgment as to the federal income tax
consequences of the Merger and is not binding on the Internal Revenue Service or
any court of law, tribunal, administrative agency or other governmental body.
The conclusions are based on the Code, existing judicial decisions,
administrative regulations and published rulings. No assurance can be given that
future legislative, judicial or administrative changes or interpretations would
not adversely affect the accuracy of the conclusions stated herein.
Nevertheless, by rendering this opinion, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
This opinion is being delivered to you solely for your benefit and that of the
Company's shareholders and may not be relied upon or utilized for any other
purpose or by any other person without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving the foregoing consent, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended (the "Securities Act"), or the rules and
regulations promulgated thereunder, nor do we admit that we
C-3
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act or the rules and
regulations promulgated thereunder.
Sincerely,
▇▇▇▇▇▇ GODWARD LLP
/s/
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
C-4
FORM OF
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
TAX OPINION
_________, 2005
The Hain Celestial Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
You have requested our opinion as to whether, for U.S. federal income
tax purposes, the proposed merger (the "Merger") of Spectrum Organic Products,
Inc., a California corporation (the "Company"), with and into [______] ("Merger
Sub"), a California limited liability company owned directly by The Hain
Celestial Group, Inc., a Delaware corporation ("Parent"), will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Any capitalized terms not defined herein
will have the meaning ascribed to them in the Agreement and Plan of Merger by
and between Parent and Company, dated as of August 23, 2005 (such agreement,
including all exhibits and schedules thereto, hereinafter referred to as the
"Merger Agreement").
The opinion set forth in this letter is based on relevant provisions
of the Code, Treasury Regulations promulgated thereunder and interpretations of
the foregoing as expressed in court decisions and administrative determinations
as of the date hereof. These provisions and interpretations are subject to
change, possibly on a retroactive basis. We assume no obligation to modify or
supplement our opinion if, after the date hereof, any such laws, regulations,
positions or decisions change or we become aware of any facts that might change
our opinion.
For purposes of rendering the opinion set forth in this letter, we
have reviewed the Merger Agreement and such other documents, law and facts as we
have deemed necessary. In our review, we have assumed the genuineness of all
signatures; the proper execution of all documents; the authenticity of all
documents submitted to us as originals; the conformity to originals of all
documents submitted to us as copies; and the authenticity of the originals of
any copies.
In rendering this opinion, we have relied, with your consent, upon the
following assumptions:
(a) The representations of Parent and Merger Sub set forth in the certificate
attached hereto as Exhibit A , and the representations of the Company
set forth
in the certificate attached hereto as Exhibit B (together, the "Certificates"),
are true and complete, in each case without regard to any qualification as to
materiality, knowledge or belief;
(b) Parent, Merger Sub and Company will comply fully with the
undertakings set forth in the Certificates;
C-5
(c) The Merger will be consummated in accordance with the Merger
Agreement; and
(d) The factual information contained in the Registration Statement is
true and complete.
For purposes of our opinion, we have not made an independent investigation or
review of the representations contained in the Certificates or the factual
information contained in the Registration Statement.
Based on and subject to the foregoing assumptions, we are of the
opinion that, for U.S. federal income tax purposes:
(i) the Merger will be treated as a reorganization within the meaning
of Section 368(a) of the Code;
(ii) with respect to a holder of Company Shares that, pursuant to the
Merger, exchanges Company Shares for Parent Common Stock and cash: (A) gain
(if any), but not loss, will be recognized on the exchange, but only to the
extent such gain does not exceed the amount of cash received (excluding any
cash received in lieu of fractional shares of Parent Common Stock), (B) the
tax basis of Parent Common Stock received in the Merger (including any
fractional shares of Parent Common Stock for which cash will be received)
will be the same as the tax basis of the Company Shares exchanged therefor,
reduced by any cash received in the Merger (excluding any cash received in
lieu of fractional shares of Parent Common Stock), and increased by any
gain recognized in the Merger (excluding any gain resulting from the
receipt of cash in lieu of fractional shares of Parent Common Stock as
described below), and (C) the holding period of the Parent Common Stock
received in the exchange will include the holding period of the Company
Shares exchanged therefor;
(iii) holders of Company Shares who receive cash in lieu of a
fractional share of Parent Common Stock will be treated as if such
fractional share were issued and then immediately redeemed for cash in a
separate transaction and, as a result, will recognize gain or loss equal to
the difference between the amount of cash received and the tax basis of
such fractional share; and
(iv) holders of Company Shares who exercise dissenters' rights will
generally recognize gain or loss equal to the difference between the amount
of cash received and the tax basis of their Company Shares.
We express no opinion other than the opinion expressly set forth
herein (the "Opinion"). The Opinion is not binding on the Internal Revenue
Service (the "IRS") and the IRS may disagree with the Opinion. Although we
believe that the Opinion would be sustained if challenged, there can be no
assurance that this will be the case.
C-6
The Opinion is based upon the law as it currently exists.
Consequently, future changes in the law may cause the U.S. federal income tax
treatment of the matters referred to herein to be materially and adversely
different from that described above (possibly on a retroactive basis). In
addition, any inaccuracy in the representations contained in the Certificates or
otherwise provided to us, or in the facts set forth in the Registration
Statement, may adversely affect the conclusions stated in the Opinion.
This Opinion is intended only for the use of Parent in connection with
the Merger. This Opinion may not be relied upon by any other person or for any
other purpose.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement. In giving the foregoing consent, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended (the "Securities Act"), or the rules and
regulations promulgated thereunder, nor do we admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act or the rules and regulations
promulgated thereunder.
Very truly yours,
C-7