EXHIBIT 2(a)
AGREEMENT AND PLAN OF MERGER
by and among
CONSTELLATION BRANDS. INC.,
VVV ACQUISITION CORP.
and
RAVENSWOOD WINERY, INC.
Dated as of
April 10, 2001
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND TERMS...................................................................... 1
Section 1.1 Definitions................................................................. 1
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Section 1.2 Other Terms................................................................. 7
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Section 1.3 Other Definitional Provisions............................................... 7
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ARTICLE II THE MERGER................................................................................ 7
Section 2.1 The Merger.................................................................. 7
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Section 2.2 The Closing................................................................. 7
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Section 2.3 Effective Time.............................................................. 8
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Section 2.4 Effect of Merger............................................................ 8
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Section 2.5 Procedure for Payment....................................................... 12
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Section 2.6 Subsequent Actions.......................................................... 14
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................ 14
Section 3.1 Due Organization of Company................................................. 14
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Section 3.2 Capitalization.............................................................. 14
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Section 3.3 Due Authorization of Transaction; Binding Obligation........................ 15
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Section 3.4 Non-Contravention........................................................... 16
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Section 3.5 Government Approvals, Consents and Filings.................................. 16
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Section 3.6 Litigation.................................................................. 16
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Section 3.7 Brokers' Fees............................................................... 16
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Section 3.8 Reports and Financial Information........................................... 17
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Section 3.9 Absence of Certain Changes or Events........................................ 17
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Section 3.10 Taxes....................................................................... 18
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Section 3.11 Employee Matters............................................................ 19
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Section 3.12 Material Contracts.......................................................... 21
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Section 3.13 Regulatory Compliance....................................................... 22
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Section 3.14 Real Property............................................................... 22
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Section 3.15 Intellectual Property....................................................... 23
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Section 3.16 Environmental Matters....................................................... 24
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Section 3.17 Title to and Condition of Assets............................................ 25
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Section 3.18 Product Recall.............................................................. 26
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Section 3.19 Grape Vines................................................................. 26
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Section 3.20 Labor Matters............................................................... 26
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Section 3.21 Opinion of Financial Advisor................................................ 26
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Section 3.22 Takeover Statutes........................................................... 27
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Section 3.23 Insurance................................................................... 27
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Section 3.24 Distributor Relations....................................................... 27
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Section 3.25 Suppliers................................................................... 27
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Section 3.26 Related Party Transactions.................................................. 27
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Section 3.27 No Other Representations or Warranties...................................... 28
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................... 28
Section 4.1 Due Incorporation........................................................... 28
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Section 4.2 Due Authorization of Transaction; Binding Obligation........................ 28
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Section 4.3 Non-Contravention........................................................... 29
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Section 4.4 Government Approvals, Consents, and Filings................................. 29
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Section 4.5 Litigation.................................................................. 29
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Section 4.6 Financing................................................................... 29
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Section 4.7 Finder's Fees; Brokers...................................................... 30
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ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER..................................................... 30
Section 5.1 Conduct of Business of the Company Pending the Merger....................... 30
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Section 5.2 Compensation Plans.......................................................... 31
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Section 5.3 Voting Agreements........................................................... 32
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Section 5.4 No Solicitation............................................................. 32
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Section 5.5 Conduct of Business by Parent and Merger Sub Pending the Merger............. 34
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ARTICLE VI ADDITIONAL AGREEMENTS..................................................................... 34
Section 6.1 Shareholder Approvals....................................................... 34
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Section 6.2 Proxy Statement............................................................. 34
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Section 6.3 Access to Information; Confidentiality...................................... 35
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Section 6.4 Consents; Approvals......................................................... 36
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Section 6.5 Notification of Certain Matters............................................. 37
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Section 6.6 Further Assurances.......................................................... 37
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Section 6.7 Public Announcements........................................................ 37
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Section 6.8 Conveyance Taxes............................................................ 38
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Section 6.9 Director and Officer Liability.............................................. 38
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Section 6.10 Action by Parent and Company's Boards....................................... 38
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Section 6.11 Employee Benefits........................................................... 38
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Section 6.12 Payment of Accrued Bonuses.................................................. 39
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ARTICLE VII CONDITIONS TO THE MERGER................................................................. 39
Section 7.1 Conditions to Obligations of Each Party to Effect the Merger................ 39
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Section 7.2 Additional Conditions to Obligations of Parent and Merger Sub............... 40
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Section 7.3 Additional Conditions to Obligation of the Company.......................... 40
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ARTICLE VIII TERMINATION............................................................................. 41
Section 8.1 Termination................................................................. 41
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Section 8.2 Effect of Termination....................................................... 42
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Section 8.3 Fees and Expenses........................................................... 42
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ARTICLE IX GENERAL PROVISIONS........................................................................ 43
Section 9.1 Effectiveness of Representations, Warranties and
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Agreements; Knowledge, Etc.................................................. 43
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Section 9.2 Notices..................................................................... 43
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Section 9.3 Amendment................................................................... 44
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Section 9.4 Waiver...................................................................... 45
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Section 9.5 Headings.................................................................... 45
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Section 9.6 Severability................................................................ 45
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Section 9.7 Entire Agreement............................................................ 45
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Section 9.8 Assignment, Merger Sub...................................................... 45
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Section 9.9 Parties in Interest......................................................... 45
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Section 9.10 Governing Law............................................................... 45
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Section 9.11 Counterparts................................................................ 46
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Section 9.12 WAIVER OF JURY TRIAL........................................................ 46
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Exhibits
Exhibit A -- Form of Voting Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 10, 2001, (this
"Agreement"), by and among Ravenswood Winery, Inc., a California corporation
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(the "Company"), Constellation Brands, Inc., a Delaware corporation ("Parent"),
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and VVV Acquisition Corp., a Delaware corporation and an indirect, wholly-owned
subsidiary of Parent ("Merger Sub").
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W I T N E S S E T H :
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WHEREAS, the board of directors of each of Parent, Merger Sub and the
Company have each determined that it is advisable and in the best interests of
their respective shareholders for Parent to enter into a strategic business
combination with the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, the boards of directors of
Parent, Merger Sub and the Company have each approved the merger of Merger Sub
with and into the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to Parent and Merger Sub to enter into this
Agreement, certain shareholders of the Company have entered into Voting
Agreements with Parent;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Definitions.
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(a) The following terms, as used herein, have the following
meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
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regulations promulgated under the Exchange Act.
"Agreement" means this Agreement and Plan of Merger, as the same may be
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amended or supplemented from time to time in accordance with the terms hereof.
"Alternative Transaction" means any of the following: (i) a transaction
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pursuant to which any Third Party (or group of Third Parties) seeks to acquire,
directly or indirectly, more than 25 percent of the outstanding shares of
Company Common Stock, whether from the Company or pursuant to a tender offer or
exchange offer or otherwise (other than upon exercise of the Company Stock
Options, upon exercise of Purchase Rights under the Company ESPP or conversion
of the Company Debentures), (ii) a merger, recapitalization, consolidation or
other business combination involving the Company pursuant to which any Third
Party acquires more than 25 percent of the
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outstanding equity securities of the Company or the entity surviving such merger
or business combination, (iii) any other transaction pursuant to which any Third
Party acquires control of all or substantially all of the assets of the Company,
or (iv) any combination of the foregoing.
"Applicable Law" means, with respect to any Person, any domestic, foreign,
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federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority applicable to such Person or
any of its Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such officer's,
director's, employee's, consultant's or agent's activities on behalf of such
Person or any of its Affiliates).
"Business Day" means a day other than a Saturday, Sunday or other day on
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which commercial banks in San Francisco, California are authorized or required
by law to close.
"California Code" means the California Corporations Code and all amendments
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and additions thereto.
"Certificate" means a stock certificate representing shares of Company
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Common Stock.
"Closing" has the meaning set forth in Section 2.2 hereof.
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"Closing Date" has the meaning set forth in Section 2.2 hereof.
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"COBRA" has the meaning set forth in Section 3.11(a)(vii) hereof.
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"Code" means the Internal Revenue Code of 1986, as amended, or any
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successor thereto.
"Company" has the meaning set forth in the Preamble hereof.
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"Company Common Stock" means the Common Stock, no par value, of the
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Company.
"Company Debenture" means each of the Convertible Subordinated Debentures
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of the Company due December 31, 2008, in the aggregate principal amount of
$1,687,500.
"Company's Disclosure Letter" means the written disclosure schedule
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delivered by the Company to Parent and Merger Sub in connection with and prior
to the execution and delivery of this Agreement.
"Company Employee Plans" means all bonus, stock option, stock purchase,
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incentive, deferred compensation, supplemental retirement, unemployment,
severance, vacation, insurance or hospitalization program and any other fringe
or employee benefit plans, programs or arrangements for any current or former
Employee, director, consultant
2
or agent, and any current or former employment or executive compensation or
severance agreements, written or otherwise, for the benefit of, or relating to,
any employee of the Company, and excluding agreements with former employees
under which the Company has no remaining monetary obligations.
"Company ESPP" means the Employee Stock Purchase Plan for Ravenswood
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Winery, Inc.
"Company Permits" has the meaning set forth in Section 3.13(b) hereof.
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"Company Preferred Stock" means the Preferred Stock, no par value, of the
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Company.
"Company SEC Reports" has the meaning set forth in Section 3.8(a) hereof.
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"Company Stock Options" means the outstanding options to purchase shares of
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Company Common Stock under the Company Stock Plan.
"Company Stock Plan" means the Ravenswood Winery, Inc. 1999 Equity
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Incentive Plan.
"Confidentiality Agreement" has the meaning set forth in Section 6.3(a)
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hereof.
"Continuing Employees" has the meaning set forth in Section 6.11(a) hereof.
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"Contract" means any contract, agreement, undertaking, indenture, note,
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bond, loan, instrument, lease, mortgage, commitment or other binding agreement,
whether written or oral.
"Damages" means the amount of any loss, damage, injury, liability, claim,
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fee, demand, settlement, judgment, award, fine, penalty, tax, charge or cost.
"Dissenting Shares" has the meaning set forth in Section 2.4(h)(i) hereof.
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"Effective Time" has the meaning set forth in Section 2.3 hereof.
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"Employee" means an employee of the Company, including any employee of the
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Company who is on leave of absence or on layoff status.
"Environmental Laws" means any federal, state or local laws (whether under
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common law, statute, rule, regulation or otherwise), requirements under permits
issued with respect thereto, and other requirements of Governmental Authorities
relating to the environment, any Hazardous Substance, or to any activities
involving Hazardous Substances or occupational health and safety, including, but
not limited to, the Clean Air Act, As Amended, 42 U.S.C. Section 7401 Et Seq.;
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The Federal Water Pollution Control Act, As Amended, 33 U.S.C. Section 1251 Et
--
Seq.; The Resource Conservation And Recovery Act Of 1976, As Amended, 42 U.S.C.
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Section 6901 Et Seq.; The Comprehensive Environment Response, Compensation And
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Liability Act Of 1980, As
3
Amended (Including The Superfund Amendments And Reauthorization Act Of 1986,
"CERCLA"), 42 U.S.C. Section 9601 Et Seq.; The Toxic Substances Control Act, As
-- ---
Amended, 15 U.S.C. Section 2601 Et Seq.; The Occupational Safety And Health Act,
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As Amended, 29 U.S.C. Section 651, The Emergency Planning And Community Right-
To-Know Act Of 1986, 42 U.S.C. Section 11001 Et Seq.; The Safe Drinking Water
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Act, As Amended, 42 U.S.C. Section 300f Et Seq.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Final Date" has the meaning set forth in Section 8.1(b) hereof.
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"GAAP" means United States generally accepted accounting principles applied
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on a consistent basis throughout the periods involved.
"Governmental Authority" means any territorial, federal, state or local,
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whether domestic, foreign or supranational, governmental or quasi-governmental
authority, instrumentality, court, commission, tribunal or organization; any
regulatory, administrative or other agency; any self-regulatory organization; or
any political or other subdivision, department or branch of any of the
foregoing.
"Hazardous Substance" means any substance, material, chemical or waste that
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is listed, or contains material amounts of one or more components that are
defined, designated or classified as hazardous, acutely hazardous, toxic,
radioactive or dangerous under any applicable Environmental Law, as well as any
"solid waste", industrial waste, industrial wastewater sewage, asbestos or
asbestos containing material, petroleum and any derivative or by-products
thereof, crude oil or any fraction thereof, natural gas, natural gas liquids,
liquefied natural gas, synthetic gas useable as fuel, or polychlorinated
biphenyls (PCBs).
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
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as amended.
"IRS" means the United States Internal Revenue Service.
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"Knowledge of the Company" means the actual knowledge of the directors of
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the Company and ▇▇▇▇▇▇▇▇ Dryer.
"Law" means any federal, state, foreign or local law, statute, ordinance,
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rule, regulation, order, judgment or decree.
"Lease Agreements" has the meaning set forth in Section 3.14(a) hereof.
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"Leased Personal Property" has the meaning set forth in Section 3.17(a)
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hereof.
"Leased Real Property" has the meaning set forth in Section 3.14(a)
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hereof.
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"Liens" means liens, security interests, options, rights of first refusal,
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easements, mortgages, charges, pledges, deeds of trust, rights-of-way,
restrictions, encroachments, licenses, leases, permits, security agreements, or
any other encumbrances, restrictions or limitations on the use of real or
personal property, whether or not they constitute specific or floating charges.
"Material Adverse Effect" means a material adverse effect (or combination
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of effects materially adverse in the aggregate) on the financial condition,
business or results of operations of the Company, taken as a whole; provided,
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however, that a Material Adverse Effect shall not include changes in the market
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price or trading volume of the Company's securities or any effect resulting from
any change (i) in Law, GAAP or interpretations thereof that apply to the
Company, (ii) in general economic or business conditions or in the wine industry
generally (which changes do not disproportionately affect the Company), or (iii)
due to the public announcement of this Agreement or the transactions
contemplated by this Agreement, or the consummation of such transactions.
"Material Contracts" has the meaning set forth in Section 3.12(a) hereof.
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"Merger" has the meaning set forth in Section 2.1.
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"Merger Consideration" has the meaning set forth in Section 2.4(e)(i)
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hereof.
"Merger Sub" has the meaning set forth in the Preamble hereof.
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"NASD" means the National Association of Securities Dealers, Inc.
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"Nasdaq" means the Nasdaq National Market.
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"NYSE" means the New York Stock Exchange.
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"Owned Real Property" has the meaning set forth in Section 3.14(a) hereof.
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"Parent" has the meaning set forth in the Preamble hereof.
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"Parent Material Adverse Effect" means a material adverse effect (or
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combination of effects materially adverse in the aggregate) on the financial
condition, business or results of operations of Parent, taken as a whole;
provided, however, that a Parent Material Adverse Effect shall not include
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changes in the market price or trading volume of the Parent's securities or any
effect, resulting from any change in Law, GAAP or interpretations thereof that
apply to Parent, in general economic or business conditions or in the wine
industry (which changes do not disproportionately affect Parent), or due to the
public announcement of the transactions contemplated under this Agreement or the
consummation of such transactions.
"Parent's Disclosure Letter" means the written disclosure schedule
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delivered to Company by the Parent in connection with and prior to the execution
and delivery of this Agreement.
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"Paying Agent" has the meaning set forth in Section 2.5(a) hereof.
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"Payment Fund" has the meaning set forth in Section 2.5(a) hereof.
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"Permitted Liens" means mechanics', carriers', workmen's, repairmen's or
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other like Liens arising or incurred in the ordinary course of business (which
are not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings), Liens arising under original purchase
price conditional sales Contracts and equipment leases with Third Parties
entered into in the ordinary course of Business (which are not overdue for a
period of more than 60 days or which are being contested in good faith by
appropriate proceedings), Liens for taxes and other governmental charges, if
adequate reserves are maintained, which are not due and payable or which may
thereafter be paid without penalty, imperfections of title, restrictions or
encumbrances, which imperfections of title, restrictions and encumbrances do
not, individually or in the aggregate, materially impair the continued use and
operation of the business of the Company, taken as a whole, as presently
conducted.
"Person" means an individual, a corporation, a partnership, an association,
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a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Proprietary Asset" means any patent, patent application, trademark
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(whether registered or unregistered), service ▇▇▇▇ application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, computer software, internet domain registrations or other internet-
related assets such as websites, invention or design.
"Proxy Statement" means the proxy statement or information statement to be
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used by the Company to obtain the approval and adoption of this Agreement and
the Merger by the shareholders of the Company.
"Purchase Right" has the meaning set forth in Section 2.4(f)(iii).
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"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Shareholder Meeting" has the meaning set forth in Section 6.1 hereof.
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"Superior Proposal" means a bona fide unsolicited written proposal made by
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a Third Party relating to an Alternative Transaction on terms that the board of
directors of the Company determines in good faith and after consultation with
counsel would be, or is reasonably likely to be, more favorable to the Company's
shareholders than the transactions contemplated by this Agreement (taking into
account the legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal and such Person's ability to finance the
Alternative Transaction).
"Surviving Corporation" has the meaning set forth in Section 2.1 hereof.
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"Tax" or "Taxes" means taxes, fees, levies, duties, tariffs, imposts and
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governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local or foreign taxing authority,
including (without limitation) (i) income, franchise, profits, gross receipts,
ad valorem, net worth, goods and services, fringe benefits, withholding, sales,
use, service, real or personal property, special assessments, license, payroll,
withholding, employment, social security, accident compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.
"Tax Returns" means returns, reports and information statements with
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respect to Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
"Third Party" means any Person other than a Party to this Agreement or an
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Affiliate of such a Party.
"Voting Agreements" has the meaning set forth in Section 5.3 hereof.
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"WARN Act" means the Worker Adjustment Retraining Notification Act of 1988,
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as amended.
Section 1.2 Other Terms. Other terms may be defined elsewhere in the text
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of this Agreement and, unless otherwise indicated, shall have such meanings
throughout this Agreement.
Section 1.3 Other Definitional Provisions.
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(a) The words "herein," "hereof," "hereto" and "hereunder" and
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words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The words "will" and "shall" have the same meaning and mean
"must" unless the context otherwise requires.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Subject to and in accordance with the terms and
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conditions of this Agreement, the Merger Sub will merge with and into the
Company (the "Merger") at the Effective Time. The Company shall be the
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corporation surviving the Merger (the "Surviving Corporation").
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Section 2.2 The Closing. The closing of the transactions contemplated by
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this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ &
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▇▇▇▇▇▇▇▇ LLP, in
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San Francisco, California, commencing at 10:00 a.m. local time on the second
Business Day following the satisfaction or waiver of all conditions to the
obligations of the parties hereto to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective parties
hereto will take at the Closing itself) or such other date and location as the
parties hereto may mutually determine (the "Closing Date").
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Section 2.3 Effective Time. On the Closing Date the parties hereto shall
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cause the Merger to be consummated by filing all necessary documentation,
including an agreement of merger in the form reasonably acceptable to the
parties hereto with the Secretary of State of the State of California and a
certificate of merger in the form reasonably acceptable to the parties hereto
with the Secretary of State of the State of Delaware. The Merger shall be
effective upon such filing of the agreement of merger with the Secretary of
State of the State of California and the certificate of merger with the
Secretary of State of the State of Delaware, or on such later date as may be
specified therein (the time of such effectiveness being, the "Effective Time").
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Section 2.4 Effect of Merger.
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(a) General. The Merger shall have the effects set forth in
Sections 1107 and 1108 of the California Code. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all property,
rights, powers, privileges and franchises of Merger Sub shall vest in the
Company as the Surviving Corporation, and all debts, liabilities and duties of
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation. The Surviving Corporation may, at any time after the Effective
Time, take any action (including executing and delivering any document) in the
name and on behalf of either the Company or Merger Sub in order to carry out and
effectuate the transactions contemplated by this Agreement.
(b) Articles of Incorporation. The Articles of Incorporation of
the Company, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until amended as provided
by law and such Articles of Incorporation and the Bylaws.
(c) Bylaws. The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law and such Bylaws and the Articles of
Incorporation of the Company.
(d) Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of the
Surviving Corporation at and after the Effective Time shall be the officers of
the Company, each to hold office in accordance with the Bylaws of the Surviving
Corporation. The Company shall use reasonable best efforts to cause each
director of the Company to tender such director's resignation prior to the
Effective Time, each such resignation to be effective as of the Effective Time.
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(e) Conversion of Company Shares. At and as of the Effective Time,
(i) each outstanding share of Company Common Stock (other
than Dissenting Shares and shares of Company Common Stock held by Parent or
Merger Sub) shall be converted into the right to receive an amount (the "Merger
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Consideration") equal to $29.50 in cash (without interest), upon surrender of
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the Certificate formerly representing such outstanding share of Company Common
Stock in the manner set forth in Section 2.5, and as of the Effective Time, each
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outstanding share of Company Common Stock shall no longer be issued and
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a Certificate shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration without
interest (or, if applicable, to be treated as a Dissenting Share);
(ii) each Dissenting Share shall be treated as described in
Section 2.4 (h); or
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(iii) each share of Company Common Stock held by the Parent
or Merger Sub shall be cancelled and retired, and no consideration shall be paid
or delivered in exchange therefor; provided, however, that the Merger
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Consideration shall be subject to equitable adjustment in the event of any stock
split, stock dividend, reverse stock split, or other change in the number of
shares of Company Common Stock outstanding to which Parent consents pursuant to
Section 5.1. No share of Company Common Stock shall be deemed to be outstanding
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or to have any rights other than those set forth above in this Section 2.4(e)
after the Effective Time. --------------
(f) Options; Stock Purchase Plan.
(i) Immediately prior to the Effective Time, each
outstanding and vested portion of a Company Stock Option shall be cancelled as
of immediately prior to the Effective Time, and in consideration for such
cancellation, the holder thereof shall become entitled to receive from the
Company an amount of cash equal to the product of (A) the number of vested
shares subject to the Company Stock Option and (B) the excess of the Merger
Consideration over the per share exercise price of the Company Stock Option,
less the amount of applicable foreign, federal, state and local taxes required
to be withheld from such payment. The Company shall pay the amounts payable to
each holder of a vested Company Stock Option as soon as reasonably practicable
following the Effective Time. The Company shall pay promptly any amounts
withheld for applicable foreign, federal, state and local taxes to the
appropriate Governmental Authority on behalf of such holder of such Company
Stock Option.
(ii) Immediately prior to the Effective Time, a number of
unvested Company Stock Options held by each holder thereof equal to the lesser
of (i) unvested Company Stock Options to purchase 1,000 shares of Company Common
Stock or (ii) the number of unvested Company Stock Options held by such holder,
shall accelerate, fully vest and be treated immediately prior to the Effective
Time as vested Company Stock Options under Section 2.4(f)(i); provided that such
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Company Stock Options to be vested shall be the unvested Company Stock Options
which would have
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otherwise vested at the earliest dates following the Effective Time. Immediately
prior to the Effective Time, except as provided in the preceding sentence, each
outstanding and unvested portion of a Company Stock Option shall be cancelled
immediately prior to the Effective Time, and in consideration for such
cancellation, the holder thereof shall become entitled to receive at the time
such unvested portion of a Company Stock Option would have vested, if such
unvested portion had not been cancelled in accordance with this Section 2.4
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(f)(ii), an amount of cash equal to the product of (A) the number of unvested
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shares subject to the Company Stock Option that would have vested on such date
and (B) the excess of the Merger Consideration (without interest) over the per
share exercise price of the Company Stock Option, less the amount of applicable
foreign, federal, state and local taxes required to be withheld from such
payment, provided that the right of the holder of the Company Stock Option to
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receive this sum is not conditioned on the Employee's continued employment or
provision of services after the Effective Time. The Company shall pay the
amounts payable to each holder of an unvested Company Stock Option as soon as
reasonably practicable following the date or dates the unvested portions of the
Company Stock option would have otherwise vested if such unvested portions had
not been cancelled in accordance with this Section 2.4(f)(ii). The Company shall
------------------
pay promptly any amounts withheld or due for applicable foreign, federal, state
and local taxes to the appropriate Governmental Authority on behalf of the
holder of such Company Stock Option.
(iii) Each purchase right (a "Purchase Right") under the
--------------
Company ESPP outstanding immediately prior to the Effective Time shall
accelerate, fully vest and automatically be exercised immediately prior to the
Effective Time in accordance with the provisions of the Company ESPP. Shares of
Company Common Stock issuable upon such acceleration, vesting and exercise of
each Purchase Right shall be issued and outstanding immediately prior to the
Effective Time and shall therefore be subject to the terms of this Agreement.
The Company shall use its best efforts to provide written notice of the Merger
to holders of a Purchase Right at least ten (10) days prior to the Effective
Time.
(iv) Prior to the Effective Time the Company shall use its
reasonable best efforts to obtain any consents from all holders of Company Stock
Options and to make any amendments to the terms of such stock options or
compensations plans or arrangements that are necessary to give effect to the
transactions contemplated by this Section 2.4(f). At the Effective Time the
--------------
Company shall terminate the Company Stock Option Plan and the Company ESPP.
(v) No interest shall be paid on any amounts to be paid
pursuant to this Section 2.4(f).
--------------
(vi) The Company will use reasonable best efforts so that,
immediately following the Effective Time, none of Merger Sub, the Company or the
Surviving Corporation is or will be bound by the Company Stock Option Plan, the
Company ESPP, Purchase Right, any Company Stock Option or any other options,
warrants, rights or agreements which would entitle any Person, other than Parent
or its Affiliates, to own any capital stock of the Company, Merger Sub or the
Surviving
10
Corporation or to receive any payment in respect thereof, except as otherwise
provided herein.
(g) Company Debentures.
(i) Prior to the Effective Time the Company shall use
reasonable best efforts to obtain consents from the holders of the Company
Debentures or otherwise to amend each Company Debenture to provide for the
automatic conversion immediately prior to the Merger of such Company
Debenture into Company Common Stock in accordance with the terms of the
Company Debentures as of the date hereof. Shares of Company Common Stock
issuable upon such conversion shall be deemed issued and outstanding as of
the Effective Time for purposes of this Agreement.
(ii) Any Company Debenture outstanding immediately prior
to the Effective Time and which is not subject to automatic conversion
pursuant to Section 2.4(g)(i) or otherwise as of the Merger shall be deemed
-----------------
assumed by the Surviving Corporation and to constitute an obligation of the
Surviving Corporation; provided that, on the terms and conditions as were
--------
applicable under such Company Debenture prior to the Effective Time, each
Company Debenture shall cease to be convertible into shares of Company
Common Stock or shares of capital stock of the Surviving Corporation, but
shall be convertible into the right to receive cash in an amount equal to
the product of (i) the number of shares of Company Common Stock into which
such Company Debenture would have been convertible in accordance with its
terms, multiplied by (ii) the Merger Consideration payable per share of
Company Common Stock.
(h) Dissenting Shares.
(i) Notwithstanding any provision of this Agreement to
the contrary, any shares of Company Common Stock held by a holder who has
demanded and perfected dissenters' rights for such shares in accordance
with the California Code and who, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("Dissenting Shares")
-----------------
shall not be converted into or represent a right to receive the Merger
Consideration pursuant to Section 2.4(e), but the holder thereof shall only
--------------
be entitled to such rights as are granted by the California Code.
(ii) Notwithstanding the provisions of subsection (i)
above, if any holder of shares of Company Common Stock who demands purchase
of such shares under the California Code shall effectively withdraw or lose
(through failure to perfect or otherwise) such holder's dissenters' rights,
then, as of the later of (A) the Effective Time or (B) the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only the right to receive the Merger Consideration as provided in
Section 2.4(e), without interest thereon, upon surrender to the Company of
--------------
the Certificate representing such shares in accordance with this Agreement.
(iii) The Company shall give Parent (A) prompt notice of
its receipt of any written demands for dissenters' rights and any
withdrawals of such
11
demands and (B) the opportunity to participate in and control all
negotiations and proceedings with respect to demands for dissenters' rights
under the California Code. The Company shall not, except with the prior
written consent of Parent or as may be required under Applicable Law,
voluntarily make any payment with respect to any demands for purchase of
Company Common Stock pursuant to dissenters' rights or offer to settle or
settle any such demands.
(i) Conversion of Capital Stock of the Merger Sub. At and as
of the Effective Time, each share of Common Stock, $.00001 par value per
share, of Merger Sub shall be converted into one share of Common Stock, no
par value per share, of the Surviving Corporation.
Section 2.5 Procedure for Payment.
---------------------
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as paying agent (the "Paying
------
Agent") for the purpose of exchanging Certificates for the Merger
-----
Consideration. Parent or Merger Sub shall, from time to time, make
available or cause to be made available to the Paying Agent funds (the
"Payment Fund") in such amounts and at times necessary for the payment of
------------
the Merger Consideration in the manner provided herein. The Paying Agent
shall invest portions of the Merger Consideration as Parent directs (it
being understood that any and all interest earned on funds made available
to the Paying Agent pursuant to this Agreement shall be the property of,
and shall be turned over to, Parent), provided, that such investments shall
--------
be in obligations of or guaranteed by the United States of America or of
any agency thereof and backed by the full faith and credit of the United
States of America, in commercial paper obligations rated A-1 or P-1 or
better by ▇▇▇▇▇'▇ Investors Services, Inc. or Standard & Poor's
Corporation, respectively, or in deposit accounts, certificates of deposit
or banker's acceptances of, repurchase or reverse repurchase agreements
with, or Eurodollar time deposits purchased from, commercial banks with
capital, surplus and undivided profits aggregating in excess of US$100
million (based on the most recent financial statements of such bank which
are then publicly available).
(b) Letter of Transmittal. Promptly after the Effective Time,
the Surviving Corporation shall instruct the Paying Agent to mail to each
holder of record of one or more shares of Company Common Stock, (i) a
letter of transmittal, which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent, and which shall have such
other provisions as Parent shall reasonably specify, and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration.
(c) Entitlement of Shares. Upon surrender of a Certificate
for cancellation to the Paying Agent, together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration payable
in respect of the shares of Company Common Stock previously represented by
such Certificates, after giving effect to any withholding tax required by
Applicable Law, and the Certificates so
12
surrendered shall forthwith be cancelled. Until surrendered as contemplated
by this Section 2.5, each Certificate shall be deemed at any time after the
-----------
Effective Time to represent only the right to receive the Merger
Consideration. No interest will be paid or accrued on the Merger
Consideration.
(d) Payments to Other Persons. If Merger Consideration is to
be paid to any Person other than the Person in whose name the Certificates
for shares surrendered for conversion are registered, it shall be a
condition of the payment that such Certificates be properly endorsed and
the signatures thereon properly guaranteed and otherwise in proper form for
transfer and that the Person requesting such payment shall have paid to the
Paying Agent any transfer or other taxes required by reason of the delivery
of Merger Consideration to a Person other than the registered holder of
such Certificate, or shall have established to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable.
(e) Termination. Any portion of the Payment Fund held by the
Paying Agent for delivery pursuant to this Section 2.5 and unclaimed at the
-----------
end of six months after the Effective Time shall be paid or delivered to
the Surviving Corporation, upon demand, and any holders of Certificates who
have not theretofore complied with this Section 2.5 shall, subject to
-----------
Applicable Law, thereafter look only to the Surviving Corporation for
payment of the Merger Consideration in respect of shares of Company Common
Stock and shall have no rights against Parent with respect to such
payments. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation or the Paying Agent shall be liable to any holder of shares of
Company Common Stock for any amount paid to any Governmental Authority
pursuant to any applicable abandoned property, escheat or similar law. Any
amounts unclaimed by holders of shares of Company Common Stock two years
after the Effective Time (or such earlier date immediately prior to such
time as such amounts would otherwise escheat to or become the property of
any Governmental Authority) shall, to the extent permitted by Applicable
Law, become the property of the Surviving Corporation free and clear of any
claims or interest of any Person previously entitled thereto.
(f) Stock Transfer Books; No Further Ownership Rights. At and
after the Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registrations of transfers of shares
of Company Common Stock thereafter on the records of the Company. From and
after the Effective Time, the holders of Certificates evidencing ownership
of the shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to
such shares of Company Common Stock, except as otherwise provided for
herein or by Applicable Law. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, Parent or the Paying Agent for any
reason, they shall be cancelled and exchanged for the Merger Consideration
as provided in this Section 2.5, subject to Section 2.5(e).
----------- --------------
(g) Lost, Stolen or Destroyed Certificates. Notwithstanding
anything here to the contrary herein, in the event any Certificates shall
have been lost, stolen or
13
destroyed, Parent shall pay the Merger Consideration in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof; provided, that Parent may, in its
--------
discretion and as a condition precedent to the payment thereof, require the
owner of such lost, stolen or destroyed Certificates to provide an
indemnity or deliver a bond in such sum as Parent may reasonably direct as
indemnity against any claim that may be made against Parent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
Section 2.6 Subsequent Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or
things are necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to
or under any of the rights, properties or assets of either Merger Sub or
the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to carry out this
Agreement and the Merger, the officers and directors of the Surviving
Corporation are hereby authorized to execute and deliver, in the name and
on behalf of each of Merger Sub or the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of Merger Sub or the Company or otherwise, all
such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise
to carry out this Agreement and the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent, except as set
forth in the Company SEC Reports or the Company's Disclosure Letter, as
follows:
Section 3.1 Due Organization of Company. The Company is a corporation
---------------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted and to own, operate or lease all of
its properties and assets. True and complete copies of the Articles of
Incorporation and Bylaws of the Company with all amendments and
restatements thereto through the date hereof have been provided to Parent
prior to the date hereof. The Company is duly qualified as a foreign
corporation to do business, and is in good standing (to the extent the
concept of good standing exists), in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary, except where the failure to be so
qualified has not had a Material Adverse Effect.
Section 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock and 1,000,000 shares of Company
Preferred Stock. As of the close of business on April 8 , 2001, 4,876,067
shares of Company Common Stock were issued and outstanding, no shares of
Company Preferred Stock were issued or outstanding, and Company Stock
Options to acquire 487,750 shares
14
of Company Common Stock were outstanding under the Company Stock Plan. The
Company has outstanding the Company Debentures which are convertible upon
the request of the holders at any time prior to December 31, 2003, into
shares of Company Common Stock at a rate of 900 shares of Company Common
Stock per $10,000 of principal amount. Under the Company ESPP, all
outstanding employee Purchase Rights under the Company ESPP shall
automatically be exercised or cancelled pursuant to Section 2.4(f)(iii),
-------------------
immediately prior to the Effective Time, and shares of Company Common Stock
shall be purchased accordingly. As of April 8, 2001, the Company had
accrued deposits of not more than $10,000 for the purchase of Company
Common Stock under the Company ESPP. The maximum number of shares of
Company Common Stock that may be issued under the Company ESPP is 50,000.
Section 3.2(a) of the Company's Disclosure Letter sets forth as of the
--------------
close of business on April 8, 2001, the name of each holder of an
outstanding Company Stock Option or Company Debenture, and with respect to
each Company Stock Option held by any such holder, the exercise price and
number of shares of Company Common Stock for which such Company Stock
Option is exercisable and with respect to each Company Debenture held by
any such holder, the number of shares of Company Common Stock into which
such Company Debenture is convertible as of April 8, 2001. Except as set
forth in this Section 3.2(a), the Company has no existing (i) options,
--------------
warrants, calls, preemptive rights, subscriptions or other rights,
convertible securities, agreements or commitments of any character
obligating the Company to issue, transfer or sell any shares of capital
stock or other equity interest in the Company or securities convertible
into or exchangeable for such shares or equity interests, (ii) contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock of the Company, or (iii) voting trusts or similar agreements
to which the Company is a party with respect to the voting of the capital
stock of the Company. The Company since April 8, 2001, has not issued any
shares of Company Common Stock except in connection with the exercise of a
Company Stock Option, conversion of a Company Debenture, or exercise of a
Purchase Right.
(b) All of the issued and outstanding shares of Company
Common Stock are, and all shares of Company Common Stock which may be
issued pursuant to the exercise of outstanding Company Stock Options, the
conversion of outstanding Company Debentures or upon the exercise of
Purchase Rights under the Company ESPP will be, when issued in accordance
with the respective terms thereof, duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights or similar rights created
by statute, the Articles of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which the Company is bound.
(c) The Company does not own, directly or indirectly, any
interest in a corporation, limited liability company, partnership or other
business organization, and is not obligated to make any capital
contribution to or other investment in any other Person.
Section 3.3 Due Authorization of Transaction; Binding Obligation. The
----------------------------------------------------
Company has full corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the approval and adoption of this
Agreement and the Merger by the Company's shareholders to perform its
obligations hereunder, and the execution, delivery and performance of this
Agreement by the Company have been duly authorized
15
by all necessary corporate action on the part of the Company (other than
the approval and adoption of this Agreement and the Merger by the Company's
shareholders). This Agreement has been duly executed and delivered by the
Company and this Agreement is the legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
subject to the qualification, however, that enforcement of the rights and
remedies created hereby is subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general
equity principles.
Section 3.4 Non-Contravention. The execution, delivery and
-----------------
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby do not and will not (a) contravene the
Articles of Incorporation or Bylaws or other charter or organizational
documents of the Company, (b) conflict with or violate any Applicable Law
or Company Permit, or (c) conflict with or result in a breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in any
loss of any benefit, or the creation of any Lien on any of the property or
assets of the Company pursuant to any Contract, judgment, decree, order or
ruling to which the Company is a party or by which the Company or its
assets or properties is bound or affected, except for such contraventions,
violations, conflicts, breaches, defaults, rights creation, or Lien
creation which individually or in the aggregate, have not had, or are not
reasonably likely to have, a Material Adverse Effect.
Section 3.5 Government Approvals, Consents and Filings. No approval,
------------------------------------------
authorization, consent, order, filing, registration or notification is
required to be obtained by the Company from, or made or given by the
Company to, any Governmental Authority or any other Person in connection
with the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby,
except for such approvals, authorizations, consents, orders, filings,
registrations or notifications of which the failure to obtain is not
reasonably likely to have a Material Adverse Effect.
Section 3.6 Litigation. As of the date hereof, the Company is not
----------
engaged in, or a party to, or to the Knowledge of the Company, threatened
with, any legal action or other proceeding, at law or in equity, before any
Governmental Authority. The Company is not subject to any outstanding
judgment, injunction, order or decree of any court or Government Authority
to which the Company is a party which adversely affects the operations of
the Company.
Section 3.7 Brokers' Fees. Except for fees payable to ▇▇ ▇▇▇▇▇▇▇▇▇ +
-------------
Co., LLC, the Company has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which the Company, Parent or Merger Sub
could become liable or obligated. A true and correct copy of the Company's
engagement letter with ▇▇ ▇▇▇▇▇▇▇▇▇ + Co., LLC has been provided to Parent.
16
Section 3.8 Reports and Financial Information.
---------------------------------
(a) The Company has filed all forms, reports, proxy
statements and documents required to be filed with the SEC pursuant to the
Exchange Act since April 8, 1999, including, without limitation, Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2000 and Quarterly
Reports on Form 10-QSB for the quarters ended December 31, 1999, March 31,
2000, September 30, 2000 and December 31, 2000, respectively (all such
reports and amendments thereto, collectively, the "Company SEC Reports"),
-------------------
and has previously furnished or made available to Parent true and complete
copies of all of the Company SEC Reports filed with the SEC (including any
exhibits thereto). As of their respective dates, the Company SEC Reports
complied in all material respects with the requirements of the Exchange Act
or the Securities Act and the rules and regulations of the SEC promulgated
thereunder, as the case may be, applicable to such Company SEC reports, and
none of the Company SEC Reports, as of their respective dates (as amended
through the date hereof), contained any untrue statement of a material fact
or omitted a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each of the balance sheets (including the related notes)
included in the Company SEC Reports fairly presents the financial position
of the Company as of the date thereof, and the other related financial
statements (including the related notes) included therein fairly present
the results of operations and the changes in cash flows of the Company for
the respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved, except as otherwise noted
therein and subject, in the case of the unaudited interim financial
statements, to (i) normal year end adjustments; and (ii) the permitted
exclusion of all footnotes that would otherwise be required by GAAP.
(c) The Company does not have any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) that
would be required to be reflected on, or reserved against in, a balance
sheet of the Company or described or referred to in the notes thereto,
prepared in accordance with GAAP, except for (i) liabilities or obligations
that were so reserved on, or reflected in (including the notes to), the
balance sheets included in the Company SEC Reports, (ii) liabilities or
obligations arising in the ordinary course of business (including trade
indebtedness) since December 31, 2000, and (iii) liabilities or obligations
to ▇▇ ▇▇▇▇▇▇▇▇▇ + Co., LLC, pursuant to the financial arrangements
described in Section 3.7, expenses and costs of counsel and other advisers
-----------
incurred by the Company in connection with the transactions contemplated by
this Agreement, and (iv) liabilities or obligations which do not constitute
a Material Adverse Effect.
Section 3.9 Absence of Certain Changes or Events. Since December 31,
------------------------------------
2000, the Company has not:
(a) taken any of the actions prohibited in Section 5.1
-----------
hereof;
17
(b) incurred any material liability, except in the ordinary
course of its business, consistent with past practices;
(c) made any change in accounting principles except insofar
as may have been required by a change in GAAP or Applicable Law; or
(d) suffered or incurred any Damages (whether or not covered
by insurance) with respect to any of the tangible assets of the Company
which have had a Material Adverse Effect.
Section 3.10 Taxes.
-----
(a) The Company has made available to Parent all Tax Returns
filed by the Company for all periods ending on or after June 30, 1997 and
before the date of this Agreement, and supporting information, claims for
refunds of Taxes and any amendments, supplements, or other information
supplied to the taxing authorities for all such periods. The Company has
filed all Tax Returns required by law to be filed by it prior to the date
of this Agreement, and such Tax Returns are true, complete and correct in
all material respects. The Company has paid or made adequate provision in
accordance with GAAP in the financial statements included in the Company
SEC Reports for the payment of all material Taxes which have accrued or
have become payable. All Taxes that the Company has been required to
withhold or to collect have been duly withheld or collected and all
withholdings and collections either have been duly and timely paid over to
the appropriate Governmental Authorities or are, together with the payments
due or to become due in connection therewith, duly reflected on the
financial statements of the Company. There are no audits, examinations,
administrative proceedings or court proceedings, pending or proposed with
regard to any Taxes or Tax Returns filed by the Company. The Company has
not given or been requested to give waivers or extensions of any statute of
limitations relating to the filing of Tax Returns or the assessment of
Taxes for which the Company may have any undisclosed liability, except for
any waiver or extension which has expired or any extensions resulting from
the filing of a Tax Return after its original due date in the ordinary
course of business. To the Knowledge of the Company no claim has ever been
made by any Governmental Authority in a jurisdiction where the Company does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. The Tax Returns of the Company have not been audited by the
IRS (or the appropriate statute of limitations has expired) for any fiscal
years through the fiscal year ending June 30, 2000.
(b) The Company (i) is not a party to any agreement providing
for the allocation, payment or sharing of Taxes between the Company, on the
one hand, and any Third Party, on the other hand; (ii) does not have an
application pending with respect to any Tax requesting permission for a
change in accounting method; (iii) has not filed a consent to the
application of Code Section 341(f) or any similar state or local tax
elections; (iv) has no liability for Taxes for any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign income tax law), as transferee,
successor, by contract or otherwise; and (v) has maintained its records
with respect to Taxes in a commercially reasonable manner.
18
(c) Section 3.10 of the Company's Disclosure Letter lists (i)
------------
all Tax Returns required to be filed within 45 days after the date of this
Agreement, and (ii) all states where the Company files income or franchise
Tax Returns.
Section 3.11 Employee Matters.
----------------
(a) Company Employee Plans.
----------------------
(i) Section 3.11(a) of the Company's Disclosure
---------------
Letter sets forth a true and complete list of each Company Employee Plan. A
true and correct copy of each Company Employee Plan as currently in effect
and, if applicable, the most recent annual report, summary plan
description, trust agreement and any determination letter issued by the IRS
for each Company Employee Plan have been delivered to or will be made
available for review by Parent.
(ii) None of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any Person
other than coverage mandated by applicable law or benefits, the full cost
of which is borne by the retiree.
(iii) The Company has complied in all material respects
with ERISA, the Code and all laws and regulations applicable to the Company
Employee Plans, and each Company Employee Plan has been maintained and
administered in material compliance with its terms.
(iv) Each Company Employee Plan intended to qualify
under Section 401(a) of the Code has been determined by the IRS to so
qualify pursuant to a favorable determination letter after January 1, 1989,
and each trust maintained pursuant thereto has been determined by the IRS
to be exempt from taxation under Section 501 of the Code. Nothing has
occurred to the Knowledge of the Company which may reasonably be expected
to impair such determination of any Company Employee Plan and its related
trust.
(v) No Company Plan is covered by Title IV of ERISA
or Section 412 of the Code. No fact or event exists which could give rise
to any liability under Title IV of ERISA or Section 412 of the Code.
(vi) With respect to each Company Employee Plan:
(1) no prohibited transactions (as defined in
Section 406 or 407 of ERISA or Section 4975 of the Code) have occurred for
which a statutory, administrative or class exemption is not available; and
(2) no action or claims (other than routine
claims for benefits made in the ordinary course of Company Employee Plan
administration for which Company Employee Plan administrative review
procedures have not been exhausted) are pending or, to the Knowledge of the
Company, threatened or imminent against or with respect to any Company
Employee Plan, any employer who is
19
participating (or who has participated) in any Company Employee Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of the Company Employee
Plan.
(vii) All of the Company Employee Plans, to the extent
applicable, are in compliance in all material respects with the
continuation of group health coverage provisions continued in Section 4980B
of the Code and Sections 601 through 608 of ERISA ("COBRA"). The Company
-----
does not maintain or contribute to any plan that provides health benefits
to an employee after the employee's termination of employment or retirement
except as required under COBRA.
(viii) All reports, forms and other documents required
to be filed with any Government Authority or furnished to employees, former
employees or beneficiaries with respect to any Company Employee Plan
(including summary plan descriptions, Forms 5500 and summary annual
reports) have been timely filed and finished and are accurate.
(ix) The Company has made all contributions due and
payable as of or prior to the date hereof to the Company Employee Plans for
all periods ending prior to the date hereof.
(x) All insurance premiums due and payable as of or
prior to the date hereof for insurance coverages under the Company Employee
Plans have been paid in full, subject only to normal retrospective
adjustments in the ordinary course, with regard to the Company Employee
Plans for plan years ending on or before the Closing Date.
(xi) All expenses and liabilities relating to all of
the Company Employee Plans have been, and will on the Closing Date be,
fully and properly accrued on the Company's books and records and disclosed
in accordance with GAAP and in the financial statements of the respective
Company Employee Plans.
(xii) Each of the Company Employee Plans provides that
it may be amended or terminated at any time and, except for benefits
protected under Section 411(d) of the Code, all benefits payable to
current, terminated employees or any beneficiary may be amended or
terminated by Parent or the Company at any time without liability.
(xiii) The Company does not have liability nor is it
threatened with any liability (whether joint or several) (1) for any excise
tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (2)
to a fine under Section 502 of ERISA.
(xiv) There are no negotiations, demands or proposals
which are pending or have been made which concern matters now covered, or
that would be covered, by the type of agreement required to be listed in
Section 3.11(a) of the Company's Disclosure Letter.
---------------
20
(b) Employees. The employment of each Employee is terminable
---------
by the Company at will. The Company is not a party to, nor is it bound by
any employment agreement. Section 3.11(b) of the Company's Disclosure
---------------
Letter sets forth the aggregate accrued vacation pay of the Employees as of
March 31, 2001.
Section 3.12 Material Contracts.
------------------
(a) Section 3.12(a) of the Company's Disclosure Letter
---------------
includes a list of the following agreements, Contracts or other instruments
in effect and binding upon the Company (including all amendments thereto)
(collectively, the "Material Contracts"): (i) agreements, Contracts or
------------------
other instruments which have been filed by the Company with the SEC
pursuant to the requirements of the Exchange Act as "material contracts";
(ii) agreements, Contracts or other instruments which are required to be
filed by the Company with the SEC pursuant to the requirements of the
Exchange Act as "material contracts" and have not been filed; (iii) each
Company Employee Plan; (iv) any agreement or indenture relating to the
borrowing of money in excess of $150,000 in principal amount or mortgaging,
pledging or otherwise placing a Lien (other than a Permitted Lien) on any
portion of the Company's assets to secure an obligation in excess of
$150,000 in principal amount; (v) guaranty of any obligation for borrowed
money in excess of $150,000 in principal amount; (vi) all of the leases,
subleases, licenses and other material agreements relating to or
constituting real property; (vii) any lease or agreement under which it is
lessee of or holds or operates any personal property owned by any other
party with annual payments of at least $150,000; (viii) contract or group
of related contracts with the same party for the supply of wine to any
Person or providing for deliveries extending beyond December 31, 2001 with
annual payments in excess of $150,000; (ix) any contract or group of
related contracts with the same party for the purchase of goods (including
grapes or bulk wine), inventories, supplies or services, under which the
undelivered balance of such goods, inventories, supplies or services has a
purchase price in excess of $150,000; (x) any contract or group of related
contracts with the same party for the sale of products or services in an
amount in excess of $150,000; (xi) manufacturer's representative, sales
agency and distribution contracts and agreements that have a term of one
year or more and are not terminable by the Company on notice of six months
or less without penalty; (xii) contracts and agreements prohibiting or
materially restricting the ability of the Company to compete in any
geographic area with any Person, other than (A) distribution (including
independent sales representative) contracts and agreements that have a term
of less than one year or are terminable by the Company on notice of six
months or less without penalty, and, in each case, which are not material
to the Company and (B) supplier and customer agreements relating to non-
disclosure of confidential information of the other party which are not
material to the Company; (xiii) any other contract or commitment involving
the payment by or to the Company of $150,000 or more (whether in cash or
other assets) in any twelve month period or more (whether in cash or other
assets) than $150,000 in the aggregate over the life of the contract; (xiv)
stockholder, voting trust or similar contracts and agreements relating to
the voting of shares or other equity or debt interests of the Company known
to the Company; or (xv) joint venture agreements, partnership agreements
and other similar contracts and agreements involving a sharing of profits
and expenses. The Company has made available to Parent, prior to the date
hereof, true,
21
correct and complete copies in all material respects of each such Material
Contract. To the Knowledge of the Company, the representations made in this
Section 3.12(a) would also be true and correct if the references to
---------------
$150,000 in this Section 3.12(a) were reduced to $50,000, so long as
---------------
Material Contracts for the purchase or sale of grapes and wine are not
included.
(b) (i) The Company has not breached, is not in default
under, and has not received written notice of any breach of or default
under (or, would be in default, breach or violation with notice or lapse of
time, or both), any Material Contract, (ii) to the Knowledge of the
Company, no other party to any of the Material Contracts has breached or is
in default of any of its obligations thereunder, and (iii) each of the
Material Contracts is in full force and effect, and will continue to be in
full force and effect following consummation of the transactions
contemplated hereby, except in any such case for breaches, defaults or
failures that in the aggregate do not have a Material Adverse Effect.
Section 3.13 Regulatory Compliance.
---------------------
(a) The Company is in compliance with all Applicable Laws,
except for instances of non-compliance that individually or in the
aggregate have not had a Material Adverse Effect. The Company has not
received from any Governmental Authority any written notice alleging any
violation of Applicable Laws, except for instances of non-compliance that
individually or in the aggregate have not had a Material Adverse Effect, or
claiming any liability of the Company as a result of any such alleged
violation which is reasonably likely to have a Material Adverse Effect.
(b) The Company holds all permits, licenses, variances,
exemptions, consents, certificates, orders and approvals from Governmental
Authorities which are necessary to the operation of the Company as it is
now being conducted (collectively, the "Company Permits"). The Company is
---------------
in compliance with the terms of the Company Permits, except for failures to
comply which have not had a Material Adverse Effect. The Company has not
received written notice that any Company Permit will be terminated or
modified or cannot be renewed in the ordinary course of business, and to
the Knowledge of the Company there is no reasonable basis for any such
termination, modification or nonrenewal. Section 3.13(b) of the Company's
---------------
Disclosure Letter sets forth a complete and accurate listing of all of the
Company Permits issued to, possessed by, or otherwise in effect with
respect to the Company.
(c) The subject matters of Sections 3.5, 3.6, 3.8, 3.10,
-----------------------------
3.11, 3.15, 3.16, 3.18, 3.20 and 3.22 are excluded from the provisions of
-------------------------------------
this Section 3.13.
------------
Section 3.14 Real Property.
-------------
(a) Section 3.14(a) of the Company's Disclosure Letter lists
---------------
(i) all leases entered into by the Company for any real property to which
the Company is a party as a lessee as of the date hereof (the "Lease
-----
Agreements"), setting forth in the case of any such lease, the location of
----------
such real property and (ii) all real properties to which the
22
Company owns fee simple title (the "Owned Real Property"), setting forth
-------------------
the legal description of each such Owned Real Property. To the knowledge of
the Company, (iii) the Company has good and marketable title to all of its
Owned Real Property and valid leasehold interests of record in and to all
real property that is the subject of the Lease Agreements (the "Leased Real
-----------
Property"), and (iv) neither the Owned Real Property nor the Leased Real
--------
Property is subject to any rights of any other Person or entity that are
superior to such interests of the Company, other than easements of record
and the matters set forth in Section 3.14(a) and Section 3.14(b) of the
--------------- ---------------
Company's Disclosure Letter provided that these items in the Disclosure
Letter do not materially interfere with the present use or occupation of
the Owned Real Property or Leased Real Property.
(b) Each of the Lease Agreements is in full force and effect
and constitutes a valid and binding obligation of the Company. To the
Knowledge of the Company, no default of the landlord or the Company has
occurred under any Lease Agreement nor has any event occurred which, with
the giving of notice or the passage of time or both, would constitute a
default of the landlord or the Company thereunder. The Company has not
received any written notice alleging that the Company is in default under
any Lease Agreement.
(c) The Company has received no written notice that any
entity or governmental authority considers the operation, use or ownership
of the Owned Real Property or the Leased Real Property to have violated any
zoning, land use or similar laws, ordinances, rules, regulations or
administrative interpretations applicable thereto, or that any
investigation has been commenced regarding such possible violation. To the
Knowledge of the Company, and except as noted in the Company's Disclosure
Letter, the present use and operation of the Owned Real Property and the
Leased Real Property is in compliance with all existing zoning, land use
and similar laws, ordinances, rules, regulations or administrative
interpretations applicable thereto.
(d) No condemnation or eminent domain proceeding against any
part of the Owned Real Property or Leased Real Property is pending or, to
the Knowledge of the Company, threatened.
(e) All operating facilities located on the Owned Real
Property and the Leased Real Property are supplied with utilities and other
services, assuming the operation of such utilities, in such amounts as are
reasonably necessary for the current operation of such facilities,
including gas, electricity, water, waste water, irrigation, drainage, and
similar reasonably required services.
Section 3.15 Intellectual Property.
---------------------
(a) Attached as Section 3.15(a) of the Company's Disclosure
---------------
Letter is a list of each material Proprietary Asset owned by or licensed to
the Company which is necessary or required for the operation of the
business of the Company as currently conducted, together with a designation
of ownership. The Company is, or upon consummation of the transactions
contemplated hereby will be, the owner of all right,
23
title and interest in and to each such Proprietary Asset or has the right
to use each such Proprietary Asset as required to conduct its business as
now operated. No registration of a Proprietary Asset listed on Section
-------
3.15(a) of the Company's Disclosure Letter has expired, been cancelled or
-------
abandoned. None of the past or present Employees, officers, directors or
shareholders of the Company have any ownership rights in any of the
Proprietary Assets.
(b) All registered trademarks listed in Section 3.15(a) of
---------------
the Company's Disclosure Letter are registered, solely in the name of the
Company, (i) on the Principal or Supplemental Register of the United States
Patent and Trademark Office, and (ii) with the appropriate foreign
authorities necessary for protection of the trademarks in all foreign
markets where the Company's trademarks are used, and each registration is
valid, in full force and effect, and enforceable.
(c) To the Knowledge of the Company, the Company is not
infringing, and has not at any time infringed or received any notice or
other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement of, any Proprietary Asset owned or used
by any other Person. To the Knowledge of the Company, no other Person is
infringing any Proprietary Asset owned or used by the Company.
(d) The Company has not licensed or sublicensed any party to
use any of the Proprietary Assets identified in Section 3.15(a) of the
---------------
Company's Disclosure Letter.
(e) There are no judgments, decrees or orders pending
against or affecting any Proprietary Asset owned or used by the Company.
Section 3.16 Environmental Matters.
---------------------
(a) The operations of the Company have been and are in
compliance in all material respects with all applicable Environmental Laws,
including without limitation the possession of and compliance with all
permits, licenses, authorizations and approvals required under applicable
Environmental Laws. There are, and have been, no past or present events,
conditions, circumstances, activities, practices, incidents or actions
which could reasonably be expected to interfere with or prevent continued
compliance with any applicable Environmental Law in any material respect.
(b) The Company has not received any written complaint,
claim, notice or request for information concerning any violation, or any
liability under, any applicable Environmental Laws during the past seven
years.
(c) There are no writs, injunctions, decrees, orders or
judgments outstanding, relating to compliance by the Company with, or
liability of the Company under, any applicable Environmental Laws.
(d) There are no environmental liens, declarations or deed
restrictions affecting the properties of the Company.
24
(e) No Hazardous Substances have been stored or otherwise
held or released on, under or about any properties owned by, leased by or
leased to, or operated by the Company during the Company's period of
ownership, lease or operation of the property, and to the Knowledge of the
Company, no Hazardous Substances had been stored or otherwise held or
released on, under or about any properties owned by, leased by or leased
to, or operated by the Company prior to the Company's period of ownership,
lease or operation of the property.
(f) No underground storage tanks currently exist or, to the
Knowledge of the Company, have existed on any properties currently owned
by, leased by or leased to, or operated by the Company. No underground
storage tanks existed on any properties previously owned by, leased by or
leased to, or operated by the Company during the Company's period of
ownership, lease, or operation of the property, and to the Knowledge of the
Company, no underground storage tanks existed on any properties previously
owned by, leased by or leased to, or operated by the Company prior to the
Company's period of ownership, lease, or operation of the property.
(g) The Company (i) has not disposed of or buried any
Hazardous Substances located in or on any properties currently or
previously owned by, leased by or to, or operated by the Company, nor have
any been released except in full compliance with all applicable
Environmental Laws; (ii) has not received any written notice from any
Person or entity alleging that the Company has disposed of any Hazardous
Substance on any properties currently or previously owned by, leased by or
to, or operated by the Company; or (iii) has not disposed of any Hazardous
Substance on third-party sites in violation of any Environmental Law or
incurred any liability for the unlawful generation, treatment, storage or
disposal, of Hazardous Substances.
Section 3.17 Title to and Condition of Assets.
--------------------------------
(a) Section 3.17 of the Company's Disclosure Letter lists
------------
all leases entered into by the Company for any personal property to which
the Company is a party as a lessee ("Leased Personal Property").
------------------------
(b) The assets as reflected in the balance sheet included in
the Company's Quarterly Report on Form 10-QSB for the quarterly period
ended December 31, 2000, and the Leased Personal Property constitute all of
the assets held for use or used primarily in connection with the business
of the Company and are adequate to carry on the business of the Company as
currently conducted other than those assets that have been disposed of in
the ordinary course of business consistent with past practice. All of the
tangible personal property used in the operation of the business of the
Company is in good operating condition and repair, except for ordinary wear
and tear. Except for any Leased Personal Property, the Company has legal
title to each of its tangible personal property assets, free and clear of
any Lien, other than Permitted Liens.
(c) Each lease for Leased Personal Property is in full force
and effect and constitutes a valid and binding obligation of the Company,
except to the extent failure to constitute a valid and binding obligation
would not reasonably be expected to
25
have a Material Adverse Effect. No default of the Company has occurred under any
such leases nor has any event occurred which, with the giving of notice or the
passage of time or both, would constitute a default of the Company thereunder,
except to the extent that any such default would not reasonably be expected to
have a Material Adverse Effect. As of the date hereof, there is no pending or,
to the Knowledge of the Company, threatened action that would interfere with the
quiet enjoyment of such leaseholds by the Company.
Section 3.18 Product Recall. The Company has not, for the past three
--------------
years, recalled any products made, bottled, distributed or sold by the Company
and it is not now nor has it ever been under any obligation to do so, and there
is no reasonable basis known to the Company for any such recall.
Section 3.19 Grape Vines. The grape vines on the vineyard portion of the
-----------
Owned Real Property and Leased Real Property are in good condition, and free in
all material respects of disease, infestation or other defects.
Section 3.20 Labor Matters.
-------------
(a) The Company is not a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization and has not received written notice of
any proposed union certification or recognition election with respect to the
Company, nor is the Company the subject of any proceeding asserting that Company
has committed an unfair labor practice pending, or, to the Knowledge of the
Company, threatened before the National Labor Relations Board or any court of
law or is seeking to compel the Company to bargain with any labor union or labor
organization nor is there pending or, to the Knowledge of the Company,
threatened, nor has there been for the past five years, any labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving the Company.
(b) The Company is in compliance with all Applicable Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, except for instances of non-compliance that individually or in
the aggregate have not had a Material Adverse Effect. There are no charges,
investigations, administrative proceedings or formal complaints of
discrimination (including discrimination based upon sex, age, marital status,
race, color, religion, national origin, sexual preference, disability, handicap
or veteran status) pending or, to the Knowledge of the Company, threatened
before the Equal Employment Opportunity Commission or any federal, state or
local agency or court against the Company.
Section 3.21 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of ▇▇ ▇▇▇▇▇▇▇▇▇ + Co., LLC, to the effect that, as of the date thereof,
the Merger Consideration is fair to the holders of the Company Common Stock from
a financial point of view.
26
Section 3.22 Takeover Statutes. No "fair price," "moratorium," "control
-----------------
share acquisition" or other similar antitakeover statute is applicable to the
Merger, except for such statutes or regulations as to which all necessary action
has been taken by the Company and its board of directors to permit the
consummation of the Merger in accordance with the terms hereof.
Section 3.23 Insurance. Section 3.23 of the Company's Disclosure Letter
--------- ------------
sets forth the insurance policies maintained by the Company and their respective
coverage and renewal dates. All of such insurance policies are in full force and
effect and the Company is not in material default with respect to its
obligations under any of such insurance policies. No notice of cancellation or
termination or rejection of any claim has been received by the Company with
respect to any such policy in the last year. The Company has been covered during
the past five years by insurance in scope and amount customary and reasonable
for the businesses in which it has been engaged during such period, and, to the
Knowledge of the Company, no contractor, lessee or licensee which performed
services and/or engaged in the production of wine on behalf of the Company was
not or are not covered by insurance in scope and amount customary and reasonable
for the business in which they have engaged during such period.
Section 3.24 Distributor Relations. Section 3.24 of the Company's
--------------------- ------------
Disclosure Letter sets forth the Company's five largest customers (measured by
revenues) as of February 28, 2001, and the revenues from each such customer and
from all customers (in the aggregate) for the eight month period then ended.
None of such five largest customers of the Company has advised the Company that
it is (x) terminating or considering terminating the handling of its business by
the Company (prior to or after the Effective Time) as a whole or in respect of
any particular product, or (y) planning to reduce, in any material amount, its
future spending with the Company (prior to or after the Effective Time).
Section 3.25 Suppliers. Section 3.25 of the Company's Disclosure Letter
--------- ------------
sets forth the Company's five largest suppliers (measured by expense) as of
February 28, 2001, and the expense from each such supplier for the eight month
period then ended. None of such suppliers of the Company has advised the Company
that it is (x) terminating or considering terminating its business with the
Company (prior to or after the Effective Time) as a whole or in respect of any
particular product, or (y) planning to reduce, in any material amount, its
future sales to the Company (prior to or after the Effective Time).
Section 3.26 Related Party Transactions. No executive officer or director
--------------------------
of the Company or, to the Knowledge of the Company, any individual in such
officer's or director's immediate family is a party to any agreement, contract,
commitment or transaction with the Company or has any interest in any real or
personal property used by the Company.
27
Section 3.27 No Other Representations or Warranties
--------------------------------------
(a) Except for the representations and warranties contained in this
Article III and the Company's Disclosure Letter, neither the Company nor any
other Person makes any express or implied representation or warranty on behalf
of the Company, and the Company hereby disclaims any such other representation
or warranty.
(b) In particular, without limiting the foregoing disclaimer, except
as stated in this Article III and the Company's Disclosure Letter, no Person
makes or has made any representation or warranty to Parent or Merger Sub with
respect to (i) any financial projection or forecast relating to the Company or
its business or (ii) any oral or written information presented to Parent or
Merger Sub during any management presentation including any question and answer
session thereto or any oral or written information provided to Parent or Merger
Sub in the course of its due diligence investigation of Parent or its business,
the negotiation of this Agreement or in the course of the transaction
contemplated hereby. Further to the extent that the Company has provided or may
provide to Parent or Merger Sub information from any inspection, engineering or
environmental report, the Company makes no representations or warranties with
respect to the accuracy, completeness or methodology of preparation or otherwise
concerning such reports. With respect to any projection or forecast delivered by
or on behalf of the Company to Parent or Merger Sub, each of Parent and Merger
Sub acknowledges that (i) there are uncertainties inherent in attempting to make
such projection and forecasts, (ii) it is familiar with such uncertainties,
(iii) it is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all such projections and forecasts so furnished to it
and (iv) it shall have no claim against any Person with respect thereto other
than a claim for fraud, bad faith or intentional misrepresentation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB
Parent and Merger Sub, jointly each and severally, hereby represent and
warrant to the Company, except as set forth in the Parent's SEC Reports or the
Parent's Disclosure Letter:
Section 4.1 Due Incorporation. Each of the Parent and Merger Sub is a
-----------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted and to own, operate or lease all of its
properties and assets. True and complete copies of the Certificate of
Incorporation or Articles of Incorporation and Bylaws of the Parent and Merger
Sub with all amendments and restatements thereto through the date hereof have
been provided to the Company prior to the date hereof.
Section 4.2 Due Authorization of Transaction; Binding Obligation. Each of
-----------------------------------------------------
Parent and Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, and the
execution, delivery and
28
performance of this Agreement by Parent and Merger Sub have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub; this
Agreement has been duly executed and delivered by Parent and Merger Sub and is
the valid and binding obligation of Parent and Merger Sub enforceable in
accordance with its terms, subject to the qualification, however, that
enforcement of the rights and remedies created hereby is subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general application relating to or affecting creditors' rights and to general
equity principles. No further approval by the board of directors, shareholders
or other security holders of Parent or Merger Sub is required for the execution,
delivery and performance of this Agreement by Parent or Merger Sub, including
without limitation the consummation of the Merger.
Section 4.3 Non-Contravention. The execution, delivery and performance of
-----------------
this Agreement by Parent and Merger Sub and the consummation of the transactions
contemplated hereby do not and will not (a) contravene the Certificate of
Incorporation or Bylaws or other charter or organizational documents of Parent
or Merger Sub, (b) conflict with or violate any Applicable Law, and (c) conflict
with or result in a breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in any loss of any material benefit, or the creation of any Lien on any of the
property or assets of the Parent and each of its subsidiaries pursuant to any
Contract, judgment, decree, order or ruling to which Parent and each of its
subsidiaries is a party or by which it or any of its assets or properties is
bound or affected, except for such contraventions, violations, conflicts,
breaches, defaults, rights creation or Lien creation which individually or in
the aggregate have not had, or is not reasonably likely to have a Parent
Material Adverse Effect.
Section 4.4 Government Approvals, Consents, and Filings. No approval,
-------------------------------------------
authorization, consent, order, filing, registration or notification is required
to be obtained by Parent or any of its subsidiaries from, or made or given by
Parent or any of its subsidiaries to, any Governmental Authority or other Person
in connection with the execution, delivery and performance of this Agreement by
Parent or any of its subsidiaries and the consummation of the transactions
contemplated hereby, except for such approvals, authorizations, orders, filings,
registrations or notifications of which the failure to obtain, individually or
in the aggregate, is not reasonably likely to have a Parent Material Adverse
Effect.
Section 4.5 Litigation. As of the date hereof, Parent and Merger Sub are
----------
not engaged in, or a party to, or threatened with, any legal action or other
proceeding before any Governmental Authority, which seeks to restrain,
materially modify or invalidate the transactions contemplated by this Agreement.
Section 4.6 Financing. Parent and Merger Sub will have, as and when
---------
required, the funds available as is necessary to consummate the transactions
contemplated hereby in accordance with the terms hereof.
29
Section 4.7 Finder's Fees; Brokers. Neither Parent nor Merger Sub has any
----------------------
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
the Company could become liable or obligated.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business of the Company Pending the Merger. The
------------------------------------------------------
Company agrees that except as expressly contemplated by this Agreement, or as
contemplated by the Company's Disclosure Letter, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time:
(a) The business of the Company shall be conducted only in the
ordinary and usual course of business and consistent with past practices.
(b) The Company shall not without the prior consent of Parent (which
consent shall not be unreasonably withheld or delayed) (i) amend its Articles of
Incorporation or Bylaws; or (ii) split, combine or reclassify any shares of its
outstanding capital stock, declare, set aside or pay any dividend or other
distribution payable in cash, stock or property in respect of its capital stock,
or directly or indirectly redeem, purchase or otherwise acquire any shares of
its capital stock or other securities.
(c) The Company shall not without the prior consent of Parent (which
consent shall not be unreasonably withheld or delayed) (i) authorize for
issuance, issue, sell, pledge, dispose of, encumber, deliver or agree or commit
to issue, sell, pledge, or deliver any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) other than shares of Company Common Stock
issued to holders of Company Stock Options or Company Debentures or issued
pursuant to the Company ESPP; (ii) acquire, dispose of, transfer, lease,
license, mortgage, pledge or encumber any fixed or other assets other than in
the ordinary course of business and consistent with past practices; (iii) incur,
assume or prepay any material indebtedness, liability or obligation or any other
material liabilities or issue any debt securities; (iv) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person in a material
amount; (v) make any loans, advances or capital contributions to, or investments
in, any other Person; (vi) fail to maintain insurance consistent with past
practices for its business; (vii) change any accounting method or practice of
the Company except insofar as may be required by a change in GAAP or Applicable
Law; (viii) make or enter into any binding commitment for any capital
expenditures or related group of capital expenditures in excess of $10,000; (ix)
prior to the submission by the Company of its grape and bulk wine purchase plans
for calendar year 2001, and the approval of these plans by Parent, the Company
will not enter into any grape or bulk wine purchase agreement involving more
than $25,000; (x) modify, amend or terminate any Material Contract, except in
the ordinary course of business consistent with past practices; (xi)
30
initiate any new product promotions, product discounts or other material price
changes, or (xii) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing.
(d) The Company shall use its reasonable best efforts to preserve
intact its business organization, to keep available the services of its present
officers and key Employees, and to preserve the goodwill of those having
business relationships with it; provided, however, that no breach of this
-------- -------
covenant shall be deemed to have occurred as a result of any matter arising out
of the transactions contemplated by this Agreement or the public announcement
thereof.
(e) The Company shall use reasonable best efforts to prevent any
representation or warranty of the Company herein from becoming untrue or
incorrect in any material respect.
Section 5.2 Compensation Plans. During the period from the date of this
------------------
Agreement and continuing until the Effective Time, the Company agrees that it
will not do any of the following without the prior written consent of Parent
(which consent shall not be unreasonable withheld or delayed), except as
required by Applicable Law or pursuant to existing contractual arrangements.
(a) enter into, adopt or amend any Company Employee Plans to
materially increase the benefits thereunder;
(b) grant or become obligated to grant any increase in the
compensation or fringe benefits of directors, officers or Employees (including
any such increase pursuant to any Company Employee Plans) or any increase in the
compensation payable or to become payable to any officer, except for increases
in compensation in the ordinary course of business consistent with past
practice, or enter into any contract, commitment or arrangement to do any of the
foregoing, except for normal increases and non-stock benefit changes in the
ordinary course of business consistent with past practice;
(c) make any material change in any Company Employee Plans
arrangement or enter into any employment or similar agreement or arrangement
with any employee; or
(d) enter into or renew any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or employee of
compensation or benefits contingent, or the terms of which are materially
altered in favor of such individual, upon the occurrence of any of the
transactions contemplated by this Agreement.
(e) Notwithstanding anything to the contrary in this Section 5.2, the
-----------
Company (i) shall be permitted to pay cash bonuses to its Employees in the
ordinary course of business in amounts consistent with past practice and to make
any changes to comply with Applicable Law; provided, however, that the Company
--------
shall advise Parent of any such payments or changes; and (ii) shall, or cause
the plan administrator under the Company ESPP to, (y) amend the terms of the
Company ESPP effective as soon as
31
practicable after the execution and delivery of this Agreement such that as of
the date hereof there shall be no new Participants (as defined in the Company
ESPP) to the plan and no existing Participant shall be allowed to increase his
or her rate of participation within the Company ESPP and (z) suspend immediately
the Company ESPP following the close of the current Purchase Period (as defined
in the Company ESPP).
Section 5.3 Voting Agreements. Concurrently herewith certain of the
-----------------
Company's shareholders entered into a Voting Agreement with Parent in
substantially the form attached hereto as Exhibit A (the "Voting Agreements").
--------- -----------------
Section 5.4 No Solicitation.
---------------
(a) The Company shall not, and shall not authorize the Company's
officers, directors, Employees, Affiliates, agents or other representatives
(including any investment banker, financial advisor, attorney or accountant
retained by it) to, (i) initiate, solicit or knowingly encourage (including by
way of furnishing non-public information) or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or that may
reasonably be expected to lead to, an Alternative Transaction, or enter into
discussions (except as to the existence of this Section 5.4) or negotiate with
-----------
any Person for the purpose of facilitating an Alternative Transaction, (ii)
agree to, or recommend, any Alternative Transaction, or (iii) enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger.
(b) The Company shall promptly notify Parent of all material terms of
any proposals for an Alternative Transaction received by the Company or by any
officer, director, Employee, agent, investment banker, financial advisor,
attorney, accountant or other representative of the Company relating to any of
such matters, and if such proposal is in writing, the Company shall promptly
deliver or cause to be delivered to Parent a copy of such proposal. The Company
shall keep Parent reasonably apprised of the status and material terms of any
proposal relating to an Alternative Transaction on a current basis.
(c) The Company shall use its reasonable best efforts to cause its
directors, officers, Employees, agents and representatives immediately to cease
all existing activities, discussions and negotiations with any parties conducted
heretofore with respect to any Alternative Transaction and use its reasonable
best efforts to ensure that no directors, officers, Employees, agents or
representatives, directly or indirectly, undertakes any such activities during
the term of this Agreement. If the board of directors of the Company learns of
any such action, the Company shall use reasonable best efforts to cause the
party or parties undertaking such action to cease such action immediately. The
Company shall promptly notify the officers, directors and Employees of the
Company and any investment banker or other advisor or representative retained by
the Company of the restrictions described in this Section 5.4.
-----------
(d) Nothing contained in this Agreement shall prohibit the board of
directors of the Company, the Company, and each of its officers, directors,
Employees, Affiliates, agents or other representatives (including any investment
banker, financial
32
advisor, attorney or accountant retained by the Company) from (i) referring a
Third Party to this Section 5.4, (ii) furnishing information to, entering into a
-----------
confidentiality agreement with, or entering into discussions or negotiations
with, any Person in connection with an unsolicited bona fide proposal by such
Person relating to an Alternative Transaction if, and only to the extent that
(A) the board of directors of the Company, after consultation with the Company's
financial advisors, believes in good faith that such proposal could lead to a
Superior Proposal and (B) prior to furnishing such information to, or entering
into discussions or negotiations with, such Person the Company provides written
notice to Parent to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such Person, (iii) complying with Rule
14e-2 promulgated under the Exchange Act or making such disclosure to the
Company's shareholders as, in the good faith determination of the Company's
board of directors, is required by Applicable Law, (iv) recommending a Superior
Proposal, provided, that the terms of Section 5.4(e) are met, or (v) entering
-------- --------------
into an agreement or understanding with respect to a Superior Proposal,
provided, that the terms of Section 5.4(f) are met.
-------- --------------
(e) The Company agrees that neither the board of directors of the
Company nor any committee thereof will (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent, the
recommendation of the board of directors of the Company with respect to the
Merger or (ii) approve or recommend, or propose publicly to approve or
recommend, any Alternative Transaction. Notwithstanding the foregoing or any
other provision of this Agreement to the contrary, if, prior to the Effective
Time, (x) in response to a bona fide unsolicited proposal with respect to an
Alternative Transaction (including following any actions permitted by paragraph
(d)), the board of directors of the Company determines, in its good faith
judgment taking into account the advice of its financial advisor and outside
counsel, that such proposal is a Superior Proposal, or (y) under circumstances
not related to an Alternative Transaction, the Company's board of directors,
after consultation with outside counsel, determines in good faith that failure
to take such action would breach its fiduciary duties to the Company's
shareholders under Applicable Law, the board of directors of the Company may
(subject to this and the following sentences) take any or all of the actions
described in the preceding sentence; provided, that the Company shall
--------
immediately inform Parent orally and in writing of the material terms and
conditions of such Alternative Transaction and the identity of the Person making
it, or such other circumstances, and if any Alternative Transaction is in
writing, the Company shall immediately deliver a copy thereof to Parent, if the
Company has not already done so pursuant to Section 5.4(b). Nothing in this
--------------
Section 5.4(e) shall in any way limit or otherwise affect Parent's right to
--------------
terminate this Agreement pursuant to Section 8.1. Any withdrawal or
-----------
modification of the recommendation of the board of directors of the Company
shall not change the approval of the board of directors of the Company for
purposes of causing any state takeover statute or other state law to be
inapplicable to the transactions contemplated hereby, including the Merger.
(f) Notwithstanding any other provision of this Agreement, if, prior
to the Effective Time, in response to a bona fide unsolicited proposal with
respect to an Alternative Transaction (including following any actions permitted
by paragraph (d)), if
33
the board of directors of the Company determines, in its good faith judgment
taking into account the advice of its financial advisor and outside counsel,
that such proposal is a Superior Proposal, the board of directors of the Company
may (subject to this and the following sentence) terminate this Agreement;
provided, that the Company gives Parent at least two Business Days prior written
--------
notice of its intention to terminate this Agreement, during which two Business
Day or longer period, the Company if requested by Parent engages in good faith
negotiations with Parent with respect to such changes as Parent may propose to
the terms of this Agreement. Nothing in this Section 5.4(f) shall in any way
--------------
limit or otherwise affect Parent's right to terminate this Agreement pursuant to
Section 8.1.
-----------
Section 5.5 Conduct of Business by Parent and Merger Sub Pending the
--------------------------------------------------------
Merger. During the period from the date of this Agreement and continuing until
------
the earlier of the termination of this Agreement or the Effective Time, Parent
and Merger Sub shall not engage in any action or enter into any transaction or
permit any action to be taken or transaction to be entered into that could
reasonably be expected to delay the consummation of, or otherwise adversely
affect, any of the transactions contemplated by this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Shareholder Approvals. The Company shall promptly call a
----------------------
meeting of its shareholders (the "Shareholder Meeting") for the purpose of
-------------------
obtaining the approval and adoption of this Agreement and the Merger. The
Shareholder Meeting shall be held as soon as practicable following the date upon
which the Proxy Statement becomes effective, and the Company will, through its
board of directors (except to the extent that the board of directors of the
Company would otherwise be allowed to withdraw or modify its recommendation
pursuant to Section 5.4(e)) recommend to its shareholders the approval and
---------------
adoption of this Agreement and the Merger.
Section 6.2 Proxy Statement.
---------------
(a) The Company shall prepare and file with the SEC a preliminary
Proxy Statement relating to the Merger and this Agreement, and use its
reasonable best efforts (x) to obtain and furnish the information required to be
included by Applicable Law in the preliminary Proxy Statement and, after
consultation with Parent, to respond promptly to any comments made by the SEC
with respect to the Proxy Statement, and (y) to cause the Proxy Statement and
any amendment or supplement thereto, to be mailed to its shareholders, provided,
--------
that the Company (1) will promptly notify Parent of the SEC or its staff for
amendments or supplements of the Proxy Statement or for additional information;
(2) will promptly provide Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger and
(3) will not amend or supplement the Proxy Statement without first consulting
with Parent and its counsel,
34
and (z) to obtain the necessary approvals of the Merger and this Agreement by
its shareholders to the extent required by the California Code.
(b) The Company shall prepare and revise the Proxy Statement so that,
at the date mailed to Company shareholders and at the time of the Shareholder
Meeting, the Proxy Statement will (x) 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 that the statements made therein, in light of the
circumstances under which they are made, are not misleading (except that the
Company shall not be responsible under this clause (b) with respect to
statements made therein based on information supplied by Parent or Merger Sub
expressly for inclusion in the Proxy Statement), and (y) comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
(c) The Company shall include in the Proxy Statement (except to the
extent that the or board of directors of the Company would otherwise be allowed
to withdraw or modify its recommendation pursuant to Section 5.4(e)) the
---------------
recommendation of such Board that shareholders of the Company vote in favor of
the approval of the Merger and the adoption of this Agreement.
(d) Parent shall furnish to the Company such information concerning
itself and Merger Sub, for inclusion in the Proxy Statement, as may be requested
by the Company and required to be included in the Proxy Statement. Such
information provided by Parent and Merger Sub in writing expressly for inclusion
in the Proxy Statement will not, at the date the Proxy Statement is filed with
the SEC, and mailed to Company shareholders and (including any corrections or
modifications made by Parent or Merger Sub to such information) at the time of
the Shareholder Meeting, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order
that the statements made therein, in light of the circumstances under which they
were made, are not misleading.
(e) Parent shall vote or cause to be voted all shares of Company
Common Stock beneficially owned by Parent or Merger Sub, or which Parent or
Merger Sub have the power to vote or direct the vote of in favor of, adoption of
the Merger and the Merger.
Section 6.3 Access to Information; Confidentiality.
--------------------------------------
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject, the Company shall
afford to the officers, Employees, accountants, counsel and other
representatives of Parent reasonable access, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records. The Company shall furnish promptly to the Parent all information
concerning its business, properties and personnel as Parent may reasonably
request, and the Company shall make available to Parent the appropriate
individuals (including attorneys, accountants and other professionals) for
discussion of the Company's business, properties and personnel as Parent may
reasonably request.
35
Prior to the Closing, at the request of Parent, the Company will deliver to
Parent an unaudited balance sheet as of the most recent month ending at least 15
Business Days prior to the then scheduled Closing Date and the related financial
statements for such month. Subject to Section 6.3(b), Parent shall keep such
--------------
information confidential in accordance with the terms of the letter agreement,
dated February 16, 2001 (the "Confidentiality Agreement") between Parent and the
-------------------------
Company. Neither Parent nor the Company shall disclose to any sales
representatives, distributors, brokers, customers, suppliers or Employees of the
Company any information concerning the transactions contemplated by this
Agreement without the prior written consent of the other party.
(b) The Company agrees that Parent may use, and the Company
shall deliver, such consents of the Company and shall request the Company's
outside public accountants to deliver such consents as may be reasonably
requested by Parent to the use of the financial and other information provided
pursuant to Section 6.3(a); provided that the Company shall have the right, not
-------------- --------
to be unreasonably withheld, to consent in advance to the public disclosure by
Parent of the Company's confidential information.
(c) The Company and Parent shall file all reports required to be
filed by each of them with the SEC between the date of this Agreement and the
Effective Time and shall deliver to the other party copies of such reports
promptly after the same are filed. Such reports will comply in all material
respects with the requirements of the Exchange Act or the Securities Act and the
rules and regulations promulgated thereunder, as applicable, and none of such
reports, as of their respective dates, will contain any untrue statement of
material fact or omit to state a 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.
Section 6.4 Consents; Approvals.
-------------------
(a) The Company and Parent shall coordinate and cooperate with
one another and shall each use their reasonable best efforts to promptly obtain
(and shall each refrain from taking any willful action that would impede
obtaining) all consents, waivers, approvals, authorizations or orders
(including, without limitation, all rulings, decisions or approvals by any
Governmental Authority), and the Company and Parent shall each use their
reasonable best efforts to promptly make all filings (including, without
limitation, the pre-merger notification filings required under the HSR Act, and
all other filings with Governmental Authorities), required in connection with
the authorization, execution and delivery of this Agreement by the Company and
Parent and the consummation by them of the transactions contemplated hereby.
(b) Each party hereby agrees to use its reasonable best efforts
to file the premerger notification report, and all other documents to be filed
in connection therewith, required by the HSR Act and the Premerger Notification
Rules promulgated thereunder with the United States Federal Trade Commission and
the United States Department of Justice as soon as practicable following the
date hereof, but in any event within five days following the date hereof. Each
party shall respond promptly to any request for additional information that may
be issued by either Federal Trade
36
Commission or Department of Justice and shall use reasonable best efforts to
assure that the waiting period required by the HSR Act has expired or been
terminated prior to the date that is 30 days after such filing.
(c) The Company and Parent shall furnish all information
required to be included in any Proxy Statement, or for any application or other
filing to be made pursuant to the rules and regulations of any Governmental
Authority in connection with the transactions contemplated by this Agreement.
Except where prohibited by applicable statutes and regulations, and subject to
the Confidentiality Agreement, each party shall coordinate with one another in
preparing and exchanging such information, and shall promptly provide the other
(or its counsel) with copies of all filings, presentations or submissions made
by such party with any Governmental Authority in connection with this Agreement
or the transactions contemplated hereby. Each of Parent and Company shall
promptly make all necessary filings with Governmental Authorities and shall
promptly provide the other party with copies of filings made by such party
between the date hereof and the Effective Time.
Section 6.5 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or non-
occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be materially untrue or inaccurate and (ii) any
failure of the Company, Parent or Merger Sub, as the case may be, to materially
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
-------- -------
pursuant to this Section 6.5 shall not limit or otherwise affect the remedies
-----------
available hereunder to the party receiving such notice and further provided that
failure to give such notice shall not be treated as a breach of a covenant
hereunder unless the failure to give such notice results in material prejudice
to the other party.
Section 6.6 Further Assurances. Upon the terms and subject to the
------------------
conditions hereof, each of the parties hereto shall use reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, and
to assist and cooperate with the other parties hereto in doing, as promptly as
practicable, all other things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to
otherwise satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement.
Section 6.7 Public Announcements. Parent and the Company shall consult
--------------------
with each other before issuing any press release with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld or delayed; provided, however, that a party may,
-------- -------
without the prior consent of the other party, issue such press release or make
such public statement as may upon the advice of counsel be required by law or
the NASD or the NYSE if it has used reasonable best efforts to consult with the
other party.
37
Section 6.8 Conveyance Taxes. Parent and the Company shall cooperate in
----------------
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar Taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
Section 6.9 Director and Officer Liability.
------------------------------
(a) For a period of six years after the Effective Time, Parent
will, and will cause the Surviving Corporation to, indemnify and hold harmless
(and make advances as incurred to) the present and former officers and directors
of the Company in respect of acts or omissions occurring at or prior to the
Effective Time to the extent provided under the Company's Articles of
Incorporation and Bylaws in effect on the date hereof.
(b) Parent will and will cause the Surviving Corporation to
perform any indemnification agreements between the Company and any of its
directors, officers and Employees in force as of immediately prior to the
Effective Time.
(c) For a period of six years after the Effective Time, Parent
shall cause to be maintained in effect the policies of directors' and officers'
liability insurance maintained by the Company for the benefit of those Persons
who are covered by such policies at the date hereof or the Effective Time (or
Parent and/or the Surviving Corporation may substitute therefor policies of at
least the same coverage with respect to matters occurring prior to the Effective
Time); provided, that the Parent and/or the Surviving Corporation shall not be
--------
required to pay an annual premium in excess of two hundred percent (200%) of the
last annual premium paid by the Company prior to the date hereof which is set
forth in Section 3.23 of the Company's Disclosure Letter and if the Surviving
------------
Corporation is unable to obtain the insurance required by this Section 6.9(c) it
--------------
shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
(d) The provisions of this Section 6.9 are intended for the
-----------
benefit of, and may be enforced by, each Person entitled to indemnification
under this Section 6.9.
-----------
Section 6.10 Action by Parent and Company's Boards. Prior to the
-------------------------------------
Effective Time, the boards of directors of Parent and the Company shall each
comply as applicable with the provisions of the SEC's no-action letter dated
January 12, 1999 addressed to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ and ▇▇▇▇ LLP
relating to Section 16(b) of the Exchange Act.
Section 6.11 Employee Benefits.
-----------------
(a) Parent agrees that all Employees of the Company other than
the Company's current directors who continue employment with Parent, the
Surviving Corporation or any subsidiary thereof after the Effective Time (the
"Continuing
----------
38
Employees") shall be provided such employment on terms and conditions that, in
---------
the aggregate, substantially as favorable as provided by the Company as of the
Effective Time with respect to wages and salaries, provided, that the Company
--------
has not otherwise breached Section 5.2 hereof with respect to increases in wages
-----------
and salaries.
(b) As of the Effective Time through the period ending February
28, 2002, Parent shall, or shall cause the Surviving Corporation to, establish
and maintain compensation and benefit plans and arrangements for Continuing
Employees that, in the aggregate, are no less favorable than those currently
provided by the Company to the Continuing Employees as of the Effective Time
(excluding any stock options or other stock-based compensation), except as
required by Applicable Law. From and after March 1, 2002, and until February 28,
2004, Parent shall, or shall cause the Surviving Corporation to, treat
Continuing Employees no less favorably than employees of Parent, in the
aggregate, who are in comparable positions and at comparable locations and shall
give each Continuing Employee past service credit under its compensation and
benefit plans and arrangements and for all employee benefits purposes for
service with the Company prior to the Effective Time as if such service had been
with Parent; provided, that such credit for past service with the Company shall
--------
be solely for purposes of vesting and eligibility, but not benefit accrual.
Parent shall honor, or cause the Surviving Corporation to honor, in accordance
with their terms and bear any cost associated with all employee benefit
obligations to current and former Employees of the Company accrued as of the
Effective Time. Through February 28, 2002, Parent agrees to provide, or cause
the Surviving Corporation to provide, to Continuing Employees the currently
provided coverage under the Company's existing medical, dental and health plans
or under comparable plans or arrangements. Parent agrees that the Surviving
Corporation shall be responsible for providing all legally-mandated continuation
coverage for Continuing Employees and their covered dependents who experience a
loss of coverage due to a "qualifying event" (within the meaning of Section 603
of ERISA) which occurs at any time on or after the Effective Time. Nothing in
this Section 6.11 is intended to create any employment obligation other than as
------------
employees at will who may be terminated with or without cause.
Section 6.12 Payment of Accrued Bonuses. As of the Effective Time, the
--------------------------
annual bonus for the fiscal year ending June 30, 2001, for each Employee shall
accrue in full and be payable by the Company to the extent not previously paid
by the Company. Parent shall cause the Surviving Corporation to pay such bonuses
as soon as practicable after the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Obligations of Each Party to Effect the
-----------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
------
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of
39
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; and there shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and any other applicable waiting period under any
other premerger notification statute of a foreign jurisdiction, to the extent
material, has either expired or been terminated.
(c) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the shareholders of the Company.
Section 7.2 Additional Conditions to Obligations of Parent and Merger
---------------------------------------------------------
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
---
subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
on and as of the Effective Time (except (i) for changes contemplated by this
Agreement, (ii) those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such date
(subject to the qualifications in clause (iii) below)); and (iii) where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" or "Knowledge of the Company" set forth therein) would not have
a Material Adverse Effect) with the same force and effect as if made on and as
of the Effective Time, and Parent and Merger Sub shall have received a
certificate to such effect signed by the President and Chief Financial Officer
of the Company.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the President and Chief Financial Officer of the Company.
(c) Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred a Material Adverse Effect.
Section 7.3 Additional Conditions to Obligation of the Company. The
--------------------------------------------------
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct on and as of the Effective Time (except (i) for changes contemplated
by this Agreement, (ii) those representations and warranties which address
matters only as of a
40
particular date), and the Company shall have received a certificate to such
effect signed by the President and Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by the President and Chief Financial Officer of Parent.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the boards of
directors of Parent and the Company; or
(b) by either Parent or the Company, if the Merger shall not have
been consummated by September 28, 2001 (the "Final Date"), (provided that the
---------- --------
right to terminate this Agreement under this Section 8.1(b) shall not be
--------------
available to any party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the Merger
to occur on or before such date and such action or failure to act constitutes a
material breach of this Agreement); or
(c) by either Parent or the Company, if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a non-appealable final order, decree or ruling or taken any
other action, in each case having become final and non-appealable, having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except if the party relying on such order, decree or ruling or other
action has not complied with its obligations under Sections 6.4; or
------------
(d) by Parent or the Company if, at the Shareholder Meeting
(including any adjournment or postponement thereof), the requisite vote of the
shareholders of the Company for approval and adoption of this Agreement and the
Merger shall not have been obtained; or
(e) by Parent, if (i) the board of directors of the Company shall
withdraw, modify or change its recommendation of this Agreement or the Merger in
a manner adverse to Parent or shall have resolved to do any of the foregoing; or
(ii) the board of directors of the Company shall have recommended to the
shareholders of the Company an Alternative Transaction; or
(f) by the Company, pursuant to Section 5.4(f); or
--------------
41
(g) by Parent or the Company, upon a material breach of any
representation, warranty, covenant or agreement on the part of the Company or
Parent, respectively, set forth in this Agreement such that the conditions set
forth in Section 7.2(a) or 7.2(b), or Section 7.3(a) or 7.3(b), would not be
-------------- ------ -------------- ------
satisfied, provided, that if such breach is curable through the exercise of
reasonable best efforts, then the other party may not terminate pursuant to this
Section 8.1(g) in respect of such breach if such breach shall have been cured
--------------
within 30 days following notice by the other party of such breach, provided the
breaching party continues to use reasonable best efforts to cure such breach
during the 30 day period (it being understood that (i) the other party may not
terminate this Agreement pursuant to this Section 8.1(g) after notice of such
--------------
breach if such breach shall have been cured within 30 days or the party seeking
to terminate shall then be in material breach of this Agreement and (ii) no cure
period shall be required for a breach which by its nature cannot be cured).
Section 8.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
-----------
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers or shareholders; provided, however, that nothing
-------- -------
in this Section 8.2 shall relieve any party from liability for breach of this
-----------
Agreement or for fees and expenses as set forth in Section 8.3, and that this
-----------
Section 8.2 and Section 8.3 shall survive indefinitely any termination of this
----------- -----------
Agreement.
Section 8.3 Fees and Expenses.
-----------------
(a) Except as set forth in this Section 8.3, (i) all fees and
-----------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, if the
Merger is not consummated, or (ii) if the Merger is consummated, then the
Surviving Corporation shall pay all such fees and expenses.
(b) The Company shall pay Parent a fee of $8,000,000 in cash (the
"Fee") upon the occurrence of both of the following events:
(i) the termination of this Agreement by Parent or the
Company pursuant to (A) Section 8.1(d) or 8.1(e)(i), provided, that an
------------- ---------
Alternative Transaction shall have been publicly announced prior to the time the
Company seeks the approval and adoption of this Agreement and the Merger by its
shareholders and such proposed Alternative Transaction has not been withdrawn by
the Third Party or otherwise affirmatively rejected by the Board of Directors of
the Company; (B) Section 8.1(e)(ii) or (C) Section 8.1(f); and
------------------ ------------------
(ii) the proposed Alternative Transaction is consummated
within eighteen months of the date of such termination.
(c) The Fee payable pursuant to Section 8.3(b) shall be paid
--------------
within one business day after the consummation of the Alternative Transaction
which gives rise to the obligation to make such payment.
42
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Effectiveness of Representations, Warranties and Agreements;
------------------------------------------------------------
Knowledge, Etc.
--------------
(a) Except as otherwise provided in this Section 9.1, the
-----------
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
-----------
forth in Article II and Section 6.3 shall survive the Effective Time
---------- -----------
indefinitely and the agreements and liabilities set forth or otherwise described
in Section 8.2 or Section 8.3 shall survive termination indefinitely. The
----------- -----------
Confidentiality Agreement shall survive termination of this Agreement as
provided therein.
(b) Any disclosure made with reference to one or more Sections of the
Company's Disclosure Letter or the Parent Disclosure Letter shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent; provided, that
--------
the Company, with respect to the Company's Disclosure Letter, and Parent, with
respect to the Parent Disclosure Letter, shall exercise reasonable best efforts
to cross reference the sections where a disclosure made in the applicable
Disclosure Letter is applicable to more than one representation or warranty.
Section 9.2 Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally, the third Business Day
after deposit in the U.S. mail, if mailed by registered or certified mail
(postage prepaid, return receipt requested), or the next Business Day if
delivered by a commercial courier guaranteeing overnight delivery to the parties
at the following addresses (or at such other address for a party as shall be
specified by like changes of address which shall be effective upon receipt) or
as of the date delivered if sent by facsimile transmission, with confirmation
received, to the facsimile number specified below:
(a) If to Parent or Merger Sub:
Constellation Brands, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
43
With copies to:
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ Building, 30th Floor
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Constellation Brands, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company:
Ravenswood Winery, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Ravenswood Winery, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.3 Amendment. This Agreement may be amended by the parties hereto
---------
by action taken by or on behalf of their respective boards of directors at any
time prior to the Effective Time; provided, however, that, after approval of the
-------- -------
Merger by the shareholders of the Company, no amendment may be made which by law
requires further
44
approval by such shareholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time, any party
------
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
Section 9.5 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.6 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 9.7 Entire Agreement. This Agreement (including the documents and
----------------
instruments referred to herein) constitute the entire agreement and supersede
all prior agreements and undertakings (other than the Confidentiality
Agreement), both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and, except as otherwise expressly provided
herein, are not intended to confer upon any other Person any rights or remedies
hereunder.
Section 9.8 Assignment, Merger Sub. This Agreement shall not be assigned
----------------------
by operation of law or otherwise without the prior written consent of Parent and
the Company, except that Parent and Merger Sub may assign all or any of their
rights hereunder to any Affiliate of Parent provided that no such assignment
shall relieve the assigning party of its obligations hereunder.
Section 9.9 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, except as provided in Sections 2.4(f), 6.9 and 6.12 hereof.
--------------- --- ----
Section 9.10 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the internal laws of the State of California
applicable to
45
contracts executed and fully performed within the State of California, without
regard to the conflicts of laws provisions thereof.
Section 9.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 9.12 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
--------------------
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
46
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement and Plan Merger to be executed as of the date first written above by
their respective officers thereunto duly authorized.
CONSTELLATION BRANDS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
VVV ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Huneeus
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Huneeus
Title: President
RAVENSWOOD WINERY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Wine Maker
By: /s/ ▇. ▇▇▇▇ ▇▇▇▇▇▇
------------------
Name: ▇. ▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman/CEO
47