<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
SARATOGA BEVERAGE GROUP, INC.
(NAME OF THE ISSUER)
SARATOGA BEVERAGE GROUP, INC.
NCP-SBG RECAPITALIZATION CORP.
NCP-SBG, L.P.
NCP-SBG G.P., L.L.C.
NORTH CASTLE PARTNERS II, L.P.
NCP G.P. II, L.P.
NORTH CASTLE G.P. II, L.L.C.
CHARLES F. BAIRD, JR.
ROBIN PREVER
STEVEN BOGEN
WARREN LICHTENSTEIN
STEEL PARTNERS II, L.P.
(NAME OF THE PERSONS FILING STATEMENT)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
803436 10 4
(CUSIP NUMBER OF CLASS OF SECURITIES)
ROBIN PREVER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SARATOGA BEVERAGE GROUP, INC.
11 GEYSER ROAD
SARATOGA SPRINGS, NEW YORK 12866
TELEPHONE: (518) 584-6363
TELECOPY: (518) 584-0380
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF PERSONS FILING STATEMENT)
COPY TO:
Charles I. Weissman, Esq. Franci J. Blassberg, Esq.
SWIDLER BERLIN SHEREFF DEBEVOISE & PLIMPTON
FRIEDMAN, LLP 875 Third Avenue
The Chrysler Building New York, New York 10022
405 Lexington Avenue Telephone: (212) 909-6000
New York, New York 10174 Telecopy: (212) 909-6836
Telephone: (212) 973-0111
Telecopy: (212) 891-9598
This statement is filed in connection with (check the appropriate box):
[X] (a) The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
[ ] (b) The filing of a registration statement under the Securities Act
of 1933.
[ ] (c) A tender offer.
[ ] (d) None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. [X]
<PAGE>
CALCULATION OF FILING FEE:
Transaction Valuation* Amount of Filing Fee
$36,189,383 $7,237.88
* For purposes of calculating the fee only. The filing fee was determined
based upon (a) 4,910,218 issued and outstanding shares of Class A common
stock, par value $.01 per share, which does not include 550,000 shares
which will be rolled over into the surviving corporation, and 522,955
issued and outstanding shares of Class B common stock, par value $.01 per
share (together, the "Shares"), of Saratoga Beverage Group, Inc. as of
January 14, 2000; and (b) the merger consideration of $6.00 per Share (the
"Merger Consideration"), plus $3,590,345 payable to holders of options and
warrants to purchase Shares in exchange for the cancellation of such
options and warrants. The payment of the filing fee, calculated in
accordance with Regulation 240.0-11 under the Securities Exchange Act of
1934, as amended, equals one-fiftieth of one percent of the value of the
Shares (and options and warrants to purchase Shares) for which the Merger
Consideration will be paid.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ________________________
Filing Party: ________________________
Date Filed: ________________________
Form of Registration No.: ________________________
<PAGE>
INTRODUCTION
This Rule 13E-3 Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") is being filed by Saratoga Beverage Group, Inc., a Delaware corporation
(the "Company"), NCP-SBG Recapitalization Corp. ("MergerCo"), NCP-SBG, L.P., a
Delaware limited partnership ("Purchaser"), NCP-SBG G.P., L.L.C., a Delaware
limited liability company, North Castle Partners II, L.P., a Delaware limited
partnership, NCP G.P. II, L.P., a Delaware limited partnership, North Castle
G.P. II, L.L.C., a Delaware limited liability company, Charles F. Baird, Robin
Prever, Steven Bogen, Warren Lichtenstein, and Steel Partners II, L.P.
(collectively, the "Filing Parties"), in connection with the proposed merger
(the "Merger") of NCP-SBG Recapitalization Corp. ("MergerCo") with and into the
Company, with the Company being the surviving corporation (the "Surviving
Corporation") pursuant to a Stock Purchase Agreement and Agreement and Plan of
Merger, dated as of January 5, 2000 (the "Merger Agreement"), by and among the
Company, MergerCo and the Purchaser. Upon the effectiveness of the Merger (the
"Effective Time"), each share of common stock of the Company issued and
outstanding immediately prior to the Effective Time, other than (i) Shares held
by the Company as treasury stock, (ii) a minimum of 550,000 and a maximum of
700,000 Shares (the "Rollover Stock") held by Robin Prever, Steven Bogen, Warren
Lichtenstein, Steel Partners II, L.P. and certain other stockholders
(collectively, the "Continuing Stockholders"), and (iii) Shares as to which
dissenters' rights have been validly exercised, will be converted into the right
to receive $6.00 in cash, without interest, and each share of Rollover Stock
will be converted into the right to receive one share of common stock of the
Surviving Corporation. Following the merger the Purchaser will hold
approximately 90% of the Surviving Corporation and the Continuing Stockholders
will hold approximately 10% of the common stock of the Surviving Corporation.
This Schedule 13E-3 is being filed with the Securities and Exchange
Commission concurrently with a preliminary proxy statement filed by the Company
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Proxy Statement"). A copy of the Proxy Statement is attached hereto as
Exhibit (d)(1). The following cross reference sheet is being supplied pursuant
to General Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in this Schedule 13E-3. The
information contained in the Proxy Statement is expressly incorporated herein by
reference and the responses to each item are qualified in their entirety by
reference to the information contained in the Proxy Statement and the exhibits
thereto. Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the Proxy Statement.
1
<PAGE>
ITEM NUMBER AND CAPTION IN
SCHEDULE 13E-3 LOCATION IN THE PROXY STATEMENT
1. ISSUER AND CLASS OF SECURITY
SUBJECT TO THE TRANSACTION
(a) Outside Front Cover Page, "Summary"
and "Saratoga"
(b) "Introduction;" "Price of Class A
Common Stock;" and "The Special
Meeting - Record Date; Stock
Entitled to Vote; Quorum"
(c) - (d) "Price of Class A Common Stock"
(e) Not Applicable
(f) "Purchases of Common Stock by and
Other Transactions with Certain
Persons"
2. IDENTITY AND BACKGROUND "Summary;" "Saratoga;" "Purchaser"
and "MergerCo"
3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a)(1) "Special Factors - Background
of the Merger;" - Certain Effects
of the Merger;" "The Merger - Robin
Prever Employment Agreement,"
"-Robin Prever Non-Competition
Agreement," "- Stockholders
Agreement," "- Consulting
Agreement," "- Voting Agreement;"
"- Registration Rights Agreement"
and "Purchases of Common Stock by
and Other Transactions with Certain
Persons"
(a)(2) "Special Factors - Background
of the Merger," "The Merger- Robin
Prever Employment Agreement,"
"-Robin Prever
Non-Competition Agreement," "-
Stockholders Agreement," "-
Consulting Agreement," "- Voting
Agreement," " - Registration
Rights Agreement" and "Purchases of
Common Stock by and Other
Transactions with Certain Persons"
(b) "Special Factors - Plans For
Saratoga after the Merger; Conduct
of the Business of Saratoga if the
Merger is not Consummated," "-
Certain Effects of the Merger,"
"The Merger- Robin Prever
Employment Agreement," "-Robin
Prever Non-Competition Agreement,"
- "Stockholders Agreement,"
"Consulting Agreement," "- Voting
Agreement," "- Registration Rights
Agreement" and "Purchases of Common
Stock by and Other Transactions
with Certain Persons"
2
<PAGE>
ITEM NUMBER AND CAPTION IN
SCHEDULE 13E-3 LOCATION IN THE PROXY STATEMENT
4. TERMS OF THE TRANSACTION
(a) - (b) "Introduction," "Special Factors -
Certain Effects of the Merger," "-
Background of the Merger" and " -
Plans for Saratoga After the
Merger; Conduct of the Business of
Saratoga if the Merger is not
Consummated," "The Merger" and
"Certain Provisions of the Merger
Agreement"
5. PLANS OR PROPOSALS OF THE ISSUER
OR AFFILIATE
(a) - (g) "Special Factors - Certain Effects
of the Merger," "-Plans for
Saratoga After the Merger; Conduct
of the Business of Saratoga if the
Merger is not Consummated," "The
Merger" and "Certain Provisions of
the Merger Agreement"
6. SOURCE AND AMOUNTS OF FUNDS OR
OTHER CONSIDERATION
(a) - (d) "The Merger - Option Information,"
" - Merger Financing," and "Certain
Provisions of the Merger Agreement
- Fees and Expenses"
7. PURPOSE(S), ALTERNATIVES, REASONS
AND EFFECTS
(a) - (c) "Introduction," "Special Factors-
Certain Effects of the Merger," "-
Background of the Merger," "
Reasons for Saratoga for the
Merger; Fairness of the Merger" and
"- Plans For Saratoga after the
Merger; Conduct of the Business of
Saratoga if the Merger is not
Consummated"
(d) "Special Factors - Certain Effects
of the Merger," "- Recommendations
of the Special Committee and the
Board of Directors," " - Reasons
for Saratoga for the Merger;
Fairness of the Merger," "The
Merger - Material Federal Income
Tax Consequences," "- Accounting
Treatment of the Merger," "-
Interests of Certain Persons in the
Merger," "Certain Provisions of the
Merger Agreement - The Merger," "-
Merger Consideration," "- Surrender
and Payment" and "- The Surviving
Corporation"
3
<PAGE>
ITEM NUMBER AND CAPTION IN
SCHEDULE 13E-3 LOCATION IN THE PROXY STATEMENT
8. FAIRNESS OF THE TRANSACTION
(a) - (e) "Introduction," "Special Factors-
Background of the Merger," "-
Recommendations of the Special
Committee and the Board of
Directors," "- Reasons of Saratoga
for the Merger; Fairness of the
Merger," "- Opinion of Financial
Advisor to the Special Committee"
and Annex B to the Proxy Statement
-- Opinion of Schroder & Co. Inc.
(f) Not Applicable
9. REPORTS, OPINIONS, APPRAISALS AND
CERTAIN NEGOTIATIONS
(a) - (c)
"Special Factors- Background of the
Merger," "- Reasons for Saratoga
for the Merger; Fairness of the
Merger," "Recommendations of the
Special Committee and the Board of
Directors," "- Opinion of Financial
Advisor to the Special Committee"
and Annex B to the Proxy Statement
-- Opinion of Schroder & Co., Inc.
10. INTEREST IN SECURITIES OF THE ISSUER
(a) "The Merger - Interest of Certain
Persons in the Merger" "Security
Ownership of Certain Beneficial
Owners and Management"
(b) "Purchasers of Common Stock by and
Other Transactions with Certain
Persons"
11. CONTRACTS, ARRANGEMENTS OR
UNDERSTANDINGS WITH RESPECT
TO THE ISSUER'S SECURITIES "Summary" "Special Factors -
Background of the Merger," "The
Merger - Interest of Certain
Persons in the Merger," "-- Option
Information" " - Robin Prever
Employment Agreement," "- Robin
Prever Non-Competition Agreement,"
"Stockholders Agreement," "-
Consulting Agreement," "Voting
Agreement," "-- Registration Rights
Agreement," " Merger Financing,"
"Certain Provisions of The Merger
Agreement - Surrender and Payment "
and "Security Ownership of Certain
Beneficial Owners and Management"
4
<PAGE>
12. PRESENT INTENTION AND
RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE
TRANSACTION
(a) "The Merger - Interests of Certain
Persons in The Merger," "The
Special Meeting - Matters to be
Considered," " - Required Votes"
and " The Merger - Voting
Agreement"
(b) "Special Factors - Background of
the Merger, "Recommendations of the
Special Committee and the Board of
Directors," " -Background of the
Merger" and "-Reasons of Saratoga
for the Merger; Fairness of the
Merger"
13. OTHER PROVISIONS OF THE
TRANSACTION
(a) "The Special Meeting - Appraisal
Rights," "Dissenting Stockholders'
Rights," and Exhibit C - Rights of
Dissenting Stockholders Under
Delaware General Corporation Law
(b) Not Applicable
(c) Not Applicable
14. FINANCIAL INFORMATION
(a) "Incorporation of Certain Documents
by Reference"
(b) "Selected Historical Consolidated
Financial Data," "Unaudited Pro
Forma Condensed Consolidated
Financial Data"
15. PERSONS AND ASSETS EMPLOYED,
RETAINED OR UTILIZED
(a) - (b) "Special Factors- Background of the
Merger," "- Opinion of Financial
Advisor to the Special Committee,"
"The Special Meeting - Solicitation
of Proxies," "The Merger - Robin
Prever Employment Agreement," "-
Robin Prever Non-Competition
Agreement," "- Consulting
Agreement," "Certain Provisions of
the Merger Agreement -
Indemnification and Insurance," "
Fees and Expenses," "Independent
Auditors" and Annex B to the Proxy
Statement -- Opinion of Schroder
& Co., Inc.
5
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The Company is the issuer of the securities subject to this
Schedule 13E-3. The information set forth on the outside front Cover Page and in
the sections entitled "Summary" and "Saratoga" in the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in the sections entitled "Introduction,"
"Price of Class A Common Stock" and "The Special Meeting -- Record Date; Stock
Entitled to Vote; Quorum" in the Proxy Statement is incorporated herein by
reference.
(c)-(d) The information set forth in the section entitled "Price of
Class A Common Stock" in the Proxy Statement is incorporated herein by
reference.
(e) Not applicable.
(f) The information set forth in the section entitled "Purchases of
Common Stock by and Other Transactions with Certain Persons" in the Proxy
Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (d) and (g) This Statement is being filed by the Company and the
Filing Parties. The information set forth in the sections entitled "Summary,"
"Saratoga," "Purchaser" and "MergerCo" in the Proxy Statement is incorporated
herein by reference.
The following is certain information regarding the Company's
affiliates.
NCP-SBG Recapitalization Corp., a Delaware corporation ("MergerCo") is
wholly-owned by NCP-SBG L.P., a Delaware limited partnership (the "Purchaser").
The general partner of the Purchaser is NCP-SBG, G.P., L.L.C., a Delaware
limited liability company. The sole member of NCP-SBG G.P., L.L.C. is North
Castle Partners II, L.P., a Delaware limited partnership. The general partner of
North Castle Partners II, L.P. is NCP G.P. II, L.P., a Delaware limited
partnership. The general partner of NCP G.P. II, L.P. is North Castle G.P. II,
L.L.C., a Delaware limited liability company. The sole member of North Castle
G.P. II, L.L.C. is Charles F. Baird, Jr.
The address for all of the above entities is c/o North Castle Partners,
L.L.C., 60 Arch. Street, Greenwich, CT 06830.
6
<PAGE>
Charles F. Baird, Jr., a United States citizen, is currently the senior
managing member of North Castle Partners, L.L.C. where he has been a member
since its formation in May 1997. Prior to that, Mr. Baird served as managing
director of AEA Investors, Inc. a New York based private equity firm. From June
1992 to June 1996, Mr. Baird also served as chairman of PLI Holdings. His
business address is North Castle Partners, L.L.C., 60 Arch Street, Greenwich,
CT 06830.
The above mentioned Reporting Persons (other than Mr. Baird) are
private investment vehicles formed for the purpose of investing in transactions
arranged by North Castle Partners, L.L.C. ("North Castle Partners"). North
Castle Partners is a private investment firm specializing in acquisition
transactions. NCP-SBG L.P. was formed at the direction of North Castle Partners
to effect the proposed transactions described in Item 4 below and has not
engaged in any activities other than those incident to its formation and such
proposed transactions.
Robin Prever, a United States citizen, has been the President, Chief
Executive Officer and a director of the Company since April 1992. Her business
address is c/o Saratoga Beverage Group, Inc., 11 Geyser Road, Saratoga Springs,
New York 12866.
Steven Bogen, a United States citizen, has been a director of the
Company since January 29, 1999 concurrently with the Company's acquisition of
The Fresh Juice Company, Inc. ("Fresh Juice"). Mr Bogen was Co_Chairman of the
Board, Chief Executive Officer, and Secretary of Fresh Juice from April 1, 1996
to January 29, 1999. Chief Executive Officer of The Ultimate Juice Company, Inc.
("Ultimate Juice") from 1988 to January 29, 1999; Chairman of the Board of
Ultimate Juice from 1989 through March 31, 1996; Chairman of the Board of Clear
Springs Citrus, Inc. ("Clear Springs") from July 27, 1993 through August 31,
1996; President of Clear Springs from July 27, 1993 through March 11, 1994. His
business address is c/o Fresh Solutions, Inc., 280 Wilson Avenue, Newark, New
Jersey 07105 .
Warren Lichtenstein, a United States citizen, has been a director of
the Company since June 1994. Mr. Lichtenstein has been with Steel Partners II,
LP since 1990 as a Managing Partner. The business address of Mr. Lichtenstein is
c/o Steel Partners II, L.P., 750 Lexington Avenue, New York, New York 10022.
Steel Partners II, L.P. is a limited partnership organized in the state
of Delaware. Its address is 750 Lexington Avenue, New York, New York 10022.
(e)-(f) None of the Company or any of the Filing Parties, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations and similar misdemeanors) or been a party to a civil proceeding that
resulted in a judgment, decree or final order finding any violation of U.S. or
state securities laws or enjoining further violations of, or prohibiting
activities to, any such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) (1) The information set forth in the sections entitled "Special
Factors - Background of the Merger," "Certain Effects of the Merger," "The
Merger - Robin Prever Employment Agreement," "- Robin Prever Non-Competition
Agreement," "Stockholders Agreement," "- Consulting Agreement," "- Voting
Agreement," "- Registration Rights Agreement" and "Purchases of Common Stock by
and Other Transactions with Certain Persons" in the Proxy Statement is
incorporated herein by reference.
7
<PAGE>
(2) The information set forth in the sections entitled "Special Factors
- - Background of the Merger," "The Merger - Robin Prever Employment Agreement,"
"-Robin Prever Non-Competition Agreement," "- Stockholders Agreement," "-
Consulting Agreement," "- Voting Agreement," "Registration Rights Agreement" and
"Purchases of Common Stock by and Other Transactions with Certain Persons" in
the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Special
Factors- Plans For Saratoga after the Merger; Conduct of the Business of
Saratoga if the Merger is not Consummated," "- Certain Effects of the Merger,"
"The Merger - Robin Prever Employment Agreement," "- Robin Prever
Non-Competition Agreement," "- Stockholders Agreement," "- Consulting
Agreement," "- Voting Agreement," "Registration Rights Agreement" and "Purchases
of Common Stock by and Other Transactions with Certain Persons" in the Proxy
Statement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) - (b) The information set forth in the sections entitled
"Introduction," "Special Factors - Certain Effects of the Merger," "- Background
of the Merger," " - Plans for Saratoga after the Merger; Conduct of the Business
of Saratoga if the Merger is not Consummated," "The Merger" and "Certain
Provisions of the Merger Agreement" in the Proxy Statement is incorporated
herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) - (g) The information set forth in the sections entitled "Special
Factors - Certain Effects of the Merger," "-Plans for Saratoga after the Merger;
Conduct of the Business of Saratoga if the Merger is not Consummated," "The
Merger" and "Certain Provisions of the Merger Agreement" in the Proxy Statement
is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) - (d) The information set forth in the sections entitled "The
Merger - Option Information," "Merger Financing" and "Certain Provisions of the
Merger Agreement - Fees and Expenses" in the Proxy Statement is incorporated
herein by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) - (c) The information set forth in the sections entitled
"Introduction," "Special Factors - Certain Effects of the Merger," "- Background
of the Merger," " - Reasons of Saratoga for the Merger; Fairness of the Merger"
and "- Plans For Saratoga after the Merger; Conduct of the Business of Saratoga
if the Merger is not Consummated" in the Proxy Statement is incorporated herein
by reference.
(d) The information set forth in the sections entitled "Special Factors
- - Certain Effects of the Merger," "- Recommendations of the Special Committee
and the Board of Directors," " - Reasons for Saratoga for the Merger; Fairness
of the Merger," "The Merger Material Federal Income Tax Consequences," "-
Accounting Treatment of the Merger," "- Interests of Certain Persons in the
Merger," "Certain Provisions of the Merger Agreement - The Merger," "- Merger
Consideration," "- Surrender and Payment" and "- The Surviving Corporation" in
the Proxy Statement is incorporated herein by reference.
8
<PAGE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) - (e) The information set forth in the sections entitled
"Introduction," "Special Factors- Background of the Merger," "Recommendations of
the Special Committee and the Board of Directors," "- Reasons of Saratoga for
the Merger; Fairness of the Merger," "- Opinion of Financial Advisor to the
Special Committee" in the Proxy Statement and Annex B thereto, Opinion of
Schroder & Co., Inc. is hereby incorporated herein by reference.
(f) Not applicable
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in the sections entitled "Special
Factors- Background of the Merger," "- Reasons of Saratoga for the Merger;
Fairness of the Merger," "- Recommendations of the Special Committee and the
Board of Directors," and "Opinion of Financial Advisor to the Special Committee"
in the Proxy Statement and Annex B thereto, Opinion of Schroder & Co., Inc. is
hereby incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the sections entitled "The Merger -
Interests of Certain Persons in the Merger" and "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is hereby incorporated
herein by reference.
(b) The information set forth in the section entitled "Purchases of
Common Stock by and Other transactions with Certain Persons" is hereby
incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The information set forth in the sections entitled "Summary," "Special
Factors - Background of the Merger," "The Merger Interest of Certain Persons in
the Merger," "Option Information," " - Robin Prever Employment Agreement," "-
Robin Prever Non-Competition Agreement," - "Stockholders Agreement," "-
Consulting Agreement," "- Voting Agreement," "Registration Rights Agreement," "
- - Merger Financing," "Certain Provisions of the Merger Agreement - Surrender and
Payment" and "Security Ownership of Certain Beneficial Owners and Management" in
the Proxy Statement is hereby incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION.
(a) The information set forth in the sections entitled "The Merger -
Interests of Certain Persons in the Merger," "The Special Meeting - Matters to
be Considered," " - Required Votes" and " The Merger - Voting Agreements" in the
Proxy Statement is hereby incorporated herein by reference.
9
<PAGE>
(b) The information set forth in the sections entitled "Special
Factors- Background of the Merger," "- Recommendations of the Special Committee
and the Board of Directors" and "-Reasons of Saratoga for the Merger; Fairness
of the Merger" is hereby incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "The Special
Meeting - Appraisal Rights," "Dissenting Stockholders' Rights" and Annex C -
Rights of Dissenting Stockholders Under Delaware General Corporation Law in the
Proxy Statement is hereby incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION
(a) The information set forth in the section entitled "Incorporation of
Certain Documents by Reference" and "Selected Historical Consolidated Financial
Data" in the Proxy Statement is hereby incorporated herein by reference.
(b) The information set forth in the section entitled "Unaudited Pro
Forma Condensed Consolidated Financial Data" in the Proxy Statement is hereby
incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) - (b) The information set forth in the sections entitled "Special
Factors- Background of the Merger," "- Opinion of Financial Advisor to the
Special Committee," "The Special Meeting - Solicitation of Proxies," "The Merger
- - Robin Prever Employment Agreement," "- Robin Prever Non-Competition
Agreement," "- Consulting Agreement," "Certain Provisions of the Merger
Agreement Indemnification and Insurance," " - Fees and Expenses," "Independent
Auditors" and Annex B to the Proxy Statement, in the Proxy Statement is hereby
incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
Additional Information is set forth in the Proxy Statement and the
Exhibits thereto which is hereby incorporated herein by reference in its
entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
See attached Exhibit Index.
10
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF ITS KNOWLEDGE AND BELIEF, EACH OF
THE UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS
TRUE, COMPLETE AND CORRECT.
Dated: January 21, 2000 SARATOGA BEVERAGE GROUP, INC.
By: /s/ Kim A. James
---------------------------
Name: Kim A. James
Title: Chief Financial Officer
NCP-SBG RECAPITALIZATION CORP.
By: /s/ Peter J. Shabecoff
----------------------------
Name: Peter J. Shabecoff
Title: Vice President
NCP-SBG L.P.
By: NCP-SBG G.P., L.L.C.,
its general partner
By: /s/ Peter J. Shabecoff
----------------------------
Name: Peter J. Shabecoff
Title: Executive Vice President
NCP-SBG G.P., L.L.C.
By: /s/ Peter J. Shabecoff
----------------------------
Name: Peter J. Shabecoff
Title: Executive Vice President
NORTH CASTLE PARTNERS II, L.P.
By: NCP G.P. II, L.P., its
general partner
By: NORTH CASTLE G.P. II, L.L.C.
its general partner
By: /s/ Peter J. Shabecoff
----------------------------
Name: Peter J. Shabecoff
Title: Executive Vice President
NCP G.P. II, L.P.
By: NORTH CASTLE G.P. II, L.L.C.,
its general partner
By: /s/ Peter J. Shabecoff
----------------------------
Name: Peter J. Shabecoff
Title: Managing Director
11
<PAGE>
NORTH CASTLE G.P. II, L.L.C.
By: /s/ Peter J. Shabecoff
----------------------------
Name: Peter J. Shabecoff
Title: Managing Director
/s/ Charles F. Baird, Jr
--------------------------------
CHARLES F. BAIRD, JR.
/s/ Robin Prever
--------------------------------
ROBIN PREVER
/s/ Steven Bogen
--------------------------------
STEVEN BOGEN
/s/ Warren Lichtenstein
--------------------------------
WARREN LICHTENSTEIN
STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C.
General Partner
By: /s/ Warren Lichtenstein
----------------------------
Name: Warren Lichtenstein
Title: Chief Executive Officer
12
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
17(a)(1) Commitment Letter, dated as of January 5, 2000, made by North
Castle Partners II, L.P. to Saratoga Beverage Group, Inc. and
NCP-SBG, L.P.
17(a)(2) Commitment Letter, dated as of December 31, 1999, made by Bank of
America, N.A. and Banc of America Securities LLC to NCP-SBG
Recapitalization Corp.
17(a)(3) Commitment Letter, dated as of January 3, 2000, made by Key
Mezzanine Capital Fund L.L.P. to NCP-SBG Recapitalization Corp.
17(b)(1) Opinion of Schroder & Co. Inc., financial advisor to the Special
Committee of the Board of Directors of Saratoga Beverage Group,
Inc.*
17(b)(2) Presentation to the Special Committee to the Board of Directors
of Saratoga Beverage Group, Inc.
17(c)(1) Stock Purchase Agreement and Agreement and Plan of Merger, dated
as of January 5, 2000, by and among Saratoga Beverage Group,
Inc., NCP-SBG Recapitalization Corp. and NCP-SBG, L.P.*
17(c)(2) Form of Voting Agreements, dated as of January 5, 2000, by and
between NCP-SBG, L.P. and each of the other parties thereto.*
17(c)(3) Employment Agreement, dated as of January 5, 2000, by and between
Saratoga Beverage Group, Inc. and Robin Prever.
17(c)(4) Non-Competition Agreement, dated as of January 5, 2000, by and
between Saratoga Beverage Group, Inc. and Robin Prever.
17(c)(5) Stockholders Agreement, dated as of January 5, 2000, by and among
Saratoga Beverage Group, Inc. and the other parties thereto.
17(c)(6) Registration Rights Agreement, dated as of January 5, 2000, by
and among Saratoga Beverage Group, Inc. and the other parties
thereto.
17(c)(7) Consulting Agreement, dated as of January 5, 2000, by and between
Saratoga Beverage Group, Inc. and North Castle Partners, L.L.C.
17(d)(1) Preliminary Proxy Statement, Letter to Stockholders and Notice of
Special Meeting of Stockholders and Proxy Card (filed herewith).
17(e) Rights of Dissenting Stockholders Under the DGCL.*
*Incorporated by reference from the Proxy Statement, a copy of which is attached
hereto as Exhibit 17(d)(1).
<PAGE>
North Castle Partners II, L.P.
c/o North Castle Partners, L.L.C.
60 Arch Street, First Floor
Greenwich, CT 06830
January 5, 2000
CONFIDENTIAL
- ------------
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12366
Attn: Robin Prever
NCP-SBG, L.P.
c/o North Castle Partners, L.L.C.
60 Arch Street, First Floor
Greenwich, CT 06830
Investment in Saratoga Beverage Group, Inc.
-------------------------------------------
Dear Sirs:
Reference is hereby made to the Stock Purchase Agreement and
Agreement and Plan of Merger, dated as of the date hereof, among NCP-SBG, L.P.,
a Delaware limited partnership ("NCP-SBG"), Saratoga Beverage Group, Inc., a
Delaware corporation (the "Company"), and the other parties thereto (the "Merger
Agreement"; capitalized terms used herein without definition have the meanings
ascribed thereto in the Merger Agreement), pursuant to which NCP-SBG agrees to
acquire certain shares of the Company's common stock as of the Closing Date.
Subject to the terms and conditions of the Merger Agreement,
North Castle Partners II, L.P. ("North Castle") hereby commits to the Company
and NCP-SBG that it will provide $28,660,000 of equity financing to NCP-SBG
required to acquire the Purchased Shares for the Purchase Price pursuant to the
Merger Agreement, provided that North Castle shall provide up to an additional
$10 million in equity financing if the full amount of the debt financing
contemplated by either the letter, dated the date hereof, between the NCP-SBG
Recapitalization Corp., Bank of America, N.A. and Banc of
<PAGE>
America Securities, LLC or the letter dated, the date hereof, between
NCP-SBG Recapitalization Corp. and Key Mezzanine Capital Fund L.L.P. is not
available at the Effective Time.
This Letter Agreement and the commitment described herein
shall terminate upon the earlier of the consummation of the Stock Purchase and
the termination of the Merger Agreement in accordance with its terms. Upon any
such termination of this Letter Agreement, any obligations hereunder will
terminate and neither party shall have any liability whatsoever to the other
party, except for any liability arising out of any breach hereof occurring prior
to such termination.
This Letter Agreement may not be assigned or otherwise
transferred to any other person without the prior written consent of the
undersigned. The terms of this Letter Agreement may not be modified or otherwise
amended, or waived, except pursuant to a written agreement signed by NCP-SBG,
the Company and the undersigned. This Letter Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the conflict of laws rules thereof to the extent that such
rules would require or permit the application of the laws of another
jurisdiction. This Letter Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one instrument.
North Castle acknowledges that a copy of this Letter Agreement
may be filed as an exhibit to the Schedule 13E-3 and that the material terms and
conditions of this Letter Agreement may be described in the Proxy Statement.
Very truly yours,
NORTH CASTLE PARTNERS II, L.P.
By: NCP G.P. II, L.P.,
its General Partner
By: North Castle GP II, L.L.C.,
its General Partner
By: /s/ Peter Shabecoff
---------------------------
Name: Peter Shabecoff
Title: Managing Director
<PAGE>
Acknowledged and agreed upon as of the date first above written:
NCP-SBG, L.P.
By: NCP-SBG, L.L.C.,
its General Partner
By: /s/ Peter Shabecoff
-------------------------------
Name: Peter Shabecoff
Title: Executive Vice President
SARATOGA BEVERAGE GROUP
By: /s/ Kim James
------------------------------
Name: Kim James
Title: Chief Financial Officer
<PAGE>
December 31, 1999
NCP-SBG Recapitalization Corp.
c/o North Castle Partners, L.L.C.
275 Battery Street, Suite 2160
San Francisco, CA 94111
Attention: Peter Shabecoff
Re: $30,000,000 Senior Secured Credit Facilities
--------------------------------------------
Dear Mr. Shabecoff:
You have advised us that Saratoga Beverage Group, Inc., a
Delaware corporation (the "Company"), intends to consummate a transaction (the
"Transaction") in which North Castle Partners, L.L.C. (the "Sponsor"), certain
members of management and other stockholders of the Company and certain
affiliates of the Sponsor and other parties arranged by the Sponsor
(collectively with the Sponsor, the "Investors") will acquire control of the
Company by means of a leveraged recapitalization, in which an entity to be
formed by the Investors would purchase newly issued shares in the Company and
immediately thereafter you, a newly-formed transitory merger company
("Mergerco"), indirectly owned by the Investors, would merge (the "Merger") with
the Company, with the Company as the surviving corporation. At the effective
time of the Merger (the "Merger Effective Date"), shares of common stock of the
Company (other than shares owned by the Investors and certain members of
management and other stockholders of the Company and other Investors
satisfactory to us (the "Rollover Stockholders"), which would remain
outstanding) would be converted into the right to receive $6.00 in cash per
share of common stock of the Company. Following the Merger, the Investors and
the Rollover Stockholders will own approximately 90% and 10% of the Company,
respectively. References herein to "you" and the "Borrower" shall mean Mergerco
prior to any assignment of Mergerco's rights and obligations hereunder (and
under the related Fee letter) to the Company occurring on or prior to the Merger
Effective Date and the Company from and after any such assignment.
We understand that the funding required to effect the
Transaction and to pay related fees and expenses in connection therewith shall
be approximately $63,960,000 and shall be provided solely from (i) at least
$31,960,000 from the issuance by the Company of equity (the "New Equity
Issuance") to the Investors, to management and other stockholders of the Company
<PAGE>
NCP-SBG Recapitalization Corp.
December 31, 1999
Page 2
and to other investors satisfactory to us (of which at least $28,660,000 shall
be in cash and $3,300,000 in management and other stockholder equity rollover),
(ii) at least $10,000,000 in cash from the issuance by the Borrower of senior
subordinated notes (the "Senior Subordinated Notes") and (iii) the incurrence by
the Borrower of the senior secured bank financing described below.
We further understand that up to $30,000,000 of senior secured
credit facilities (collectively, the "Senior Credit Facilities") may be required
by the Borrower (i) to provide funds required for the Transaction, (ii) to pay
certain transaction fees and expenses in connection with the Transaction of
approximately $3,875,000, (iii) to provide funds to refinance certain
indebtedness of the Company outstanding on the date of the consummation of the
Merger (the "Closing") in an aggregate principal amount of approximately
$19,910,000 and (iv) after the Closing, to provide for working capital and other
general corporate purposes of the Company and its subsidiaries. We understand
that no more than $22,000,000 of the Senior Credit Facilities is expected to be
funded at the Closing. The Senior Credit Facilities will be comprised of (i) an
$8,000,000 revolving credit facility and (ii) a $22,000,000 term loan facility.
Attached as Annex I hereto is a Summary of Principal Terms and Conditions (the
"Term Sheet") setting forth the principal terms and conditions on which we are
willing to arrange the Senior Credit Facilities and to make our portion of the
Senior Credit Facilities available. All capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Term Sheet. We further
understand that, except as described above, no external financing will be
required to effect the Transaction.
In connection with the foregoing, Bank of America, N.A. ("Bank
of America" or the "Agent") is pleased to advise you that, subject to the terms
and conditions set forth herein and in the Term Sheet, it (i) commits to provide
the Senior Credit Facilities and (ii) will act as Agent for the syndicate of
financial institutions (the "Lenders") party to the Senior Credit Facilities.
Banc of America Securities LLC ("BAS" or the "Arranger") is pleased to advise
you of its commitment, as sole Lead Arranger, Book Manager and Syndication Agent
for the Senior Credit Facilities, to form a syndicate of financial institutions
reasonably acceptable to you for the Senior Credit Facilities. To carry out our
commitment, we reserve the right to engage the services of BAS and other of our
affiliates to furnish the services contemplated hereby and to allocate any fees
payable to us as we and our affiliates may agree in our sole discretion.
Bank of America reserves the right, prior to or after the
execution of definitive credit documentation for the Senior Credit Facilities,
to syndicate all or a part of its commitments hereunder to one or more financial
institutions that will become Lenders party to the Senior Credit Facilities.
Bank of America will act as sole and exclusive agent for the Senior Credit
Facilities, and BAS will act as sole and exclusive Lead Arranger, Book Manager
and Syndication Agent for the Senior Credit Facilities. No additional agents
will be appointed, and no other titles will be awarded, without the prior
written approval of Bank of America and BAS.
You agree actively to assist Bank of America and BAS in
achieving a syndication of the Senior Credit Facilities that is satisfactory to
us and you. Syndication of the Senior Credit Facilities will be accomplished by
a variety of means, including direct contact during the
<PAGE>
NCP-SBG Recapitalization Corp.
December 31, 1999
Page 3
syndication between senior management and advisors of the Sponsor and the
Company and the proposed Lenders. To assist us in the syndication efforts, you
hereby agree (i) to provide and cause your advisors to provide Bank of America,
BAS and the other proposed Lenders upon request with all information reasonably
deemed necessary by us to complete syndication, including, without limitation,
historical financial information, projections and other evaluations prepared by
the Sponsor, the Company and its subsidiaries and their respective advisors, or
on their behalf, (ii) to assist us upon our reasonable request in the
preparation of an information package (the "Information Memorandum") for
delivery to potential syndicate members and participants and (iii) otherwise to
assist us in our syndication efforts, including making officers and advisors of
the Sponsor, the Company and its subsidiaries available to attend and make
presentations regarding the business and prospects of the Company and its
subsidiaries at one or more meetings of potential syndicate members at such
times and places as we may reasonably request. You further agree to refrain from
engaging in any additional financings for Mergerco or the Company, other than
the New Equity Issuance and the Senior Subordinated Notes during such
syndication process unless otherwise agreed to by us in writing.
It is understood and agreed that Bank of America and BAS, in
consultation with you, will arrange and control all aspects of the syndication,
including decisions as to the selection of proposed Lenders and any titles
offered to them, when commitments will be accepted and the final allocations of
the commitments among the Lenders. It is understood and agreed that no Lender
will receive compensation from you or on your behalf outside the terms contained
herein, in the Term Sheet or in the Fee Letter (as defined below) in order to
obtain its commitment to participate in the Senior Credit Facilities. It is also
understood and agreed that the amount and distribution of the fees among the
other Lenders will be at the sole discretion of Bank of America and BAS and that
any syndication prior to the execution of definitive documentation will reduce
the commitments of Bank of America.
Bank of America's and BAS' obligations hereunder are
conditioned on the existence of no material misstatements in or omissions from
the materials and information, taken as a whole, which have previously been or
will be furnished to Bank of America and BAS with respect to the Company and the
Transaction, and on Bank of America's and BAS' confirmation that the Sponsor has
performed appropriate due diligence with respect to the Company, the Transaction
and the transactions contemplated hereby. Bank of America's and BAS'
confirmatory due diligence with respect to materials and information which has
previously been furnished to them prior to the date hereof is complete. In the
event their confirmatory due diligence with respect to materials and information
which have not yet been furnished to them discloses information relating to
conditions or events not previously disclosed to Bank of America or BAS or
relating to new information or additional developments concerning conditions or
events previously disclosed to Bank of America or BAS which Bank of America and
BAS in good faith believe could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), assets, properties,
business or operations of the Company and its subsidiaries taken as a whole
(prior to and after giving effect to the Transaction) or on the feasibility of
the Transaction or the financing thereof, Bank of America and BAS each may, in
their sole discretion, suggest alternative financing amounts or structures that
ensure adequate
<PAGE>
NCP-SBG Recapitalization Corp.
December 31, 1999
Page 4
protection for the Lenders or decline to participate in the Senior Credit
Facilities. Neither of Bank of America nor BAS shall be responsible or liable
for any consequential or special damages which may be alleged as a result of
their failure to provide or arrange the Senior Credit Facilities.
The obligations of Bank of America and BAS hereunder are
subject to the satisfaction of each of the terms and conditions set forth
herein, each of the terms and conditions set forth in the Term Sheet and each of
the following conditions precedent in a manner acceptable to each of them:
(i) execution and delivery by Mergerco and the
Company of a definitive Merger Agreement and other documentation
relating to the Transaction, all in form and substance satisfactory to
each of Bank of America and BAS in their sole discretion
(collectively, the "Merger Agreement"), which shall include, without
limitation, conditions to the effect that any "poison pill" or similar
security or contractual arrangement of the Company, any Delaware
provisions restricting the ability of Mergerco or the Company to
effect the Merger and other provisions of law or contract which might
materially impede or delay the Merger or otherwise materially
adversely affect the Transaction or the parties to the Transaction
shall have been effectively rendered inapplicable to the Merger and
the Transaction;
(ii) all documents and materials publicly filed
with respect to the Merger shall be reasonably acceptable to Bank of
America and BAS;
(iii) a sufficient number of shares of common stock
of the Company shall have been voted in favor of the Transaction as
shall be required under applicable law and the Company's certificate
of incorporation and by-laws to effect the Merger;
(iv) execution and delivery of a fee letter (the
"Fee Letter") by each of Mergerco, Bank of America and BAS prior to or
concurrently with the acceptance by Mergerco of this commitment letter
(this "Commitment Letter");
(v) the negotiation, execution and delivery prior
to May 31, 2000 of definitive documentation with respect to the Senior
Credit Facilities consistent with this Commitment Letter, the Term
Sheet and the Fee Letter and containing such other indemnities,
covenants, representations and warranties, events of default,
conditions precedent, security arrangements and other terms and
conditions as shall be satisfactory to each of Bank of America and BAS
in their sole discretion;
(vi) there not having occurred or become known
since the date hereof any material adverse change in, or a material
disruption of, financial, banking or capital markets conditions or in
the market for syndicated bank credit facilities, in each case as
determined by Bank of America and BAS, in the sole discretion of each;
<PAGE>
NCP-SBG Recapitalization Corp.
December 31, 1999
Page 5
(vii) there shall not have occurred since December
31, 1998 any material adverse change with respect to the Transaction
or in the condition (financial or otherwise), results of operations,
properties, assets, business, material business relationships,
management, material relationships or projected revenues or cashflows
of the Company and its consolidated subsidiaries, taken as a whole,
and there shall exist no conditions, events or occurrences that,
individually or in the aggregate, would reasonably be expected to
result in such a material adverse change; and
(viii) Consolidated EBITDA of the Company for the
fiscal year ending December 31, 1999 (based on audited financial
statements and adjusted to reflect an additional one month of EBITDA
of The Fresh Juice Company, Inc. in an amount not exceeding $475,000)
("Consolidated Adjusted EBITDA") shall be at least $5,000,000, all
proposed adjustments (which shall not exceed $1,487,000 in the
aggregate) to Consolidated Adjusted EBITDA of the Company shall be
satisfactory to Bank of America and BAS and neither of Bank of America
nor BAS shall have discovered any information with respect to the
Company and its subsidiaries which is inconsistent in a material and
adverse manner with information (including projections and other
financial information) supplied by you.
The obligations of Bank of America and BAS hereunder are also
subject to, among other conditions contained herein and in the Term Sheet, their
reasonable satisfaction that (i) the Company and its subsidiaries are taking all
necessary and appropriate steps to ascertain the extent of, and to quantify and
successfully address, all business and financial risks facing the Company or any
of its subsidiaries as a result of what is commonly referred to as the "Year
2000 Problem" (i.e., the inability of certain computer applications to recognize
correctly and perform date-sensitive functions involving certain dates prior to,
including and after December 31, 1999), including risks resulting from the
failure of key vendors and suppliers of the Company and any of its subsidiaries,
and the Company and its subsidiaries to successfully address the Year 2000
Problem and (ii) the Company's and its subsidiaries' material computer
applications and those of its key vendors and suppliers will, on a timely basis,
adequately address the Year 2000 Problem in all material respects.
To induce Bank of America and BAS to issue this Commitment
Letter and to continue with their due diligence efforts and as consideration for
the agreements of Bank of America and BAS hereunder, including, without
limitation, their respective agreements to underwrite, manage, structure and
syndicate the Senior Credit Facilities and to provide advisory services in
connection with the syndication, you agree to pay to Bank of America and BAS the
fees set forth in the Term Sheet and the Fee Letter. You agree that, once paid,
such fees shall not be refundable under any circumstances. All such fees shall
be paid in immediately available funds. You further agree that all out-of-pocket
expenses of Bank of America and BAS (including the fees and disbursements of
McGuire, Woods, Battle & Boothe LLP, counsel for Bank of America and BAS) in
connection with their investigation of the Company and its subsidiaries, the
syndication of the Senior Credit Facilities and the preparation, execution and
delivery of this Commitment Letter, the Fee Letter, the Term Sheet and all
definitive financing
<PAGE>
NCP-SBG Recapitalization Corp.
December 31, 1999
Page 6
agreements and closing documents shall be for your account if the Transaction is
consummated and the Senior Credit Facilities are made available. You further
agree to indemnify and hold harmless Bank of America, BAS and their respective
affiliates and each director, officer, employee, counsel and agent thereof (each
an "Indemnified Person") from and against any and all actions, suits,
proceedings (including any investigations or inquiries), claims, losses,
damages, liabilities or expenses of any kind or nature whatsoever which may be
incurred by or asserted against or involve Bank of America, BAS or any such
Indemnified Person as a result or arising out of or in any way related to or
resulting from this Commitment Letter or the transactions contemplated hereby
and, upon demand, to pay and reimburse Bank of America, BAS and each Indemnified
Person for any legal or other out-of-pocket expenses incurred in connection with
investigating, defending or preparing to defend or participate in any such
action, suit, proceeding (including any inquiry or investigation) or claim
(whether or not Bank of America, BAS or such Indemnified Person is a party to
any action or proceeding out of which any such expenses arise, and whether any
such action, suit or proceeding is between you, the Sponsor, the Company and
Bank of America, BAS or an Indemnified Person or between Bank of America and/or
BAS and an Indemnified Person and a third person or otherwise); provided,
however, that you shall not have to indemnify any Indemnified Person against any
loss, claim, damage, expense or liability to the extent such is found by a final
decision of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of any Indemnified Person. You agree that no
Indemnified Person shall have any liability to you or to your subsidiaries or
affiliates or to your or their respective security holders or creditors for any
indirect, consequential or special damages arising out of, relating to or in
connection with the Transaction or any matter contemplated by this Commitment
Letter or the Term Sheet.
The provisions of the immediately preceding paragraph shall
remain in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or the obligations of Bank of America or
BAS hereunder.
By your acceptance of this Commitment Letter, you represent,
warrant and covenant that no written information and no information (written or
otherwise) which has been or is hereinafter made available to Bank of America,
BAS or the other Lenders by the Sponsor, the Company and any of its
subsidiaries, or by any of their respective representatives or advisors,
including any information given at information meetings for potential syndicate
members (collectively, the "Information"), in connection with the transactions
contemplated hereby contained (or, in the case of information furnished after
the date hereof, will contain) as of the time it was furnished (or is furnished)
any material misstatement of fact or omitted (or will omit) as of such time to
state any material fact necessary to make the statements therein, in light of
the circumstances in which they were (or will be) made, not misleading; provided
that, with respect to Information consisting of statements, estimates and
projections regarding the future performance of the Company and its subsidiaries
(collectively, the "Projections"), no representation or warranty is made other
than that the Projections have been (or will be) prepared by you or your
representatives in good faith. You agree to furnish, or cause the Company to
furnish, us with such Information and Projections and other information as we
may reasonably
<PAGE>
NCP-SBG Recapitalization Corp.
December 31, 1999
Page 7
request and to supplement the Information and the Projections from time to time
until the Closing, so that the representations and warranties in the preceding
sentence are true and correct on and as of the date of Closing. In arranging and
syndicating the Senior Credit Facilities, Bank of America and BAS will use and
rely on the Information and the Projections without independent verification
thereof.
Except as required by applicable law or judicial process, this
Commitment Letter and the Term Sheet and the contents hereof and thereof shall
not be disclosed by you to any third party without the prior consent of each of
Bank of America and BAS, other than on a confidential basis to your affiliates,
officers, directors, employees, attorneys and accountants and to the Company and
its officers, directors, employees, attorneys, accountants and financial
advisors, in each case to the extent necessary in your reasonable judgment;
provided that each of such persons shall also be bound by the confidentiality
provisions hereof. Bank of America and BAS acknowledge that copies of this
Commitment Letter and the Term Sheet (but not the Fee Letter) may be filed as
exhibits to the transaction statement on Schedule 13E-3 filed with the
Securities and Exchange Commission in connection with the Transaction and that
the material terms and conditions of this Commitment Letter and the Term Sheet
(but not the Fee Letter) may be described in the Proxy Statement for the
Transaction. Except as required by applicable law or judicial process, the Fee
Letter and the contents thereof shall not be disclosed by you to any third party
without the prior consent of Bank of America and BAS, other than on a
confidential basis to the Company and its and officers, directors, employees,
attorneys and accountants; provided that each of such persons shall also be
bound by the confidentiality provisions hereof. The content of any public
announcements made after the date hereof relating to the Senior Credit
Facilities is subject to Bank of America's and BAS's prior consent, such consent
not to be unreasonably withheld or delayed, before any such announcement is
made.
Bank of America reserves the right to allocate, in whole or in
part, to BAS certain fees payable to Bank of America in such manner as Bank of
America and BAS agree in their sole discretion. You acknowledge and agree that
each of Bank of America and BAS may share with any or their respective
affiliates and with any employee of either of Bank of America or BAS or their
affiliates (and their professional advisors) who are involved in the negotiation
and execution of definitive documentation relating to, and the consummation of
the transactions contemplated by, this Commitment Letter and the Term Sheet, any
information relating to the Senior Credit Facilities, the Transaction, the
Sponsor, the other Investors, the Company and the subsidiaries and affiliates
thereof.
This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement. Delivery of an executed counterpart of
the signature page of this Commitment Letter by facsimile transmission shall be
effective as delivery of a manually executed counterpart thereof. This
Commitment Letter, together with the Term Sheet and the Fee Letter, embodies the
entire agreement and understandings among Bank of America, BAS and you with
respect to the specific matter set forth herein and supersedes all prior
agreements and understanding related to the subject matter hereof. No party has
been authorized by Bank of America or BAS to make
<PAGE>
NCP-SBG Recapitalization Corp.
December 31, 1999
Page 8
any oral or written statements inconsistent with this Commitment Letter. This
Commitment Letter may not be amended nor may any provision hereof be waived or
modified except by an instrument in writing signed by Bank of America, BAS and
you. Except for the assignment by you to the Company on or prior to the Merger
Effective Date, this Commitment Letter may not be assigned by you without the
prior written consent by Bank of America and BAS (and any purported assignment
without such consent shall be void). Each of us hereby irrevocably waives any
right to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to this Commitment
Letter, the Term Sheet, the Fee Letter or the transactions contemplated hereby
and thereby or the actions of Bank of America or BAS in connection with the
negotiation, performance and enforcement hereof and thereof. THIS COMMITMENT
LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE
GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF
LAW PRINCIPLES. YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS COMMITMENT
LETTER OR ANY MATTERS CONTEMPLATED HEREBY.
The commitments of Bank of America and BAS set forth herein
will terminate at 5:00 p.m., Eastern time, on January 6, 2000 unless you execute
this Commitment Letter and the Fee Letter and return them to us prior to that
time (which may be by facsimile transmission), whereupon this Commitment Letter
and the Fee Letter shall become binding agreements. Following acceptance by you,
this undertaking and commitment will expire on the earlier to occur of (i) the
closing of the Transaction without the use of the Senior Credit Facilities, (ii)
the acceptance by the Sponsor, the Company or any of their respective affiliates
of an offer for all or any substantial part of the capital stock or assets of
the Company and/or its subsidiaries other than the offer contemplated hereby and
(iii) May 31, 2000 unless definitive documentation for the Senior Credit
Facilities is executed and delivered prior to such date.
Any brokerage commissions or finders' fees payable in
connection with the Transaction shall be payable by you, and you agree to
indemnify Bank of America and BAS and hold them harmless from any against any
such commissions.
We are pleased to have been given the opportunity to assist
you in connection with this transaction.
[The remainder of this page is intentionally left blank.]
<PAGE>
Very truly yours,
BANK OF AMERICA, N.A.
By: /s/ Yousuf Omar
----------------------------------
Name: Yousuf Omar
Title: Managing Director
BANC OF AMERICA SECURITIES LLC
By: /s/ Yousuf Omar
----------------------------------
Name: Yousuf Omar
Title: Managing Director
Agreed to and accepted this 5th
------
day of January, 2000
NCP-SBG RECAPITALIZATION CORP.
By: /s/ Peter J. Shabecoff
------------------------------------
Name: Peter J. Shabecoff
Title: Vice President
<PAGE>
ANNEX 1 to
Commitment Letter
SARATOGA BEVERAGE GROUP, INC. - ACQUISITION FACILITY
$30,000,000 SENIOR SECURED CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS & CONDITIONS
RECAPITALIZATION: Saratoga Beverage Group, Inc. (the
"Company") intends to consummate a
transaction (the "Transaction") in which
North Castle Partners, L.L.C. (the
"Sponsor"), certain members of management
and other stockholders of the Company and
certain affiliates of the Sponsor and other
parties arranged by the Sponsor
(collectively with the Sponsor, the
"Investors") will acquire by means of a
leveraged recapitalization, in which an
entity to be formed by the Investors would
purchase newly issued shares in the Company
and immediately thereafter NCP-SBG
Recapitalization Corp., a Delaware
corporation and a newly-formed transitory
merger company ("Mergerco"), indirectly
owned by the Investors, would merge (the
"Merger") with the Company, with the Company
as the surviving corporation. At the
effective time of the Merger (the "Merger
Effective Date"), shares of common stock of
the Company (other than shares owned by the
Investors and certain members of management
and other stockholders of the Company and
other Investors satisfactory to us (the
"Rollover Stockholders"), which would remain
outstanding) would be converted into the
right to receive $6.00 in cash per share of
common stock of the Company. Following the
Merger, the Investors and the Rollover
Stockholders will own approximately 90% and
10% of the Company, respectively. A credit
agreement and ancillary collateral
documentation providing for the Senior
Credit Facilities described below (the
"Credit Documentation") will be executed by
the Company and the Lenders referred to
below (the date of such execution and
delivery, the "Closing Date") simultaneously
with the Merger Effective Date, but the
initial extensions of credit thereunder
shall not be made until the Merger Effective
Date. From and after the Merger Effective
Date, the Company will succeed by operation
of law and pursuant to the terms of an
acknowledgement agreement satisfactory to
the Lenders to all obligations of Mergerco
under the Credit Documentation. The
Transaction will be consummated in such a
manner as to qualify for recapitalization
accounting treatment. The approximate
sources and uses of funds necessary to
consummate the Transaction are set forth in
Addendum II to this Term Sheet.
BORROWER: The Company.
<PAGE>
AGENT: Bank of America, N.A. (the "Agent" or "Bank
of America") will act as sole and exclusive
administrative agent and collateral agent.
As such, Bank of America will negotiate with
the Borrower, act as the primary contact for
the Borrower and perform all other duties
associated with the role of exclusive agent.
No other agents or co-agents may be
appointed without the prior written consent
of BAS (as defined below) and Bank of
America.
ARRANGER: Banc of America Securities LLC ("BAS") will
act as sole Lead Arranger, Book Manager and
Syndication Agent.
LENDERS: Bank of America and/or a syndicate of
financial institutions, arranged by BAS,
which institutions will be reasonably
acceptable to the Borrower (collectively,
the "Lenders").
SENIOR CREDIT
FACILITIES: An aggregate principal amount of up to
$30,000,000 will be available under the
conditions hereinafter set forth:
Revolving Credit Facility: $8,000,000
revolving credit facility, which will
include (i) a sublimit to be determined for
the issuance of standby and commercial
letters of credit (each a "Letter of
Credit") and (ii) a sublimit for swingline
loans ("Swingline Loans") in an amount to be
determined. Letters of Credit will be issued
by Bank of America (in such capacity, the
"Fronting Bank"), and Swingline Loans will
be made available by Bank of America (in
such capacity, the "Swingline Lender"). Each
Lender will purchase, pro rata according to
its respective revolving commitment, an
irrevocable and unconditional participation
in each Letter of Credit.
Term Loan Facility: $22,000,000 term loan
facility, any unborrowed amount of which
shall not be available after the Merger
Effective Date.
The Term Loan Facility and the Revolving
Credit Facility are referred to herein
collectively as the "Senior Credit
Facilities." The aggregate principal amount
of the Loans borrowed on the Merger
Effective Date shall not exceed $22,000,000.
SWINGLINE OPTION: Swingline Loans will be made available by
the Swingline Lender on a same day basis, in
minimum amounts of $100,000. The Swingline
Lender may, in its sole discretion, require
a mandatory borrowing of Revolving Loans to
repay outstanding Swingline Loans. Each
Lender will agree to provide its pro-rata
share of Revolving Loans if so required by
the Swingline Lender, regardless of the
existence of any
-2-
<PAGE>
default or event of default or the
inaccuracy of any representation or
warranty.
PURPOSE: A portion of the proceeds of the Senior
Credit Facilities will be used (i) to make
the cash payments to holders of the
Company's outstanding common stock, options
and convertible securities as required under
the merger agreement and other documentation
relating to the Transaction (collectively,
the "Transaction Documentation") for
aggregate consideration of approximately
(but not exceeding) $36,125,000, (ii) to
provide funds required to refinance certain
existing indebtedness of the Company in an
aggregate principal amount of not more than
approximately $19,910,000 outstanding as of
the Merger Effective Date, (iii) to pay
certain fees and expenses incurred in
connection with the Transaction of
approximately $3,875,000 and (iv) after the
Merger Effective Date, for working capital
and other general corporate purposes of the
Company and its subsidiaries. The
approximate sources and uses for the
Transaction are set forth on Addendum II to
this Term Sheet.
INTEREST RATES, FEES
AND EXPENSES: As set forth on Addendum I to this Term
Sheet.
AVAILABILITY: Revolving Credit Facility: Loans under the
Revolving Credit Facility ("Revolving
Loans") (including Swingline Loans) may be
made and Letters of Credit may be issued, on
a revolving basis, at any time after the
Merger Effective Date and prior to maturity,
provided that the outstanding principal
amount of the Revolving Loans, Swingline
Loans and the Letter of Credit Exposure (as
defined below) shall not exceed the lesser
of $8,000,000 and the Borrowing Base. The
"Borrowing Base" shall be an amount equal to
the sum of 85% of eligible receivables of
the Company and 60% of eligible inventory of
the Company valued at the lesser of cost or
fair market value. Letters of Credit may be
issued under the Revolving Credit Facility,
subject to the terms hereof, at any time
prior to, and shall expire no later than,
five business days prior to the final
maturity of the Revolving Credit Facility.
Amounts repaid under the Revolving Credit
Facility may be reborrowed.
"Letter of Credit Exposure" means an amount
equal to the sum of (i) the aggregate
undrawn amount of all outstanding Letters of
Credit and (ii) the total amount of any
unreimbursed drawings on Letters of Credit.
Term Loan Facility: Loans under the Term
Loan Facility (the "Term Loans") will be
available in a single borrowing on the
Merger
-3-
<PAGE>
Effective Date. Amounts repaid under the
Term Loan Facility may not be reborrowed.
MATURITY/SCHEDULED
AMORTIZATION: Revolving Credit Facility: The Revolving
Credit Facility will terminate and all
amounts outstanding thereunder will be due
and payable in full on June 30, 2005.
Term Loan Facility: The Term Loan Facility
will be subject to quarterly amortization
commencing December 31, 2000 in the amounts
as set forth below with the final payment of
all amounts outstanding being due and
payable on June 30, 2005.
--------------- ----------------
CALENDAR TERM LOAN
YEAR FACILITY
--------------- ----------------
2000 500,000
--------------- ----------------
2001 2,375,000
--------------- ----------------
2002 3,625,000
--------------- ----------------
2003 4,750,000
--------------- ----------------
2004 5,750,000
--------------- ----------------
2005 5,000,000
--------------- ----------------
GUARANTORS: The Senior Credit Facilities will be
irrevocably and unconditionally guaranteed
by all of the existing or subsequently
acquired or organized domestic subsidiaries
(direct or indirect) of Mergerco and,
following the Merger Effective Date, of the
Company. To the extent, and for so long as,
the guaranty by any foreign subsidiary would
not have adverse tax consequences for the
Borrower, all foreign subsidiaries of the
Borrower will also guarantee the obligations
of the Borrower. All guarantees will be
guarantees of payment and not of collection.
COLLATERAL: The Agent (on behalf of the Lenders) will
receive a first priority perfected security
interest in 100% of the capital stock of
each of the existing or subsequently
acquired or organized subsidiaries (direct
or indirect) of the Borrower (including
subsidiaries of the Borrower from and after
the Merger Effective Date) (which pledge, in
the case of any foreign subsidiary, will be
limited to 65% of the capital stock of such
foreign subsidiary to the extent, and for so
long as, the pledge of any greater
percentage would have adverse tax
consequences for the Borrower). Such capital
stock will not be subject to any other lien
or
-4-
<PAGE>
encumbrance. The Agent (on behalf of the
Lenders) also will receive a perfected
security interest in substantially all
present and future assets and properties of
the Borrower and any domestic subsidiary of
the Borrower (including, without limitation,
accounts receivable, inventory, owned and
leased real property, machinery, equipment,
other fixed assets, contracts (including the
Transaction Documents), trademarks,
copyrights, patents, license agreements,
other intellectual property and general
intangibles). The security interest
described above will be subject to certain
agreed upon liabilities and encumbrances of
the Borrower and its subsidiaries.
All the above-described pledges and security
interests will be created on terms, and
pursuant to customary documentation,
reasonably satisfactory to the Agent. The
Agent's lien on the Collateral will have a
first priority and, except as described
above, will not be subject to any other
pledges or security interests. The priority
of the lien and security interest of the
Agent shall be supported by such landlord,
vendor/supplier and mortgagee waivers,
warehousemen and bailee letters, third party
consents, intercreditor agreements and other
agreements as shall be requested by the
Agent, but only to the extent the same can
be obtained by the Borrower using
commercially reasonable efforts, in each
case in form and substance satisfactory to
the Agent.
The Collateral will ratably secure the
Senior Credit Facilities and any interest
rate swap or similar agreements with a
Lender or affiliate of a Lender.
MANDATORY
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: In addition to the Scheduled Amortization
set forth above, the Senior Credit
Facilities will be prepaid by an amount
equal to: (i) 100% of the net cash proceeds,
including certain insurance and condemnation
proceeds, of all asset sales or other
dispositions of property by the Borrower or
any of its subsidiaries (including sales of
stock of subsidiaries), subject to de
minimus baskets and reinvestment provisions
to be agreed upon and net of selling
expenses and taxes to the extent such taxes
are paid; (ii) 75% (if ratio of Consolidated
Funded Debt (to be defined in the loan
documentation) to Consolidated EBITDA of the
Company for the most recent four quarter
period (the "Leverage Ratio")) is equal to
or greater than 5.93 to 1.0) or 50% (if the
Leverage Ratio is less than 5.93 to 1.0) of
Excess Cash Flow (to be defined in the loan
documentation) pursuant to an annual cash
sweep arrangement; (iii) 100% of the net
cash
-5-
<PAGE>
proceeds from the issuance of any debt by
the Borrower or any of its subsidiaries
(other than permitted debt to be agreed
upon); and (iv) 100% of the net cash
proceeds from specified issuances of equity
by the Borrower or any of its subsidiaries.
Mandatory prepayments will be applied,
first, to reduce the Term Loans on a pro
rata basis; and second, to reduce the
Revolving Loans or cash collateralize any
outstanding Letters of Credit. Amounts so
allocated to the Term Loans will be applied
pro-rata with respect to each remaining
installment of principal.
If the Term Loan Facilities shall have been
fully repaid, the mandatory prepayments
described above shall be applied to the
Revolving Credit Facility (without any
corresponding commitment reductions. In
addition, if the aggregate outstanding
principal amount of Revolving Loans and
Swingline Loans and the Letter of Credit
Exposure at any time exceeds the total
commitments under the Revolving Credit
Facility, the Borrower shall immediately
make a prepayment in the amount of such
excess. If the outstanding principal amount
of the Revolving Loans and Swingline Loans
and the Letter of Credit Exposure at any
time exceeds the Borrowing Base, the
Borrower shall promptly make a prepayment in
the amount of such excess.
OPTIONAL
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the Senior Credit
Facilities in whole or in part at any time
without penalty, subject to reimbursement of
the Lenders' breakage and redeployment costs
in the case of prepayments of LIBOR
borrowings.
All optional prepayments of the Term Loans
will be applied pro-rata with respect to
each remaining installment of principal. The
unutilized portion of the aggregate
commitments under the Revolving Credit
Facility in excess of the outstanding
Revolving Loans, Swingline Loans and the
Letter of Credit Exposure may be irrevocably
cancelled in whole or in part.
CONDITIONS PRECEDENT
TO INITIAL FUNDING: The funding on the Merger Effective Date
will be subject to satisfaction of customary
conditions precedent for financings of this
type and deemed appropriate by the Agent,
including, but not limited to, the
following:
-6-
<PAGE>
(i) Concurrent Transactions;
Documentation. The Company shall
have received cash proceeds of at
least $28,660,000 from the issuance
of its capital stock to the
Investors. Management and current
stockholders of the Company will
retain ownership of common stock of
the Company in an amount valued at
approximately $3,300,000. The terms
of all documentation relating
thereto shall be reasonably
satisfactory to the Agent.
The Company shall have received net
cash proceeds of at least
$10,000,000 from an issuance of
senior subordinated notes pursuant
to a privately placed financing, the
terms of which (including all
subordination provisions) shall be
reasonably satisfactory to the
Agent.
A sufficient number of shares of
common stock of the Company shall
have been voted in favor of the
Transaction as shall be required
under applicable law and the
Company's certificate of
incorporation and by-laws to effect
the Merger. The Transaction shall
have been consummated pursuant to
the Transaction Documents, and
otherwise on terms satisfactory to
the Agent, and all conditions
precedent to the consummation of the
Transaction shall have been
satisfied or, with the prior
approval of the Agent, waived.
Without limiting the foregoing, the
Transaction Documents shall include,
without limitation, conditions to
the effect that any "poison pill" or
similar security or contractual
arrangement of the Company, any
provision of Delaware law
restricting the ability of Mergerco
or the Company to effect the Merger
and any other provisions of law or
contract which might materially
impede or delay the Merger or
otherwise materially adversely
affect the Transaction or the
parties to the Transaction shall
have been effectively rendered
inapplicable to the Merger. All
documents and materials (including
proxy materials) publicly filed with
respect to the Merger shall be
reasonably acceptable to the Agent
and BAS. The Borrower and all
domestic Subsidiaries of the
Borrower (such subsidiaries being
herein collectively referred to as
the "Guarantors") shall have entered
into Credit Documentation in form
and substance reasonably
satisfactory to the Agent, the
Lenders and BAS, and all conditions
precedent to the initial borrowings
shall have been satisfied. All
existing debt of the Company and its
subsidiaries outstanding upon
consummation of the Transaction
shall have been repaid in full or,
if such debt is to remain
outstanding after the Closing Date,
shall be reasonably satisfactory to
the Agent.
-7-
<PAGE>
(ii) Capitalization; Etc. After giving
effect to the Transaction, the Agent
shall be reasonably satisfied with
the corporate, capital and ownership
structure (including certificates of
incorporation and by-laws),
stockholders' agreements and
management of the Company and its
subsidiaries. Notwithstanding the
foregoing (a) at closing, the
Borrower shall have not less than
$8,000,000 million of availability
under the Revolving Credit Facility,
and (b) the Company's pro-forma
Leverage Ratio will not exceed 6.40
to 1.00 (based upon the Company's
pro forma total debt and trailing 12
month Consolidated Adjusted EBITDA
as defined above and as set forth in
the pro forma financial statements
to be delivered pursuant to
sub-paragraphs (iii)(c) and (d)
below).
(iii) Financial Statements. The Agent
shall have received (a) audited
financial statements of the Company
for its most recent three fiscal
years, (b) the most recent unaudited
annual or quarterly financial
statements of the Company, (c) an
unaudited pro-forma balance sheet of
the Company and its subsidiaries
which gives effect to the
Transaction and the financings
contemplated hereby as if they had
occurred on the last day of the most
recently completed fiscal quarter of
the Company, and (d) an unaudited
pro-forma consolidated income
statement of the Company (including
a calculation of consolidated
EBITDA) adjusted to give effect to
the Transaction and the financings
contemplated hereby for the trailing
12 months of operations ending on
December 31, 1999. The audited
financial statements of the Company
for the fiscal year ending December
31, 1999 (adjusted to reflect an
additional one month of EBITDA of
The Fresh Juice Company, Inc. in an
amount not exceeding $475,000) shall
show Consolidated Adjusted EBITDA of
at least $5,000,000. All pro-forma
adjustments to the consolidated
financial statements of the Company
(which shall not exceed $1,487,000
in the aggregate) shall be
satisfactory to the Agent in its
reasonable discretion.
(iv) Solvency. The Agent shall have
received certification as to the
financial condition and solvency of
the Borrower and its subsidiaries
after giving effect to the
Transaction, from an independent
firm satisfactory to the Agent.
(v) Other Obligations. On or prior to
the Merger Effective Date, (a) all
fees and expenses due and payable to
Bank of America, any other Lender
and/or their affiliates pursuant to
the
-8-
<PAGE>
Commitment Letter, the Fee Letter or
otherwise shall have been paid in
full as contemplated therein, and
(b) the Company shall have complied
in all material respects with all of
its obligations under the Commitment
Letter and the Fee Letter, and each
such letter shall be in full force
and effect.
(vi) Consents. All governmental,
shareholder and third-party consents
(including Hart-Scott-Rodino
clearance) and approvals necessary
in connection with the Transaction
and the other transactions
contemplated hereby shall have been
obtained; all such consents and
approvals shall be in full force and
effect; and all applicable waiting
periods shall have expired without
any action being taken by any
authority that could restrain,
prevent or impose any material
adverse conditions on the
Transaction or such other
transactions or that could seek or
threaten any of the foregoing. The
Agent and the Lenders shall be
reasonably satisfied that the Senior
Credit Facilities, the use of
proceeds thereof and all direct and
indirect collateral security
therefor comply in all respects with
Regulation U of the Board of
Governors of the Federal Reserve
System.
(vii) Judgments, Etc. There shall not
exist (a) any order, decree,
judgment, ruling or injunction which
restrains the consummation of the
Transaction in the manner
contemplated by the Transaction
Documents and (b) any pending or
threatened action, suit,
investigation or proceeding which,
if adversely determined, could
reasonably be expected to materially
adversely affect the ability of the
Borrower or the Guarantors to
perform any of their respective
obligations under the Credit
Documentation or the ability of the
Lenders to exercise their rights
thereunder.
(viii) Opinions, Etc. The Agent shall have
received (a) reasonably satisfactory
opinions of counsel to the Borrower
and the Guarantors (which shall
cover, among other things,
authority, legality, validity,
binding effect and enforceability of
the credit documentation) and such
corporate resolutions, certificates,
and other documents as the Agent
shall reasonably require and (b)
reasonably satisfactory evidence
that the Agent holds a perfected,
first priority lien in all
collateral for the Senior Credit
Facilities, subject to no other
liens except for permitted liens to
be agreed.
-9-
<PAGE>
(ix) Other Reports. The Agent shall have
received, in form and substance
reasonably satisfactory to it, all
environmental reports, year 2000
questionnaires and such other
reports, audits or certifications
and is it may reasonably request.
(x) Market Conditions. (i) Trading in
securities generally on the New York
or American Stock Exchanges shall
not have been suspended; and minimum
or maximum prices shall not have
been established on any such
exchange; (ii) a banking moratorium
shall not have been declared by New
York or United States authorities;
and (iii) there shall not have been
(x) an outbreak or escalation of any
insurrection or armed conflict
involving the United States or any
other national or international
calamity or emergency, or (y) any
disruption or material adverse
change in the general financial or
capital markets of the United States
which, in the reasonable judgment of
the Agent or BAS, would materially
and adversely affect the ability to
sell or syndicated loans of a nature
similar to the Senior Credit
Facilities.
(xi) Material Adverse Change. There shall
not have occurred a material adverse
change in the business, assets,
operations or condition (financial
or otherwise) of the Company and its
subsidiaries since December 31,
1998, and there shall exist no
conditions, events or occurrences
that, individually or in the
aggregate, could reasonably be
expected to result in such a
material adverse change.
CONDITIONS
PRECEDENT TO ALL
EXTENSIONS OF CREDIT: Usual and customary for transactions of this
type and other terms reasonably deemed
appropriate by the Agent, including, without
limitation, delivery of notice of borrowing,
borrowing base, accuracy of representations
and warranties and absence of actual or
incipient defaults.
REPRESENTATIONS &
WARRANTIES: Usual and customary for transactions of this
type and other terms reasonably deemed
appropriate by the Agent, including, without
limitation (i) corporate status; (ii)
corporate power and authority/
enforceability; (iii) no violation of law or
contracts or organizational documents; (iv)
no material litigation, proceeding or
investigation; (v) correctness of specified
financial statements; (vi) no material
adverse change; (vii) absence of undisclosed
liabilities, whether actual or contingent;
(viii) receipt of all required governmental
or third party
-10-
<PAGE>
approvals; (ix) use of proceeds/compliance
with margin regulations; (x) status under
Investment Company Act; (xi) ERISA and labor
matters; (xii) environmental matters; (xiii)
perfected liens and security interests;
(xiv) payment of taxes; (xv) status of
material agreements; (xvi) title to assets,
including intellectual property; (xvii) no
infringement of third party intellectual
property rights; (xviii) solvency; (xix)
compliance with laws and regulations, (xx)
consummation of the Transaction and (xxi)
Year 2000 compliance. The foregoing
representations and warranties shall be
subject to customary qualifications and
exceptions to be agreed upon.
COVENANTS: Usual and customary for transactions of this
type and other terms reasonably deemed
appropriate by the Agent, including, without
limitation (applicable to all subsidiaries)
(i) delivery of financial statements and
other reports; (ii) delivery of compliance
certificates and other information; (iii)
notices of default, material litigation,
material governmental and environmental
proceedings and other material events; (iv)
compliance with laws; (v) payment of taxes;
(vi) maintenance of insurance and
limitations on use of casualty and
condemnation proceeds; (vii) environmental
and ERISA covenants; (viii) limitation on
liens; (ix) limitations on mergers,
consolidations and dispositions of assets;
(x) limitation on acquisitions; (xi)
limitation on incurrence of debt, subject to
agreed upon exceptions; (xii) limitations on
issuance of equity and equity equivalents,
subject to agreed upon exceptions, and
subject to mandatory prepayment
requirements; (xiii) limitations on
dividends, redemptions or other acquisition
of capital stock or equivalents and the
redemption and/or prepayment of other debt;
(xiv) limitation on investments; (xv)
limitations on transactions with and
payments to affiliates; (xvi) limitations on
amendments to material agreements and
instruments; (xvii) limitation on nature of
business conducted; (xviii) limitation on
capital expenditures; and (xix) Year 2000
compliance. The foregoing covenants shall be
subject to customary qualifications and
exceptions to be agreed upon.
The Borrower will use its best efforts to
cause the Merger to be consummated at the
earliest possible time after the Closing
Date.
The Borrower will be required, within a
period after the Closing Date to be agreed
upon, to enter into interest rate protection
agreements reasonably acceptable to the
Agent for $6,000,000 of the outstanding
principal amount of the Term Loans and to
maintain such agreements in effect for a
period to be determined.
Financial covenants to include:
-11-
<PAGE>
o Maintenance on a rolling four quarter
basis of a maximum consolidated Total
Leverage Ratio.
o Maintenance on a rolling four quarter
basis of a minimum consolidated Fixed
Charge Coverage Ratio (EBITDA less
Capital Expenditures in excess of a
to-be-determined pre-approved schedule of
Capital Expenditures and Cash Taxes/Cash
Interest Expense plus Scheduled Principal
Repayments plus Cash Dividends).
o Maintenance at all times of a minimum
consolidated Net Worth (set at 85% of Net
Worth on the Closing Date), with step-up
provisions equal to 50% of net income and
100% of any equity issuances.
o Maintenance at all times of a minimum
consolidated EBITDA determined on a
rolling four quarter basis with step-up
provisions to be agreed upon.
All of the above financial and accounting
terms will be determined in accordance with
GAAP as in effect on the Closing Date.
Ratios will be calculated on a rolling four
quarter basis, except that the applicable
ratios for the first three full quarters
after the Closing Date will be calculated in
a manner to be agreed upon.
EVENTS OF DEFAULT: Usual and customary for transactions of this
type and other terms reasonably deemed
appropriate by the Agent, including, without
limitation: (i) nonpayment of principal,
interest, fees or other amounts; (ii)
violation of covenants; (iii) inaccuracy of
representations and warranties; (iv)
cross-default to other material indebtedness
and agreements; (v) bankruptcy events; (vi)
material judgments; (vii) ERISA, (viii)
actual or asserted invalidity of any loan
documents or security interests; or (ix)
Change in Control (to be defined). The
foregoing events of default shall be subject
to customary grace periods, notice
requirements and materiality thresholds to
be agreed upon.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make
assignments to other eligible financial
institutions approved by the Agent and,
unless a default or event of default has
occurred and is continuing, reasonably
acceptable to the Borrower. Lenders will be
permitted to sell participations with voting
rights limited to significant matters such
as changes in amount, rate and maturity date
and release of all or substantially all of
the collateral or the Guarantors.
Notwithstanding the foregoing, the
-12-
<PAGE>
principal amount of any loan assigned or
participated shall not be less than
$5,000,000. An assignment fee of $3,500 will
be payable to the Agent by the Lender in
connection with any such assignment
(including, but not limited to, an
assignment by a Lender to another Lender).
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of
the loan agreement and other definitive
credit documentation will require the
approval of Lenders holding loans and
commitments representing more than 50% of
the aggregate amount of loans and
commitments under the Senior Credit
Facilities, except that the consent of all
of the Lenders affected thereby shall be
required with respect to (i) increases in
the commitment of such lenders, (ii)
reductions of principal, interest, or fees,
(iii) extensions of scheduled maturities or
times for payment, (iv) releases of all or
substantially all of the collateral and (vi)
releases of all or substantially all of the
Guarantors.
INDEMNIFICATION: The Borrower will indemnify the Lenders in
accordance with customary terms from and
against all losses, liabilities, claims,
damages or expenses relating to their loans,
the Borrower's use of loan proceeds or the
commitments under the Senior Credit
Facilities, including, without limitation,
reasonable attorneys' fees and settlements
costs.
CLOSING: On or before May 31, 2000.
GOVERNING LAW: New York.
WAIVER OF
JURY TRIAL: The Borrower will waive its right to a trial
by jury.
COUNSEL TO THE AGENT: McGuire, Woods, Battle & Boothe LLP.
OTHER: This term sheet does not purport to
summarize all the conditions, covenants,
representations, warranties and other
provisions which would be contained in
definitive legal documentation for the
Senior Credit Facilities contemplated
hereby.
-13-
<PAGE>
ADDENDUM I
to Term Sheet
INTEREST RATES, FEES AND EXPENSES
COMMITMENT FEE: The Borrower will pay a per annum fee
(the "Commitment Fee") on the unused portion
of the Senior Credit Facilities at an
applicable percentage as set forth below.
The Commitment Fee is payable quarterly in
arrears for periods commencing upon the
Closing Date. Swingline Loans will not be
deemed to be utilized for purposes of
calculating the Commitment Fee.
INTEREST RATES: The Revolving Credit Facilities shall
bear interest at the Borrower's option of
(a) LIBOR, or (b) the Base Rate (to be
defined as the higher of (i) the Bank of
America prime rate and (ii) the Federal
Funds rate plus .50%); in each case plus an
applicable percentage as set forth below.
The Borrower may select interest periods of
1, 2, 3 or 6 months for LIBOR loans.
Interest shall be payable at the end of the
selected interest period, but no less
frequently than quarterly.
A default rate shall apply on all loans in
the event of default under the Senior Credit
Facilities at a rate per annum of 2% above
the applicable interest rate.
If during the 180 day period following the
Closing, any breakage costs, charges or fees
are actually incurred with respect to LIBOR
loans on account of the syndication of the
Senior Credit Facilities, the Borrower shall
promptly reimburse the Agent for any such
costs, charges or fees. Such right of
reimbursement shall be in addition to and
not in limitation of customary cost and
yield protections.
LETTER OF
CREDIT FEES:
The Borrower will pay a per annum fee (the
"Letter of Credit Fee") on the amount
available to be drawn under each Letter of
Credit at an applicable percentage referred
to below. Letter of Credit Fees are payable
quarterly in arrears to be shared
proportionately among the Lenders. The
Borrower will also pay a fronting fee (the
"Fronting Fee") of 0.25% per annum on the
amount available to be drawn under each
Letter of Credit. Fronting Fees are payable
quarterly in arrears for the sole account of
the Fronting Bank.
<PAGE>
PRICING GRID: Applicable percentages are determined based
upon the Borrower's Leverage Ratio (defined
as total consolidated funded debt/EBITDA).
Set forth below are the LIBOR applicable
percentages for loans outstanding under the
Senior Credit Facilities (for 1, 2, 3 or 6
month interest periods), the Letter of
Credit Fee applicable percentage and the
Commitment Fee applicable percentage. The
Base Rate applicable percentages for loans
outstanding under each of the Senior Credit
Facilities will be 1.25% less than the LIBOR
Applicable Percentage. Swingline Loans will
bear interest at the Base Rate +0% without
regard to the Leverage Ratio. Prior to the
Agent's receipt of the Borrower's financial
statements for the period ending March 31,
2001, the applicable percentages shall be
3.25%. "LIBOR" means the London interbank
offered rate for US Dollar deposits,
adjusted for maximum regulatory reserves.
Interest in respect of Base Rate Loans will
be payable quarterly in arrears.
INTEREST RATES: Revolving Credit Facility: LIBOR + 3.25%
Term Facility: LIBOR + 3.25%
Performance pricing for the Revolving Credit
Facility and Term Loan Facility to be based
upon a quarterly Leverage Ratio to be
determined.
COMMITMENT FEE: 50 basis points per annum on the unused
portion of the commitments. Performance
pricing based upon a quarterly Leverage
Ratio to be determined.
CALCULATION OF
INTEREST AND FEES: Other than calculations in respect of
interest at the Base Rate (which shall be
made on the basis of actual number of days
elapsed in a 365/366 day year), all
calculations of interest and fees shall be
made on the basis of actual number of days
elapsed in a 360 day year.
COST AND YIELD
PROTECTION: Customary for transactions and facilities of
this type, including, without limitation, in
respect of breakage or redeployment costs
actually incurred in connection with
prepayments, changes in capital adequacy and
capital requirements or their
interpretation, illegality, unavailability,
reserves with proration or offset and
payments free and clear of withholding or
other taxes.
EXPENSES: The Borrower will pay all reasonable costs
and expenses associated with the
preparation, due diligence, administration,
syndication and enforcement of all
documentation executed in connection with
the Senior Credit Facilities, including,
without limitation, the reasonable legal
fees of counsel to the Agent and BAS, it
being agreed and
<PAGE>
understood that the Borrower shall pay only
those reasonable costs and expenses of a
single legal counsel associated with the
enforcement of all documentation executed in
connection with the Senior Credit
Facilities. The Borrower will also pay the
expenses of each Lender in connection with
the enforcement of any of the Credit
Documentation.
<PAGE>
ADDENDUM II
to Term Sheet
SOURCES AND USES
($MM)
<TABLE>
<CAPTION>
Sources Uses
------- ----
<S> <C> <C> <C>
Revolving Credit Facility (Amount funded at $ 0.00 Purchase of Equity (including $ 36.125
Acquisition Date) redemption of options and convertible
securities)
Term Loan Facility $ 22.00 Fees and Expenses $ 3.875
Subordinated Notes $ 10.00 Refinance Existing Debt $ 19.910
Sponsor and Management and other Shareholder Roll-Over Equity $ 3.300
Equity Investment $ 31.96
------------
Non-Compete Agreements $ 0.750
-------------
Total $ 63.96 Total $ 63.960
</TABLE>
<PAGE>
Key Mezzanine
Key Mezzanine Capital Fund, LLC
Key Mezzanine Capital Management Company, LLC
CONFIDENTIAL
------------
January 3, 2000
NCP-SBG Recapitalization Corp.
c/o North Castle Partners, L.L.C.
275 Battery Street, Suite 2160
San Francisco, CA 94111
Ladies & Gentlemen:
North Castle Partners, L.L.C. ("NCP") has advised Key Mezzanine Capital
Fund, L.L.P. ("KMC") that NCP-SBG Recapitalization Corp., an entity formed by
NCP ("NCP-SBG"), intends to merge with and into Saratoga Beverage Group, Inc.
(the "Company") and thereupon desires to obtain $10.0 million in senior
subordinated note financing to be made available, together with approximately
$32.0 million in equity and $22.0 million in senior debt, in a contemplated
recapitalization transaction in which (a) affiliates of North Castle Partners,
L.L.C. ("NCP") and certain other investors (including rollover investors) will
acquire the outstanding equity of the Company for approximately $59.0 million
and (b) to pay an amount presently expected to be approximately $5.0 million in
fees and costs associated with the foregoing.
Based on our discussions and on the financial statements, projections
and other information furnished to us, KMC agrees to commit $10,000,000 in
senior subordinated notes with warrants attached on the principal terms
("Summary of Terms and Conditions") summarized in Exhibit A attached to this
letter. Moreover, the Summary of Terms and Conditions does not purport to
include all of the conditions, covenants, representations, warranties, defaults,
definitions and other terms which would be contained in the definitive documents
for the transaction, all of which must be satisfactory in form and substance to
us and our counsel and to you and your counsel prior to proceeding with the
proposed financing. We understand that current leverage is in excess of six
times on an unadjourned basis. Furthermore, the covenants for the KMC
subordinated debt will be set in accordance with the senior debt covenants.
The proposed financing is conditioned upon no material adverse change
occurring in the business, assets, financial condition, or income of the Company
or any of its subsidiaries since the date of the latest audited financial
statements provided to us and no material adverse change occurring in the
Company's ability to operate in accordance with the financial projections
furnished to us or to comply with the proposed financial covenants. Our
willingness to enter into the proposed financing is also conditioned on the
existence of no material misstatements in or omissions from the materials, taken
as a whole, which have previously been or will be furnished to us for our
review, and on our confirmation that NCP has performed appropriate due
diligence.
<PAGE>
If in the course of documenting the transaction and our continued analysis of
financial and other information relating to the Company, we discover that any of
the foregoing conditions will in our judgment not be met, we reserve the right
to terminate any obligation which we might have with respect to the proposed
financing. In addition, the proposed financing is subject to the condition that
no material adverse change in governmental regulation or policy affecting us or
you occurs prior to the closing and no litigation or other action is pending or
threatened seeking an injunction, material damages or relief relating to the
proposed financing.
Whether or not the transactions contemplated hereby are consummated,
NCP-SBG agrees by its acceptance hereof:
(a) to pay all reasonable out-of-pocket costs and expenses
heretofore or hereafter incurred by KMC (including its reasonable fees and
disbursements of its counsel), whether or not any financing by KMC is
consummated, in connection with the following: this letter, all due diligence by
KMC and its representatives concerning the letter, all financing documentation,
and the closing of the proposed financing; provided that if NCP-SBG does not
consummate the contemplated transaction with the Company, then KMC shall assume
expenses incurred by KMC in pursuing the proposed financing;
(b) to indemnify KMC, its affiliates, and their respective
directors, officers and employees and to defend and hold KMC, its affiliates and
such other persons harmless from and against all losses, claims, damages,
liabilities and expenses (including reasonable expenses of litigation or
preparation therefor) which KMC or any such affiliates or such other persons in
connection with or arising out of the matters referred to herein, except for
damages resulting from the gross negligence or willful misconduct of the
indemnitees; and
(c) should the proposed transaction be consummated by NCP or any
of its affiliates (including NCP-SBG) with the Company before December 31, 2000,
without utilizing KMC to provide the proposed senior subordinated note financing
other than as a result of a material default by KMC in the performance of its
obligations hereunder, to pay KMC $150,000 as liquidated damages for the time,
effort and opportunity cost of providing a commitment to NCP-SBG.
If for whatever reason we have been unable to agree to definitive
credit terms and conditions and enter into a definitive agreement prior to
May 31, 2000 or if the transaction contemplated hereby has not closed by that
date, then, except for your obligations described in the immediately preceding
paragraph, neither of us shall have any further obligation with respect to the
proposed financing.
This letter and the accompanying term sheet supercedes in their
entirety our prior letters and term sheets on this subject to you and North
Castle Partners, L.L.C., and constitutes the entire understanding of the parties
with respect to the subject matter hereof and supercedes all prior and current
understandings and agreements, whether written or oral, and any modifications or
amendments to this letter must be agreed in writing by all the parties hereto.
This letter may
<PAGE>
be executed in any number of counterparts, which together shall constitute one
instrument, and shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of the State of New York.
This letter is delivered to you on the understanding that neither this
letter nor any of its terms or substance shall be disclosed, directly or
indirectly, to any other person except to NCP, the Company and their and your
respective officers, directors, employees, agents and advisors who are directly
involved in the consideration of this matter or as may be compelled to be
disclosed in a judicial proceeding or as otherwise required by law. We confirm
that, upon written notice to us by NCP-SBG, the rights under this Agreement may
be assigned to the Company in for the purpose of effectuating the merger and
recapitalization transaction with NCP-SBG.
If you are in agreement with the foregoing, please sign and return to
us the enclosed copy of this letter by January 14, 2000. This offer shall
terminate and this letter shall be of no further effect at such time unless
prior thereto we shall have received a signed copy of this letter such date.
Upon your timely acceptance, we acknowledge that a copy of this commitment
letter may be filed as an exhibit to the Schedule 13E-3 and the material terms
and conditions of this commitment letter may be described in the Proxy Statement
with respect to the above-described transaction.
We look forward to working with you on this transaction.
Very truly yours,
Key Mezzanine Capital Fund, L.L.P.
By:
---------------------------------
Title:
------------------------------
Accepted and agreed to:
NCP-SBG Recapitalization Corp.
By: /s/ Peter Shabecoff
-------------------------------
Title: Vice President
----------------------------
Dated: January 5, 2000
----------------------------
<PAGE>
KEY MEZZANINE
KEY MEZZANINE CAPITAL FUND I, L.P.
KEY MEZZANINE CAPITAL MANAGEMENT COMPANY L.L.C.
EXHIBIT A
---------
SARATOGA BEVERAGE GROUP, INC.
SENIOR SUBORDINATED NOTES
JANUARY 3, 2000
INDICATIVE TERMS AND CONDITIONS
ISSUER: Saratoga Beverage Group, Inc. ("Saratoga", the
"Borrower" or the "Company").
AMOUNT AND TYPE
OF INVESTMENT $10 million of Senior Subordinated Notes with Warrants
(the "Sub Debt"), depending upon the level of senior
debt at closing date (e.g., a $10 million Sub Debt
investment assumes a total of $22 million in senior
debt).
INVESTOR(S): Key Mezzanine Capital Fund I, L.P. ("KMC").
RATE: 12% per annum computed on actual days elapsed in a 360
day year, payable quarterly in arrears.
FACILITY FEE: 1.5% of investment amount. The fee shall be credited by
KMC against any fee payable to KMC in any subsequent
subordinated debt transaction which refinances the Sub
Debt.
FINAL MATURITY: Seven years from closing date.
AMORTIZATION: All principal is due at maturity.
WARRANTS: The holders of the Sub Debt will receive detachable
equity Warrants representing a 0.5% economic interest
on a fully diluted basis in Saratoga for each $1mm of
Sub Debt invested, exercisable at a nominal price
(i.e., for an $8mm investment, Warrants will total
40%). Holders of the Warrants will be entitled to two
Board Observation Rights.
1
<PAGE>
USE OF PROCEEDS: The proceeds from the Sub Debt, together with
approximately $22.0 million of senior debt and $32
million of equity, will be used in a recapitalization
transaction as a result of which the Saratoga equity
shall be beneficially held by NCP and its affiliates,
with certain minority interests being held by certain
other investors (including rollover investors) for an
amount now expected to be $59.08 million and to pay
reasonable fees and expenses (now estimated at $5.0
million) associated therewith.
RANKING: The principal and premium, if applicable, and interest
on the Sub Debt will be subordinated and junior in
right of payment to all Senior Debt (to be defined in a
manner satisfactory to KMC). The terms of the
subordination shall be satisfactory to KMC and to the
provider(s) of Senior Debt.
OPTIONAL PREPAYMENTS: The Sub Debt may be prepaid in whole or in part (in
multiples of $1,000,000) upon 30 days written notice
and with payment of all accrued interest on the amount
prepaid to the date of prepayment. A fee will also be
charged equal to 5% of the amount prepaid if such
prepayment occurs prior to the first anniversary, 4% of
the amount prepaid if such prepayment occurs prior to
the second anniversary, and 3% of the amount prepaid if
such prepayment occurs prior to the third anniversary.
This fee would be waived if the cumulative income to
KMC has exceeded 2X its original investment.
MANDATORY PREPAYMENTS: At any time, upon a Change of Control or sale of 35% or
more of the Company's consolidated assets, the Loan
shall be prepaid in full with accrued interest thereon
plus, during the first three years, a premium equal to
5% of the amount prepaid if such prepayment occurs
prior to the first anniversary, 4% of the amount
prepaid if such prepayment occurs prior to the second
anniversary, 3% of the amount prepaid if such
prepayment occurs prior to the third anniversary. The
premium would be waived if the cumulative return to KMC
has exceeded 2X the amount originally invested.
EXPENSES: NCP-SBG agrees to pay all reasonable out-of-pocket
costs and expenses heretofore or hereafter incurred by
KMC (including the reasonable fees and disbursements of
its counsel), whether or not any financing by KMC is
consummated, in connection with the following: this
letter, all due diligence by KMC and its
representatives concerning the letter, all financing
documentation, and the closing of the proposed
financing; provided that if NCP-
2
<PAGE>
SBG (or another NCP affiliate) does not consummate a
transaction with Saratoga, then KMC shall assume
expenses incurred by KMC in pursuing the transaction.
BREAK-UP FEES: Should NCP-SBG execute and accept this indicative term
sheet and complete, on or before December 31, 2000, the
transaction with the Company as outlined in "Use of
Proceeds" without utilizing the KMC Sub Debt, KMC shall
be entitled to receive $150,000 as liquidated damages
for the time, effort and opportunity cost of providing
a commitment to NCP-SBG.
AGREEMENT MODIFICATION: Modifications and changes to the Agreement may be made
with the consent of the holders of a majority in
principal amount of the Sub Debt then outstanding,
except that without consent of each Sub Debt holder
affected thereby, no modification or change may (i)
extend the maturity or time of or right to receive
payment of interest or principal of any Sub Debt, (ii)
reduce the rate of interest or the principal amount,
the redemption provisions on the Sub Debt, (iii) change
the subordination provisions in a manner which would
adversely affect the holders of the Sub Debt, (iv)
impair or affect the right to institute suit for
enforcement of any such payment or (v) reduce the
percentage of holders necessary to modify or change the
agreement. The Company understands that there may be
two investing entities, KMC and Regis Capital Partners,
L.P.
PRINCIPAL COVENANTS: Affirmative and negative covenants typical for senior
subordinated debt, including, but not limited to, the
following (with such customary exceptions and basket
amounts as the parties may agree):
REPORTING REQUIREMENTS: Saratoga shall remit audited annual financial
statements to each registered Sub Debt holder no later
than 90 days after the close of the fiscal year.
Borrower shall remit monthly an internal financial and
management report no later than 30 days after the end
of each month.
3
<PAGE>
DEBT SERVICE
COVERAGE RATIO: Shall be greater than a minimum level, which is to
increase over time. Minimum levels to be negotiated.
The Debt Service Coverage Ratio is defined as the ratio
of (I) pro forma EBITDA for the four previous quarters
minus capital expenditures and cash taxes for the four
previous quarters to (ii) the sum of (x) cash interest
expense for the four previous quarters plus (y)
regularly scheduled principal payments for the four
previous quarters.
OFFICERS' COMPENSATION
AND MANAGEMENT/DIRECTORS'
FEES: Parameters regarding directors' and/or management fees
to NCP or its affiliates to be agreed prior to closing.
CHANGE OF CONTROL: To be negotiated. It is expected that NCP will be
required to retain its holdings until the Sub Debt is
paid in full. It is also expected that in a strategic
sale the warrant holder will have the opportunity to
participate, on a pro rata basis, in any sale of
shares. A basket will be provided to allow the Company
to repurchase management shares/options in the event of
death, retirement or termination.
CAPITAL EXPENDITURES: To be negotiated. The intention here is not to inhibit
expenditures required to support the approved business
plan. A procedure will be established whereby requests
for expenditures in excess of the levels stated in the
covenant may be submitted to KMC for review.
INCURRENCE OF DEBT: Total Senior Debt not to exceed Senior Bank Debt
committed at closing plus a basked to be negotiated. No
additional pari passu debt will be allowed without
KMC's approval.
RESTRICTED PAYMENTS: The Company may not make or declare cash dividends or
other distributions (other than stock buy-backs from
departing employees under approved employee stock
purchase plans). Dividends from any Subsidiary to the
Company will be permitted.
SALE OF ASSETS OR
SUBSIDIARY STOCK: Except in the ordinary course of business or unless
otherwise approved in advance by KMC, Saratoga shall
not be permitted to sell assets equal to more than 10%
of its collective total assets on a rolling 12-month
basis, or 20% in the aggregate. The proceeds from
assets sales are to be representative of Fair market
Value. The use of proceeds will be negotiated, but
shall in any case be in accordance with the
requirements of the Senior Credit Agreement.
4
<PAGE>
MERGER OR CONSOLIDATION: The borrower will not merge or consolidate with any
entity or permit any entity to merge into it without
prior consent of KMC. However, KMC to permit the
Company a $5 million basket for acquisitions, assuming
the combined company meets certain financial
parameters, which will be mutually agreed upon.
Borrower has advised KMC of Borrower's general business
strategy to make a series of same industry acquisitions
and that Borrower may need to seek a waiver of the
foregoing limitations with respect to one or more of
such acquisitions, and KMC has advised borrower that
KMC is generally supportive of this strategy, but will
need to consider each specific acquisition on its
individual merits.
TRANSACTIONS WITH
AFFILIATES: Neither the Company nor any Subsidiary nor any
Affiliate will enter into or modify any outstanding
transactions or contracts with affiliates on terms
which are materially less favorable to the Company or
such Subsidiary than those of transactions with
unrelated parties obtained in arm's length dealings,
subject to customary exceptions. No loans, advances,
guarantees, indemnities, etc., shall be given by
Company or Subsidiaries.
EVENTS OF DEFAULT: Standard for this type of debt, including but not
limited to the following:
(i) Failure to pay interest when due if such
failure continues for a period of five
consecutive days whether or not such payment
shall be prohibited by the subordination
provision of the Senior Debt;
(ii) failure to pay principal or premium, if any,
when due whether or not such payment shall be
prohibited by the subordination provision of
the Senior Debt;
(iii) breach of any covenant with customary cure
periods;
(iv) default in any representation or warranty;
(v) any Final Judgment in excess of an aggregate of
$250,000 which is not covered by insurance,
against the Company or any subsidiary which is
not discharged, annulled or stayed for a period
of 30 days;
(vi) certain events of bankruptcy, insolvency and
reorganization of the company or any of its
subsidiaries, and
5
<PAGE>
(vii) acceleration of the Senior Debt causing it to
become due and payable for any reason.
If (i) an Event of Default described above in clause
(vi) or (vii) occurs, the principal amount of the debt,
and any accrued but unp0aid interest, shall become due
and payable immediately or (ii) any other Event of
Default shall have occurred and be continuing, the
holders of not less than 67% in aggregate principal of
the Sub Debt then outstanding may, by notice to the
Borrower, declare to be due and payable, immediately,
the principal amount of the Sub Debt and any accrued
and unpaid interest, and, if such Event of Default is
not involuntary, plus a premium calculated n the manner
provided under Optional Prepayments; provided, however,
that if sufficient payment or deposits shall have been
made to pay the principal of, premium, if any, and
interest on the Sub Debt due otherwise than by such
declaration plus certain expenses, and any and all
defaults (other than the nonpayment of principal and
interest on the Loan that shall have become due and by
such declaration) shall have been remedied or waived,
the holders of 67% in aggregate principal amount of Sub
Debt then outstanding may waive all defaults and
rescind and annul such declaration and consequences.
CONDITIONS
PRECEDENT: Customary for subordinated debt of private leveraged
transactions and also including specific conditions
precedent for this transaction which are appropriate,
in the business judgment of KMC, including but not
limited to:
1. Satisfaction with the terms and conditions of any
existing indebtedness or other indebtedness to be
incurred in connection with this transaction.
2. Satisfaction with documentation of Sub Debt and
Warrant Agreements (including Shareholder
Agreement and Registration Rights Agreements).
In determining either the appropriateness of any
additional conditions or whether any condition has been
satisfied, KMC shall observe reasonable commercial
standards of fair dealing.
REPRESENTATIONS
AND WARRANTIES: To include but not be limited to:
6
<PAGE>
Information and materials presented to KMC by or on
behalf of the Company or NCP is, taken as a whole,
materially accurate in all aspects. No material adverse
change since September 30, 1999.
COUNSEL: Counsel representing KMC will be selected at the sole
discretion of KMC.
7
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
WARRANTS
PROPOSED TERMS AND CONDITIONS
FORM OF WARRANTS: The holders of the Sub Debt will receive detachable
equity Warrants representing a 0.5% economic
interest on a fully diluted basis in Saratoga for
each $1mm of sub Debt invested (i.e., for an $8mm
investment, Warrants will total 4.0%). Holders of
the Warrants will be entitled to two Board
Observation Rights. The Company shall have the right
to approve any transferee of the Warrants so long as
such approval is not unreasonably withheld or
delayed.
PURCHASE PRICE: Nil.
EXERCISE PERIOD: The Warrants will be exercisable at any time prior
to the later of seven years from the Closing Date or
payment in full of the Sub Debt.
EXERCISE PRICE: $.01 per share.
ANTI-DILUTION PROVISIONS: The number and price of securities issuable upon
exercise shall be subject to appropriate adjustment
from time to time upon the occurrence of certain
events as follows: dividends paid in stock or other
securities; a reclassification, reorganization or
merger; stock splits and reverse stock splits;
dissolution; and issuance or sale of common stock or
securities convertible into common stock or options
exercisable, all at less than the prevailing market
price; or other diluting events. Employee stock
options with an exercise price equal to the fair
market value of the stock a the date of issuance
will not be treated as diluting issuances.
REGISTRATION
RIGHTS:
REQUIRED REGISTRATION: At anytime after the Company's common stock is
traded on a recognized exchange, holders of 50% or
more of the aggregate shares of common stock which
have been or could be issued upon exercise of the
Warrants may request the Company to register under
the Securities Act the common shares issued or
issuable upon exercise of Warrants. The Company will
use its best efforts
1
<PAGE>
to effect such registration, giving notice to all
other holders of the Warrants (or common stock
received upon the exercise of the Warrants), who may
join in such registration. The Company shall not be
required to file more than one registration
statement at the request of the holders, provided,
however, that in the event the holder or holders are
unable to register 100% of the common shares issued
or issuable upon the exercise of Warrants, the
Company may be required to file one additional
registration statement at the request of the holder
or holders. This right of registration will be
subject to the provision that the Company shall not
be required to register its securities more than
once in any six month period, and that the Company
will have the right to postpone registration if it
is involved in an extraordinary transaction (merger,
takeover, etc.). The Required Registration rights
shall expire three years after the occurrence of a
Liquid Public Market for the Company's common stock.
INCIDENTAL
REGISTRATION: If the Company proposes to register any of its
common stock under the Securities Act in connection
with a public distribution, it will notify each
holder of the Warrants issued in connection with the
Senior Subordinated Debt (or common stock received
upon the exercise of such Warrants), and if so,
requested by such holders, will use its best efforts
to register the common stock issued or issuable upon
exercise of the Warrants under the Securities Act.
If, however, the number of shares to be so
registered would, in the opinion of the managing
underwriter for such distribution, have a
detrimental effect upon the proposed public
distribution, then (i) all shares sought to be sold
by the Company shall be registered first before any
of the shares of the Warrant holders shall be
registered and (ii) all shares sought to be sold by
the Warrant holders and the other shareholders shall
be reduced on a pro rata basis. There shall be no
limit to the number of "piggyback" registrations
that the holders may request.
COVENANTS: Delivery to all Warrant holders of financial
information as requested pursuant to terms and
conditions in connection with the Sub Debt.
Prohibition against changing line of business.
Warrant holders to be paid pro rata share of any
dividends regardless of whether Warrants have been
exercised. Transactions with Affiliates to be
materially no less favorable than a similar Arm's
Length transaction.
2
<PAGE>
EXPENSES: Registration under the "Required Registration" and
"Incidental Registration" provisions shall be at the
expense of the Company, other than the underwriting
discount. In the event of a registered underwritten
public offering of common stock, the Company, the
holders and the underwriters agree to indemnify each
other against certain civil liabilities, including
liabilities under applicable securities laws and
regulations.
TAG ALONG RIGHTS: The holders of Warrants or Warrant Shares shall have
the right to participate (without paying any portion
of the transaction costs associated with the sale
except for their own legal expenses and any pro-rata
amount of underwriting fees or commissions) in any
sale of common stock by NCP or any of its
affiliates, or any other sale, in a single
transaction or related series of transactions, of
10% or more or the Company's common equity, to any
unaffiliated third party, such participation to be
pro-rata with the common stockholders participating
in such sale.
DRAG ALONG
OBLIGATIONS: The Holders of the Warrants or Warrant Shares shall
be obligated to sell all of their Warrants or
Warrant Shares in the event of a sale of all of the
common, or a controlling interest in, the common
stock of the Company to a third party, and consent
to and support the sale of the Company (whether by
sale of assets, merger or otherwise) to a third
party in accordance with the Company's Stockholder's
Agreement.
3
<PAGE>
[SARATOGA LOGO] SC
PRESENTATION TO:
THE SPECIAL COMMITTEE TO THE BOARD OF DIRECTORS OF SARATOGA BEVERAGE GROUP, INC.
JANUARY 5, 2000
<PAGE>
[SARATOGA LOGO] SC
The accompanying material was compiled on a confidential basis for use solely by
the Special Committee of the Board of Directors of Saratoga Beverage Group, Inc.
(the "Special Committee" and the "Company") in evaluating the Transaction
referred to therein and not with a view to public disclosure or filing thereof
under the Securities Act of 1933 or the Securities Act of 1934 (the "Federal
Securities Laws"). This material was prepared for a specific use by specific
persons and was not prepared to conform with any disclosure standards under the
Federal Securities Laws. Neither Schroder & Co. Inc. ("Schroders") nor any of
its officers, directors, employees, affiliates, advisors, agents or
representatives warrants the accuracy or completeness of any of the materials
set forth herein. Nothing contained in the accompanying material is, or shall be
relied upon as, a promise or representation as to the past or the future.
It should be understood that, unless otherwise noted, any valuations and/or
estimates contained in the accompanying material were prepared or derived from
information supplied by the management of the Company without any independent
verification by Schroders, and involve numerous and significant subjective
determinations by the Company's management, which may or may not be correct.
Accordingly, no representation or warranty can be or is made by Schroders as to
the accuracy or achievability of any such valuations and/or estimates.
<PAGE>
[SARATOGA LOGO] SC
CONTENTS
Transaction Overview I
Valuation Discussion II
Conclusion III
<PAGE>
[SARATOGA LOGO] SC
SECTION I
TRANSACTION OVERVIEW
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
SCOPE OF SCHRODERS' ENGAGEMENT AND OPINION
o The Special Committee to the Board of Directors of Saratoga Beverage Group,
Inc. ("TOGA") has engaged Schroders to render a Fairness Opinion in
connection with the proposed acquisition by NCP-SBG, L.P. ("North Castle"),
a Delaware limited partnership established by North Castle Partners, L.L.C.
o The Opinion relates to the fairness, from a financial point of view, of the
$6.00 per share being offered by North Castle, to public shareholders of
TOGA (exclusive of certain persons who are rolling over shares) in exchange
for their shares.
2
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
DUE DILIGENCE
o In connection with our Opinion, Schroder has, among other things:
o Conducted discussions with senior management of the Company concerning
the Transaction, the Company's historical financial results and
projected financial information;
o Reviewed TOGA's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, including financial statements for the twelve month
period ending December 31, 1997; and its Quarterly Report on Form 10-Q
for the nine-month period and quarter ended September 30, 1999,
including financial statements for the nine month period and quarter
ended September 30, 1998;
o Reviewed The Fresh Juice Company's ("Fresh Juice") audited financial
statements for the twelve month period ended November 30, 1998;
o Reviewed The Fresh Juice Company's Quarterly Report on Form 10-Q for
the nine month period and quarter ended August 31, 1998, including
financial statements for the 9 month period and quarter ended August
31, 1997;
o Reviewed management estimates of the financial performance of The
Fresh Juice Company for the one-month period ended January 31, 1999;
o Reviewed management estimates of the financial performance of TOGA for
the quarter ending December 31, 1999;
o Reviewed the unaudited balance sheet provided by management, dated
November 30, 1999;
o Reviewed management projections of financial performance for the years
2000 to 2004;
3
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
DUE DILIGENCE (CONTINUED)
o Schroders has also:
o Reviewed the combined companies' (The Fresh Juice Company and Saratoga
Beverage Group) financial results for the last twelve months, derived
by management using the following financial information:
o TOGA's 10-K for its fiscal year ended December 31, 1998;
o TOGA's 10-Q for the nine-month period ended September 30, 1999;
o Fresh Juice's audited financial statements for its twelve month
period ended November 30, 1998;
o Fresh Juice's 10-Q for the nine month period ended August 31,
1998;
o Management estimates of financial results for Fresh Juice for the
one month period ended January 31, 1999;
o Reviewed certain publicly available information concerning the
Company;
o Performed various financial analysis, as Schroders deemed appropriate,
of the Company using generally accepted analytical methodologies,
including:
o The application to the financial results of TOGA of the public
trading multiples of companies which we deemed comparable;
o The application to the financial results of TOGA of the multiples
reflected in recent mergers and acquisitions for businesses which
Schroders deemed as comparable;
o A discounted cash flow analysis utilizing the projections
provided by management;
o The application to the share price of TOGA of the average equity
premiums paid in a large sample of publicly reported
transactions;
o Reviewed historical trading prices and volumes of TOGA's Common Stock
on the NASDAQ National Market System from Januray 1, 1998, to December
17, 1999;
o Schroders performed additional financial studies, analyses and inquiries,
as we deemed appropriate.
4
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
PROPOSED PURCHASE PRICE
o North Castle has agreed to pay $6.00 per diluted share, in cash, for all
outstanding shares of Class A and Class B common shares of TOGA (exclusive
of certain shares being rolled over) in a transaction valued at $59.4
million, including the assumption of $16.8 million of debt, net of $0.5
million of cash and $3.3 million of cash proceeds from the exercise of
options and warrants as of 11/30/99.
o There are currently 1,296,050 options outstanding at exercise prices
ranging from $0.94 to $8.75, and 30,000 warrants outstanding at an exercise
price of $3.50. Additionally, TOGA has $1.5 million in convertible notes,
with a conversion price of $3.50.
- ------------------------------------------------------------------------
PURCHASE PRICE ANALYSIS
(000's, except price per share)
- ------------------------------------------------------------------------
OFFER PRICE PER SHARE $6.00
-------
Class A Shares 4,809.7
Class B Shares 522.9
Convertible Debt 428.6
Options 1,296.1
Warrants 30.0
-------
DILUTED SHARES 7,087.3
Implied Equity Value $42,524
Less: Cash Proceeds from Options & Warrants ($3,351)
-------
ADJUSTED EQUITY VALUE OFFERED (1) $39,173
Plus: Debt 20,655
Less: Cash (455)
-------
ENTERPRISE VALUE OFFERED $59,373
- ----------------------------------------------------- ------------------
((1) Net of cash proceeds from options and warrants
5
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
DUE DILIGENCE:
FINANCING
o Schroders also reviewed the merger documents and related exhibits as part
of its due diligence, with particular emphasis placed on the sources of
required financing in order to complete the transaction
o We have reviewed the commitment letter dated December 23, 1999,
provided by Bank of America and Banc of America Securities, L.L.C., to
provide up to $22 million in funded senior term debt
o We have reviewed the commitment letter dated December 23, 1999,
provided by Key Mezzanine Capital Fund L.L.P., to provide up to $10
million in subordinated notes
o We have reviewed the commitment letter dated January 3, 1999, provided
by North Castle GP II, L.P. to provide up $29.0 million to NCP-SBG,
L.P., and an additional $10.0 million in the event that either the
senior term or subordinated debt is not fully available at closing
o We have conducted conversations with Bank of America, Banc of America
Securities, Key Mezzanine and North Castle Partners as to the state
and progress of their due diligence
o Including estimated fees and expenses of $4.3 million, the required funding
to complete the transaction totals $63.7 million
o North Castle GP II has committed to provide up to $38.66 million
o A voting agreement among the purchasers provides, subject to
dissenters' rights, that TOGA insiders will roll at least $3.3
million, or 550,000 shares
o The remaining $21.74 million represents 4.3x 1999E EBITDA of $5.058
million
6
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
SUMMARY
FINANCIAL
PERFORMANCE
o Due to limited management systems and controls at Fresh Juice prior to its
acquisition by TOGA, there are several limitations to the historical
financial analysis.
o The last financial statements filed with the SEC by Fresh Juice were
included in its 10-Q for the quarter and nine-month period ending
August 31, 1998;
o Withum, Smith & Brown completed an audit of Fresh Juice on November
22, 1999, for the 12-month period ending November 30, 1998;
o There is no audited financial information available for Fresh Juice
for the period beginning November 30, 1998 and ending on January 31,
1999 (the effective date of TOGA's acquisition of Fresh Juice was
Friday, January 29, 1999);
o Management provided Schroders with its best estimate of the financial
performance of Fresh Juice for the one month period ending January 31,
1999; and
o Management was unable to provide a breakdown of the revenue of Fresh
Juice by business unit for the one month period ending January 31,
1999.
7
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
LAST TWELVE
MONTHS
FINANCIAL
PERFORMANCE
o The components used to calculate TOGA's twelve month combined historical
financial performance are shown below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FY 1998 COMBINED 9 MONTHS: 9/30/99 COMBINED 9 MONTHS: 1998
----------------------------------------------------------------------------------------------
TOGA FY FRESH JUICE FY TOGA FRESH JUICE TOGA FRESH JUICE PF COMBINED
ENDING ENDING COMBINED 9 MO. 1 MO. 9 MO. 9 MO. 12 MONTHS
($ IN 000'S) 12/31/98(1) 11/30/98(2) FY 1998A(3) 9/30/99(4) 1/31/99(5) 9/30/98(6) 8/31/98(7) 9/30/99(8)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE $8,881 $37,606 $46,488 $38,522 $3,200 $7,360 $28,650 $52,200
Cost of Goods (5,523) (26,931) (32,454) (29,232) (2,432) (4,470) (20,008) (39,640)
------ ------ ------ ------ ---- ------ ------ ------
GROSS PROFIT 3,358 10,676 14,034 9,289 768 2,890 8,642 12,560
SG&A (1,934) (8,789) (10,723) (5,871) (592) (1,345) (6,429) (9,411)
Depr & Amort (436) (1,345) (1,780) (1,101) (82) (420) (992) (1,551)
------ ------ ------ ------ ---- ------ ------ ------
EBIT 989 542 1,530 2,318 94 1,125 1,220 1,597
Interest Inc/(Exp) 89 (351) (262) (1,156) (19) 69 (327) (1,179)
Other 0 0 0 51 0 90 38 (76)
------ ------ ------ ------ ---- ------ ------ ------
1,078 191 1,268 1,213 75 1,284 931 341
PRE-TAX INCOME
Tax Expense, Net (18) (86) (104) (90) 0 (18) (415) 238
------ ------ ------ ------ ---- ------ ------ ------
NET INCOME $1,060 $105 $1,165 $1,123 $75 $1,266 $516 $580
====== ==== ====== ====== === ====== ==== ====
EBIT $989 $542 $1,530 $2,318 $94 $1,125 $1,220 $1,597
Depr & Amort 436 1,345 1,780 1,101 82 420 992 1,551
EBITDA $1,424 $1,887 $3,311 $3,419 $176 $1,545 $2,212 $3,148
====== ====== ====== ====== ==== ====== ====== ======
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) TOGA 10-K dated December 31, 1998, Pre-Tax Income figure excludes a
$400,000 non-recurring write-off of notes receivable
(2) Fresh Juice audited financials for 12-month period ending November 30, 1998
(3) TOGA 12-month financial performance for the period ending December 31, 1998
and Fresh Juice's 12-month financial performance for the period ending
November 30, 1998
(4) TOGA 10-Q dated September 30, 1998
(5) Management's best estimates of financial performance for the 1-month period
ending January 31, 1999 for Fresh Juice on a standalone basis
(6) TOGA 10-Q dated September 30, 1998
(7) Fresh Juice 10-Q dated August 31, 998
(8) Combined 12 months is equal to TOGA FY 12/31/98, plus Fresh Juice FY
11/30/98, plus TOGA 9-months 9/30/99, plus Fresh Juice 1-month 1/31/99,
less TOGA 9-months 9/30/98, less Fresh Juice 9-months 8/31/98
8
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
CALCULATIONS
FOR 1999E
o The components used to calculate 1999 estimated financial performance are
shown below:
<TABLE>
<CAPTION>
- -------------------------------------------------- ----------------------- ------------------------ ------------------------
FRESH JUICE ADJUSTED
($ IN 000'S) 1999E 1-MONTH 1/31/99 1999E
- -------------------------------------------------- ----------------------- ------------------------ ------------------------
<S> <C> <C> <C>
REVENUE
Water Business $9,722 - $9,722
New York Juice Business 12,500 - 12,500
FL/East Juice Business 21,583 - 21,583
CA/West Juice Business 13,911 - 13,911
Fresh Juice (1) - 3,200 3,200
Other (7,388) - (7,388)
------- ------ -------
TOTAL NET REVENUES $50,328 $3,200 $53,528
Cost of Gods Sold (38,250) (2,432) (40,682)
------- ------ -------
GROSS PROFIT 12,079 768 12,847
Gross Margin 24.0% 24.0% 24.0%
OPERATING EXPENSES, EXCL. DEPR.
SG&A (7,197) (592) (7,789)
Corporate Expenses - - -
------- ------ -------
TOTAL OPERATING EXPENSES (7,197) (592) (7,789)
EBITDA (ADJUSTED) $4,882 $176 $5,058
======= ====== =======
EBITDA Margin 9.7% 5.5% 9.4%
Depreciation (781) (82) (863)
Amortization (650) - (650)
------- ------ -------
EBIT $3,451 $94 $3,544
EBIT Margin 6.9% 2.9% 6.6%
Interest Expense (1,800) - (1,800)
Tax Expense 0 - 0
------- ------ -------
NET INCOME $1,651 $94 $1,744
======= ====== =======
- -------------------------------------------------- ----------------------- ------------------------ ------------------------
</TABLE>
(1) Management was unable to provide a breakdown of revenue by business unit
for Fresh Juice for the one month period ending January 31, 1999.
9
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
o The following projections were provided by management of TOGA:
<TABLE>
<CAPTION>
- ------------------------------- --------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31:
- ------------------------------- --------------------------------------------------------------------------------------------------
($ IN 000'S) 1999P 2000P 2001P 2002P 2003P 2004P
- ------------------------------- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Water Business $9,722 $10,305 $10,920 $11,629 $12,763 $13,331
New York Juice Business 12,500 15,500 17,000 18,600 20,000 21,500
FL/East Juice Business 21,583 35,849 39,416 42,231 43,263 44,108
CA/West Juice Business 13,911 15,733 16,693 17,527 18,408 19,324
Fresh Juice(1) 3,200 - - - - -
Other (7,388) (10,834) (12,604) (13,498) (14,165) (14,739)
------- ------- ------- ------- ------- -------
Net Revenue $53,528 $66,554 $71,424 $76,489 $80,266 $83,523
Growth 2.5% 24.3% 7.3% 7.1% 4.9% 4.1%
EBITDA $5,058 $6,988 $7,678 $8,414 $8,829 $9,188
Margin 9.4% 10.5% 10.7% 11.0% 11.0% 11.0%
EBIT $3,544 $5,342 $5,757 $6,243 $6,558 $6,816
Margin 6.6% 8.0% 8.1% 8.2% 8.2% 8.2%
- ------------------------------- ---------------- --------------- ---------------- --------------- ---------------- ---------------
</TABLE>
(1) Management was unable to provide a breakdown of revenue by business unit
for Fresh Juice's one month period ending January 31, 1999.
10
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
IMPLIED PURCHASE PRICE MULTIPLES
o The following multiples consider the $6.00 per share purchase price offered
by North Castle:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TOGA PURCHASE PRICE MULTIPLES
- -------------------------------------------------------------------------------------------------------------------
LTM 1999P 2000P
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EV/REVENUE 1.1x 1.1x 0.9x
EV/EBITDA 18.9x 11.7x 8.5x
EV/EBIT 37.2x 16.7x 11.1x
P/E 67.5x 22.5x NA(1)
- ----------------------------- ---------------------------- ---------------------------- ---------------------------
</TABLE>
Note: EV is defined as Enterprise Value
(1) Management did not provide financial projections below the EBIT line for
the years 2000 to 2004
11
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
IMPLIED EQUITY
PREMIUMS
o The Transaction offer price of $6.00 per share implies the following equity
premiums to TOGA's stock price:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
IMPLIED EQUITY PREMIUMS
- -------- ------------------------------------------------------- ------------------------- -------------------------
SHARE PRICE PREMIUM
- -------- ------------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
OFFER PRICE PER SHARE $6.00 --
CURRENT SHARE PRICE(1) $4.75 26.3%
1-MONTH AGO (2) $3.31 81.3%
60-DAYS AGO (3) $2.81 113.5%
90-DAYS AGO (4) $3.00 100.0%
- -------- ------------------------------------------------------- ------------------------- -------------------------
30-DAY AVERAGE(5) $4.37 37.3%
60-DAY AVERAGE(6) $3.66 63.9%
90-DAY AVERAGE(7) $3.40 76.5%
- -------- ------------------------------------------------------- ------------------------- -------------------------
</TABLE>
Note: The transaction was announced on December 17, 1999
(1) January 4, 2000
(2) December 3, 1999
(3) November 4, 1999
(4) October 4, 1999
(5) December 3, 1999 to January 4, 2000
(6) November 4, 1999 to January 4, 2000
(7) October 4, 1999 to January 4, 2000
12
<PAGE>
[SARATOGA LOGO] SC
TRANSACTION OVERVIEW
COMPARABLE
M&A
TRANSACTIONS
o Schroders delivered an opinion on June 29, 1998 as to the fairness of
TOGA's acquisition of Fresh Juice. At that time, the transaction was valued
at $29.4 million, or 6.9x trailing EBITDA, based on LTM EBITDA of $4.2
million. LTM EBITDA through February 28, 1998, was calculated using
financial statements contained in Fresh Juice's 10-K for the period ending
November 30, 1997, and 10-Q for the six-month periods ending February 28,
1998 and 1997.
o TOGA later received an adjustment in effective purchase price to $24.4
million based upon an understanding that FY 1998 EBITDA was at least $3.2
million, which implied an EBITDA multiple for the transaction of 7.6x.
o Audited financial figures for The Fresh Juice Company's fiscal year ended
11/30/98 show an EBITDA figure of $1.9 million, implying a multiple paid
for the business of 12.5x, considering a transaction value of $23.7 million
based on TOGA's share price at closing. The audit was completed on November
22, 1999. The transaction was completed on January 29, 1999.
- -------------------------------------------------------------------------------
DATE EV LTM EBITDA IMPLIED EV/EBITDA
- -------------------------------------------------------------------------------
LTM February 1998 $29.4 $4.2 6.9x
LTM November 1998: Estimated 24.4 3.2 7.6x
LTM November 1998: Actual 23.7 1.9 12.5x
- -------------------------------------------------------------------------------
13
<PAGE>
[SARATOGA LOGO] SC
SECTION II
VALUATION DISCUSSION
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
VALUATION METHODOLOGIES
o Discounted cash flow analysis
o Select M&A Transactions
o Other relevant M&A Transactions
o Premium analysis
o Publicly traded beverage companies
15
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
DISCOUNTED
CASH FLOW
ANALYSIS
o Using 2004 exit EBITDA multiples of 6.0x to 8.0x to determine terminal
values, and applying discount rates of 11.0% to 13.0%, the range of
enterprise and per share values for TOGA is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE
- ------------------------------------------------------------------------------------------------------
DISCOUNT RATE
-----------------------------------------------------------------
<S> <C> <C> <C>
EBITDA MULTIPLE 11.0% 12.0% 13.0%
- ------------------------------------------------------------------------------------------------------
6.0x $45,096 $43,338 $41,668
7.0x 50,548 48,552 46,655
8.0x 56,001 53,765 51,642
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
EQUITY VALUE PER SHARE - FULLY DILUTED
- ------------------------------------------------------------------------------------------------------
DISCOUNT RATE
-----------------------------------------------------------------
EBITDA MULTIPLE 11.0% 12.0% 13.0%
- ------------------------------------------------------------------------------------------------------
6.0x $3.99 $3.74 $3.50
7.0x 4.75 4.47 4.21
8.0x 5.52 5.21 4.91
- ------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
COMPARABLE
M&A
TRANSACTIONS
o Three recent beverage transactions have been considered as most relevant in
our analysis:
o Saratoga Beverage Group's acquisition of The Fresh Juice Company;
o Northland Cranberries acquisition of Minot Food Packers; and
o Triarc's acquisition of Cable Car Beverage
17
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
COMPARABLE
M&A
TRANSACTIONS
o As discussed previously, Saratoga Beverage Group acquired Fresh Juice in
January 1999. At the time the merger agreement was signed, the implied
enterprise value offered for Fresh Juice was $24.4 million, or 7.6x what
they believed to be LTM EBITDA of $3.2 million for the twelve month period
ending November 30, 1998.
o The implied values for TOGA based on a 7.6x trailing EBITDA multiple (the
figures on which management based its decision) and 1999 expected EBITDA of
$5.058 million, are as follows:
o Enterprise Value: $38.4 million
o Equity Value: $21.6 million
o Per Share Value: $3.05 per share
o At the date of the Fairness Opinion (June 28, 1998), the LTM EBITDA
multiple was 6.9x, based on an Enterprise Value of $29.6 million and LTM
EBITDA of $4.2 million (through February 28, 1998). Based on 1999 expected
EBITDA of $5.058 million, this EBITDA multiple implies values for TOGA as
follows:
o Enterprise Value: $34.9 million
o Equity Value: $18.1 million
o Per Share Value: $2.55 per share
o The actual multiple paid was 12.5x based on an effective enterprise value
of $23.7 million at closing and LTM EBITDA of $1.9 million (using the
audited financial statements for the twelve month period ended November 30,
1998). Based on 1999 expected EBITDA of $5.058 million, this EBITDA
multiple implies values for TOGA as follows:
o Enterprise Value: $63.2 million
o Equity Value: $46.4 million
o Per Share Value: $6.54 per share
18
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
COMPARABLE
M&A
TRANSACTIONS
o The acquisition of Minot Food Packers by Northland Cranberries, in May of
1998, is valuable given that both Minot and TOGA derive a large percentage
of total revenues from sales of unbranded products to institutional
customers.
o The purchase price for Minot was approximately $37.6 million, or 11.1x
trailing EBITDA. LTM earnings for this transaction were not available.
o Based on 1999 expected EBITDA of $5.058 million, this EBITDA multiple
implies values for TOGA as follows:
o Enterprise Value: $56.1 million
o Equity Value: $39.3 million
o Per Share Value: $5.54 per share
19
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
COMPARABLE
M&A
TRANSACTIONS
o The Cable Car acquisition by Triarc is valuable as a benchmark acquisition
in the specialty beverage industry. Cable Car is the owner of such brands
of Stewart's line of soft drinks, JAVA COLA, Aspen Mountain Spring Water,
Aspen Flavored Water and San Francisco Seltzer.
o The purchase price for the Cable Car acquisition was approximately $33.0
million in enterprise value, or 13.6x trailing EBITDA and 24.2x trailing
Earnings.
o Based on 1999 expected EBITDA of $5.058 million, and 1999 expected Earnings
of $1.744 million, these multiples imply values for TOGA as follows:
<TABLE>
<CAPTION>
<S> <C>
>> 13.6x trailing EBITDA: Enterprise Value: $68.8 million
Equity Value: $52.0 million
Per Share Value: $7.33 per share
>> 24.2x trailing Earnings: Enterprise Value(1): $59.0 million
Equity Value: $42.2 million
Per Share Value: $5.95 per Share
</TABLE>
- --------------------------------------------------------------------------------
(1) Enterprise Value based on equity value, plus debt, less cash, less proceeds
from options and warrants
20
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
OTHER RELEVANT
M&A
TRANSACTIONS
o There have been several acquisitions in the bottled water, juice and
"healthy" beverage category in the past few years. Median revenue, EBIT and
EBITDA multiples for these transactions imply a range of enterprise values
for TOGA of $56.1 million to $80.3 million, for an average enterprise value
of $63.8 million.
<TABLE>
<CAPTION>
- ------------- ----------------------------- --------------------------- ---------------------------------------------------------
LTM MULTIPLES
- ------------- ----------------------------- --------------------------- ------------- -------------- -------------- -------------
DATE TARGET ACQUIROR REVENUES EBITDA EBIT NET INCOME
- ------------- ----------------------------- --------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1-Apr-99 Great Pines Water Co. Suntory Water Group 2.0x 8.4x n/m 25.8x
10-Dec-98 AquaPenn Spring Water Group Danone 1.9x 17.3x 33.5x 42.8x
20-Jun-98 Tropicana Pepsico, Inc. 1.7x 12.1x 16.5x n/a
05-May-97 Minot Food Packers Northland Cranberries 0.9x 11.1x 15.6x n/a
24-Jun-97 Cable Car Beverage Triarc Companies 1.3x 13.6x 14.2x 24.2x
27-Mar-97 Snapple Beverage Triarc Companies 0.5x n/a n/a n/a
3-Mar-95 Mistic Beverage Triarc Companies 0.8x 6.0x n/a n/a
31-Aug-89 Crush International (P&G) Cadbury Schweppes, plc 3.1x 6.6x n/a n/a
- ------------- ----------------------------- --------------------------- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------- -------------------------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
MEDIAN 1.5X 11.1X 16.1X 25.8X
IMPLIED TOGA ENTERPRISE VALUE (000'S) $80,293 $56,142 $56,887 $61,854
- ------------------------------------------------------------------ ------------- -------------- -------------- -------------
IMPLIED TOGA EQUITY VALUE (000'S) $63,444 $39,293 $40,038 $45,005
IMPLIED PER SHARE VALUE (000'S) $8.95 $5.54 $5.65 $6.35
- ------------------------------------------------------------------ ------------- -------------- -------------- -------------
</TABLE>
Note: Implied values based on 1999E EBITDA of $5.058 million, and 1999E net
income of $1.744 million
21
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
PREMIUMS
ANALYSIS
o The average equity premiums paid in public M&A transactions valued between
$10 million and $50 million in equity value, over the last five years,
ranged from 29.0% to 39.8%.
<TABLE>
<CAPTION>
- ----------------------------------------- ----------------------------- ------------------------------------------------------------
PERIOD PRIOR TO ANNOUNCEMENT
------------------------------------------------------------
TRANSACTIONS BY VALUE NUMBER OF DEALS 1 DAY 1 WEEK 4 WEEKS
- ----------------------------------------- ----------------------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Between $10 million and $50 million 237 29.3% 35.6% 39.8%
TOGA Share Price (as of 12/17/99) $4.97 $3.44 $2.62
IMPLIED TOGA VALUE $6.43 $4.66 $3.66
- ----------------------------------------- ----------------------------- -------------------- -------------------- ------------------
</TABLE>
22
<PAGE>
[SARATOGA LOGO] SC
VALUATION DISCUSSION
COMPARABLE
PUBLIC
COMPANIES
o There are several public companies in the juice, bottled water and
healthy beverage category that can be considered as a peer group for
TOGA.
o Average multiples within this group imply a range of enterprise values
for Saratoga Beverage Group of $20.0 million to $59.1 million, with an
average enterprise value of $35.1 million. The average valuations imply
a range of per share values of $0.45 to $5.96, with an average share
price of $2.58.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
($ IN OOO'S) LTM MULTIPLES 1999E MULTIPLES 2000E
- --------------------------------- ---------------------------------- ------------------------------------- ----------------------
COMPANY MARKET CAP (1) REVENUES EBITDA NET INCOME REVENUES EBITDA NET INCOME REVENUES EBITDA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COTT Corporation $332,638 0.7x n/m n/m 0.7x 6.9x 25.3x 0.6x 5.8x
Clearly Canadian 6,820 0.4x n/m n/m n/m n/m n/a n/m n/m
Triarc Companies 437,715 1.4x 8.8x 45.2x n/m n/m 38.0x n/m n/m
National Beverage 147,069 0.4x 4.3x 12.5x n/m n/m n/a n/m n/m
Hansen Natural 43,134 0.6x 5.0x 9.6x 0.6x 5.0x 9.4x n/m n/m
Odwalla, Inc. 33,317 0.4x n/m n/m 0.4x n/m n/m 0.3x 7.3x
Vermont Pure 26,368 1.2x 7.4x 6.6x n/m n/m n/a n/m n/m
AVERAGE 0.7X 6.4X 18.5X 0.6X 6.0X 24.2X 0.5X 6.6X
IMPLIED TOGA ENTERPRISE VALUE $38,031 $20,072 $27,561 $30,333 $30,094 $59,121 $30,133 $45,772
IMPLIED TOGA EQUITY VALUE $21,182 $3,222 $10,712 $13,483 $13,245 $42,272 $13,284 $28,923
IMPLIED PER SHARE VALUE $2.99 $0.45 $1.51 $1.90 $1.87 $5.96 $1.87 $4.08
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: 2000 net income projections were not provided for TOGA
(1) As of January 4, 1999
23
<PAGE>
[SARATOGA LOGO] SC
SECTION III
CONCLUSION
<PAGE>
[SARATOGA LOGO] SC
VALUATION SUMMARY
CONCLUSION
o Each of these analysis produced a valuation range which we believe to be
reliable in the evaluation of this transaction. The following is a summary
of those ranges:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
VALUATION METHODOLOGY IMPLIED ENTERPRISE VALUE (000'S)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
DCF Valuation $41.7 - $56.0 million
Select M&A Transactions $34.9 - $68.8 million
Other Relevant M&A Transactions $56.1 - $80.3 million
Publicly Traded Beverage Companies $20.0 - $59.1 million
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
VALUATION METHODOLOGY IMPLIED SHARE PRICE
- ---------------------------------------------------------------------------------------------------------
DCF Valuation $3.50 - $5.52
Select M&A Transactions $2.55 - $7.33
Other Relevant M&A Transactions $5.54 - $8.95
Premiums Analysis on M&A Transactions $3.66 - $6.43
Publicly Traded Beverage Companies $0.45 - $5.96
- ---------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
[SARATOGA LOGO] SC
CONCLUSION
o Average Implied Enterprise Value provides a range of $38.2 million - $66.0
million.
o Average Implied Share Price provides a range of $3.14 - $6.84.
o Deal Enterprise Value is $59.4 million.
o Deal Value Per Share is $6.00.
o Schroders did not form a conclusion as to whether any individual analysis
or factor, considered in isolation, supported or failed to support an
opinion as to fairness from a financial point of view.
o The Merger Consideration is fair from a financial point of view to the
shareholders (exclusive of certain persons who are rolling their shares).
26
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 5, 2000, by and between SARATOGA
BEVERAGE GROUP, INC., a Delaware corporation (the "Company"), and ROBIN PREVER
(the "Executive").
WHEREAS, the Executive has been employed by the Company since April 1992
and currently serves as President and Chief Executive Officer of the Company
pursuant to an employment agreement dated as of January 28, 1999 (the "Prior
Employment Agreement");
WHEREAS, NCP-SBG, L.P., a Delaware limited partnership, NCP-SBG
Recapitalization Corp., a Delaware corporation and the Company have entered
into a Stock Purchase Agreement and Agreement and Plan of Merger, dated as of
the date hereof (as the same may be amended from time to time, the "Merger
Agreement");
WHEREAS, it has been agreed between North Castle Partners, LLC ("NCP") and
the Executive that she will be the Chief Executive Officer of all refrigerated
beverage and water businesses acquired by Company, or NCP, their respective
affiliates, and subsidiaries; and such agreement was material to the Executive
entering into this Agreement; and
WHEREAS, the Company, desires that following the "Closing Date" (as
defined in the Merger Agreement) the Executive continue to serve as the Chief
Executive Officer and President of the Company, and the Executive desires to
continue such employment, upon the terms set forth in this agreement (the
"Agreement");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive hereby agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby accepts continued employment with the
Company, upon the terms and subject to the conditions set forth herein.
2. Term. This Agreement shall become effective upon, and is conditioned
upon the occurrence of, the Commencement Date. Unless the Executive's
employment shall earlier terminate pursuant to Section 9, the Company shall
employ the Executive for a term commencing on the Closing Date (the
"Commencement Date") and ending on the third (3rd) anniversary of the
Commencement Date (the "Initial Term"). Effective upon the expiration of the
Initial Term, the Executive's employment shall automatically be extended, upon
the same terms and conditions, for an additional one year period (the
"Additional Term") unless, not later than six (6) months prior to the end of
the Initial Term, either party hereto shall have notified the other party
hereto in writing that such extension shall not take effect. The period during
which the Executive is employed pursuant to this Agreement is referred to as
the "Employment Period."
3. Position. During the Employment Period, the Executive shall serve as
Chief Executive Officer and President of the Company.
4. Duties and Reporting Relationship. (a) During the Employment Period,
the Executive shall use her skills and render services to the best of her
abilities in performing her duties hereunder. The Executive shall report to,
and be subject to supervision by, the Board of Directors of the Company (the
"Company Board"). The Executive shall devote substantially all of her business
time and attention to the business and affairs of the Company consistent with
her position with the Company. This Agreement shall not be construed as
preventing the Executive from engaging in charitable and community affairs,
giving attention to her outside investment interests or serving a member of the
board of directors of another entity, provided that such activities do not
interfere with the regular performance of her duties and responsibilities under
this Agreement.
1
<PAGE>
(b) Executive has entered into this Agreement in part based upon the
agreement between the parties that the Executive shall, immediately upon
acquisition or as promptly as practicable, become the Chief Executive Officer
for any and all acquisitions made by NCP, the Company's immediate and ultimate
parent companies, or their respective affiliates, of businesses in the
refrigerated beverage and/or water business.
5. Compensation. (a) Base Salary. The Executive's base salary ("Salary")
hereunder shall initially be $220,000 per calendar year, payable in accordance
with the Company's customary payroll practices, but in no event less frequently
than semi-monthly. Commencing on the first anniversary of this Agreement, the
Executive's Salary shall be reviewed by the Compensation Committee of the
Company Board (the "Compensation Committee") and may be adjusted from time to
time as the Compensation Committee, in its sole and absolute discretion, shall
determine; provided that, the Executive's Salary shall not at any time be less
than $220,000 per calendar year.
(b) Annual Bonus. The Compensation Committee shall set goals on an annual
basis (by March 1 of each fiscal year for such fiscal year) for the Executive's
performance as an officer of the Company, and shall cause the Company to pay to
her an annual bonus in addition to the Salary based on the achievement by the
Executive of such goals; provided, however, that the Executive shall receive a
bonus with respect to the first year following the Commencement Date of not
less than 50% of her Salary. In the event that the Executive's employment is
terminated by the Company without Cause (as defined in Section 9(b)) or by the
Executive for Good Reason (as defined in Section 9(c) excluding Section
9(c)(iv)), the Company shall pay to the Executive either (i) if prior to the
first anniversary of the Commencement Date, the target annual bonus payable in
respect of the fiscal year in which such termination of employment occurs (but
no less than 50% of her Salary); or (ii) if on or after the first anniversary
of the Commencement Date, the target annual bonus payable in respect of the
fiscal year in which such termination of employment occurs (but no less than
preceding year's annual bonus), provided that, if such termination occurs
within the first six months of such fiscal year, such payment shall be prorated
by the number of months of Executive's employment during such period over the
total number of months in such period; in either case such amount shall be paid
as soon as practicable, but in no event more than 30 days following the Date of
Termination.
(c) Initial Option Grant. The Executive shall be granted stock options
(the "Options") to purchase shares of the recapitalized common stock of the
Company, $.01 par value (the "Common Stock") that represent 2% of the Company's
full diluted equity as of the Commencement Date. The Options shall be
non-qualified stock options and shall be issued pursuant to, and in accordance
with, a stock incentive plan (the "Plan") to be adopted by the Company (a
summary of the terms of which has been previously delivered to the Executive)
on the Commencement Date which will be evidenced by one or more stock option
agreements to be entered into by the Executive and Company pursuant to the Plan
as finally adopted. Each Option shall be exercisable at a price equal to the
fair market value of the Common Stock of the Company on the date of grant. The
Options granted pursuant to this Section 5(c) shall vest in four equal portions
at the date of grant and on each of the first, second and third anniversaries
thereof, subject to the Executive's continued employment through the applicable
vesting date. The Executive's vested Options shall be exercisable for a period
of ten (10) years from the date of grant. Upon the termination of the
Executive's employment for Cause (as defined below) or other than for Good
Reason (as defined below), any unvested Options shall lapse. Upon the
termination of the Executive's employment pursuant to Section 9, the Executive
shall have one (1) year from the Date of Termination to exercise any vested
Options.
(d) Additional Option Grant. On the first anniversary of the Commencement
Date (or as soon thereafter as practicable), the Executive shall be granted
stock options to purchase shares of Common Stock that represent 1% of the
Company's fully diluted equity at the time of grant, and will be subject to the
same vesting and other provisions as the grant of Options described in the
preceding paragraph.
2
<PAGE>
6. Vacation, Holidays and Sick Leave. During the Employment Period, the
Executive shall be entitled to paid vacation, paid holidays and sick leave in
accordance with the Company's standard policies for its senior executive
officers, which policies shall provide the Executive with benefits no less
favorable than those provided to any other senior executive officer of the
Company. Such vacation may be taken, in the Executive's discretion, at such
time or times as are not inconsistent with the reasonable business needs of the
Company. The Executive shall also be entitled to all paid holidays given by the
Company to its senior executive officers.
7. Business Expenses. The Company recognizes that the Executive will incur
expenses in connection with her duties hereunder and the business of the
Company. The Company agrees to provide the Executive with a corporate American
Express Card in order to pay such expenses and to otherwise reimburse the
Executive for all such expenses paid or incurred by her (and/or, if requested
by the Executive, to advance the Executive amounts required to cover such
expenses) in connection with her employment upon timely submission by the
Executive of receipts and other documentation as required by the Internal
Revenue Code and in conformance with the Company's normal policies and
procedures.
8. Pension and Welfare Benefits; Perquisites. During the Employment
Period, the Executive shall be eligible to participate fully in all health
benefits, insurance programs, pension and retirement plans and other employee
and compensation arrangements (collectively, the "Employee Benefits") available
to officers of the Company generally, which Employee Benefits shall provide the
Executive with benefits no less favorable than those provided to any other
senior executive officer of the Company. During the Employment Period, the
Company shall pay, on a monthly basis, the Executive an automobile allowance of
$750 per month or, at the option of the Executive, shall provide the Executive
with the use of an automobile. During the Employment Period, the Company shall
pay, or reimburse the Executive, as the case may be, for the cost of first
class air travel by the Executive in connection with her duties hereunder,
provided that, such air travel is longer than three hours. In addition, during
the Employment Period, the Company shall provide the Executive with such other
perquisites as the Company Board shall deem appropriate. Nothing contained
herein shall be deemed a waiver by Executive of, or diminish or modify, any
vested rights which Executive may have or may hereafter acquire under any
employee benefit plan of the Company.
9. Termination of Employment. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) Death or Disability. The Executive's employment hereunder shall
automatically terminate upon the death of the Executive. If, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from her duties with the Company for any six (6) consecutive
months or two hundred forty (240) days in any consecutive three hundred
sixty-five (365) day period, then the Company may terminate the Executive's
employment hereunder for "Disability."
(b) By the Company. The Company may terminate the Executive's employment
hereunder with or without Cause. For purposes of this Agreement, "Cause" shall
mean the Executive's conviction of a crime constituting a felony involving
fraud or dishonesty. Notwithstanding the foregoing, the Executive's employment
hereunder shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than 75% of the directors
constituting the Company Board (other than the Executive) (after written notice
to the Executive and a reasonable opportunity for the Executive, together with
the Executive's counsel, to be heard before the Company Board), finding that
the Executive should be terminated for Cause.
(c) Termination by the Executive. The Executive shall be entitled to
terminate her employment hereunder for Good Reason (as defined below) or any
other reason. For purposes of this Agreement, "Good Reason" shall mean, without
the Executive's express written consent, (i) the assignment to the Executive of
any duties inconsistent with, or any diminution of, the Executive's positions,
titles, offices, duties, responsibilities or status with the Company; (ii) the
relocation of the Company's principal executive offices to a location more than
fifty (50) miles from Saratoga Springs, New York or Boca
3
<PAGE>
Raton, Florida or the Company's requiring the Executive to be based anywhere
other than Saratoga Springs, New York or Boca Raton, Florida, except for
required travel on the Company's business to an extent substantially consistent
with the Executive's present business travel obligations; (iii) the failure by
the Company to pay on a timely basis to the Executive any portion of the
Executive's then current compensation; (iv) if the Executive perceives in her
sole judgment that there has been a dimunition in her duties, authority,
responsibilities, day to day control, reporting responsibilities, employee
relations, status, relationship with the Company Board or NCP; or interference
with the exercise of her business judgment; or a substantial increase without
her agreement, in her duties, responsibilities, or reporting requirements; or
(v) if there is a breach of the provisions of Section 4(b) hereof; then, in
each case after written notice delivered by the Executive to the Company within
90 days of the occurrence of such action setting forth in reasonable detail the
specifics of such action or actions giving rise to such Good Reason.
(d) Notice of Termination. Any purported termination of the Executive's
employment by the Company or by the Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 18.
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean if the
Executive's employment is terminated because of death, the date of the
Executive's death, if the Executive's employment is terminated for Disability,
the date Notice of Termination is given, if the Executive's employment is
terminated for Cause, the date of delivery to the Executive of the resolution
of the Company Board referenced in Section 9(b) or if the Executive's
employment is terminated pursuant to Section 9(c) hereof or for any other
reason (other than death or Disability), the date specified in the Notice of
Termination (which, in the case of a termination for Good Reason shall not be
less than fifteen (15) days nor more than sixty (60) days from the date such
Notice of Termination is given, except if pursuant to Section 9(c)(iv) then
shall not be less than 60 days, and in the case of a termination for any other
reason shall not be less than thirty (30) days from the date such Notice of
Termination is given.)
10. Compensation During Disability, Death or Upon Termination. (a) During
any period that the Executive fails to perform her duties hereunder as a result
of incapacity due to physical or mental illness ("Disability Period"), the
Executive shall continue to receive her full Salary at the rate then in effect
for such period until her employment is terminated pursuant to Section 9(a)
hereof, provided that payments so made to the Executive during the Disability
Period shall be reduced by the sum of the amounts, if any, payable to the
Executive with respect to such period under disability benefit plans of the
Company or under the Social Security disability insurance program, and which
amounts were not previously applied to reduce any such payment.
(b) If the Executive's employment is terminated by her death or
Disability, the Company shall pay all amounts due to the Executive under
Section 5 through the Date of Termination plus all other amounts to which she
is entitled under any compensation or benefit plan or program of the Company,
in each case in accordance with Section 8, if applicable, at the time such
payments are due and the Company shall have no further obligation to the
Executive under this Agreement.
(c) If the Executive's employment shall be terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive her full Salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given plus all other amounts to which she
is entitled under any compensation or benefit plan or program of the Company,
and the Company shall have no further obligation to the Executive under this
Agreement.
(d) If the Company shall terminate the Executive's employment other than
for Cause, or the Executive shall terminate her employment for Good Reason (or
death or Disability) then
(i) the Company shall pay the Executive her full Salary through the
Date of Termination at the rate in effect at the time Notice of Termination
is given plus all other unpaid amounts, if any, to which the Executive is
entitled as of the Date of Termination under any compensation or benefit
plan or program of the Company, at the time such payments are due;
4
<PAGE>
(ii) subject to Section 11, the Company shall pay the Executive an
amount equal to the Executive's Salary equal to the lesser of (A) 24 months
and (B) the expiration of the term of this Agreement (but in no
circumstances less than 12 months) payable in substantially equal monthly
installments during the period commencing with the month immediately
following the month in which the Date of Termination occurs and ending 12
months thereafter. Notwithstanding the foregoing, if the Executive
terminates her employment pursuant to Section 9(c)(iv) hereof, the Company
shall pay the Executive an amount equal to the Executive's Salary for 12
months in substantially equal installments during the period commencing on
the month immediately following the month in which the Date of Termination
occurs and ending 12 months thereafter. If the Executive terminates her
employment pursuant to Section 9(c)(v) the Company shall pay the Executive
an amount equal to the Executive's Salary for 36 months in substantially
equal installments during the period commencing with the month immediately
following the month in which the Date of Termination occurs and ending 12
months thereafter; if the Executive terminates her employement pursuant to
Section 9(c)(v) due to an acquisition not involving those identified at
Closing, then the provisions of Section 10(d)(ii)(A) and (B) above shall
apply;
(iii) the Executive shall be entitled to continue to receive her health
benefits for a period ending on the earlier of (x) 24 months or (y) the
expiration of the term of this Agreement but in no circumstances less than
12 months; and
(iv) the balance of Executive's stock options granted pursuant to
Section 5(c) shall immediately vest on the Date of Termination and the
stock options granted pursuant Section 5(d) shall be deemed granted if they
have not already been so, and fully vested as of the Date of Termination.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 10 by seeking other employment or
otherwise, and the amount of any payment or benefit provided for in this
Section 10 shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer or by retirement benefits or
otherwise.
11. Release. In consideration of the payments to be made to the Executive
pursuant to Section 10(d)(ii) of this Agreement and as a condition to the
payment thereof, the Executive acknowledges that all such payments, if made in
accordance with the terms of this Agreement, shall constitute complete
satisfaction of all Salary obligations owed by the Company to the Executive.
The parties hereby agree that if this Section 11 becomes applicable they will
execute a mutually acceptable release to reflect the provisions of this
Section.
12. Representations and Warranties. (a) The Company represents and
warrants that this Agreement has been authorized by all necessary corporate
action of the Company and is a valid and binding agreement of the Company
enforceable against it in accordance with its terms.
(b) The Executive represents and warrants that she is not a party to any
agreement or instrument which would prevent her from entering into or
performing her duties in any way under this Agreement.
13. Successors; Binding Agreement. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
(b) This Agreement is a personal contract and the rights and interests of
the Executive hereunder may not be sold, transferred, assigned, pledged,
encumbered, or hypothecated by her, except as otherwise expressly permitted by
the provisions of this Agreement. This Agreement shall inure to the benefit of
and be enforceable by the Executive and her personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees. If the Executive should die while any amount would still be payable
to her hereunder had the Executive continued to live, all such amounts, unless
otherwise proved herein, shall be paid in accordance with the terms of this
Agreement to her devisee, legatee or other designee or, if there is not such
designee, to her estate.
5
<PAGE>
14. Restrictive Covenants. (a) Executive acknowledges and agrees that
Executive has had and will have a prominent role in the management of the
business, and the development of the goodwill, of the Company and will
establish and develop relations and contacts with the principal customers and
suppliers of the Company in the United States of America, all of which
constitute valuable goodwill of, and could be used by Executive to compete
unfairly with, the Company and that (i) in the course of her employment with
the Company, Executive will obtain confidential and proprietary information and
trade secrets concerning the business and operations of the Company in the
United States of America and the rest of the world that could be used to
compete unfairly with the Company; (ii) the covenants and restrictions
contained in this Section 14 are intended to protect the legitimate interests
of the Company in their respective goodwill, trade secrets and other
confidential and proprietary information; and (iii) Executive desires to be
bound by such covenants and restrictions.
(b) The Executive covenants and agrees that she will not any time during
and after the end of the Employment Period, directly or indirectly, use for her
own account, or disclose to any person, firm or corporation, other than
authorized officers, directors and employees of the Company or its
subsidiaries, Confidential Information (as hereinafter defined) of the Company,
except (i) while employed by the Company, in the business of and for the
benefit of the Company or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over the
business of the Company, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order the Company to
divulge, disclose or make accessible such information. For purposes of this
Agreement, "Confidential Information" shall mean non-public information
concerning the Company's financial data, statistical data, strategic business
plans, product development (or other proprietary product data), customer,
supplier, distributor and bottler lists and other information, information
relating to practices, processes, methods, trade secrets, marketing plans and
other non-public, proprietary and confidential information of the Company;
provided, however, that Confidential Information shall not include any
information which (x) is known generally to the public other than as a result
of unauthorized disclosure by the Executive, (y) becomes available to the
Executive on a non-confidential basis from a source other than the Company or
(z) was available to the Executive on a non-confidential basis prior to its
disclosure to the Executive by the Company, whether such disclosure by the
Company was before or after the date of this Agreement. It is specifically
understood and agreed by the Executive that any Confidential Information
received by the Executive during her employment by the Company is deemed
Confidential Information for purposes of this Agreement. In the event that the
Executive's employment is terminated hereunder for any reason, she immediately
shall return to the Company all Confidential Information in her possession.
(c) The Executive covenants and agrees that during the Employment Period
and for a period of three (3) years following the Date of Termination, the
Executive shall not, directly or indirectly, own any interest in, operate,
join, control or participate as a partner, director, principal, officer, or
agent of, enter into the employment of, act as a consultant to, or perform any
services for any entity which has material operations which compete with any
refrigerated beverage and water business in which the Company or its immediate
affiliates is engaged, or in which any of the foregoing has documented plans to
become engaged of which Executive has knowledge at the time of the Executive's
termination of employment. Notwithstanding the foregoing, the Executive may be
employed by, or provide services to, an investment banking firm or consulting
firm that provides services to entities described in the previous sentence,
provided that the Executive does not personally represent or provide services
to such entities. Notwithstanding anything herein to the contrary, this Section
14 shall not prevent the Executive from acquiring as an investment securities
representing not more than five percent (5%) of the outstanding voting
securities of any publicly-held corporation.
(d) The Executive and the Company agree that the covenant of
non-competition is a reasonable covenant under the circumstances, and further
agree that if, in the opinion of any court of competent jurisdiction such
covenants are not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of these
covenants as to the court shall appear not reasonable and to enforce the
remainder of these covenants as so amended.
6
<PAGE>
(e) The Executive covenants and agrees that during the Employment Period
and for a period of three (3) years following the Date of Termination, the
Executive shall not directly or indirectly engage in any conduct or make any
statement, whether in commercial or noncommercial speech, disparaging or
criticizing in any way the Company or any subsidiary or affiliate thereof, or
any products or services offered by any of these, or engage in any other
conduct or make any other statement that could be reasonably expected to impair
the goodwill of the Company or any subsidiary or affiliate thereof, the
reputation of the products of the Company or any subsidiary or affiliate
thereof or the marketing of such products, in each case except to the extent
required by law, and then only after consultation with the Company to the
extent possible.
(f) The Executive acknowledges and agrees that a breach of the covenants
contained in this Section 14 may cause irreparable injury to the Company for
which adequate remedies are not available at law. Accordingly, the Executive
agrees that the Company, in addition to pursuing any other remedies it may have
in law or in equity, may seek to obtain an injunction against the Executive
from any court having jurisdiction over the matter, restraining any further
violation of this Section 14.
15. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements (including the Prior Employment
Agreement), whether oral or in writing, previously entered into by them with
respect thereto. The Executive represents that, in executing this Agreement,
she does not rely and has not relied upon any representation or statement not
set forth herein made by the Company with regard to the subject matter, bases
or effect of this Agreement or otherwise.
16. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing,
signed by the Executive and by a duly authorized officer of the Company. The
Executive's or the Company's failure to insist upon strict compliance with any
provision of, or to assert any right under, this Agreement shall not be deemed
to be a waiver of such provision or right or of any other provisions of or
right under this Agreement.
17. Indemnification; Legal Fees. The Company shall indemnify the Executive
and hold her harmless from any cost, expense or liability arising out of or
relating to any acts, failure to act, or any decisions made by her, in the
course of performing services hereunder, within the scope of her employment
hereunder, in accordance with the Company's charter and by-laws including, but
not limited to, any criminal action or proceeding provided that she had no
reasonable cause to believe her conduct was unlawful. Except as provided for
the next sentence, the Company shall bear, or reimburse the Executive for, all
reasonable legal fees, expenses, costs, judgments, fines, penalties, and
amounts paid in settlement incurred by her in connection with entering into
this Agreement. If either party institutes any action or proceedings to enforce
any rights the party has under this Agreement or for any other judicial remedy,
the prevailing party shall be entitled to reimbursement from the other party
for its costs and expenses incurred thereby, including but not limited to,
reasonable attorneys' fees and disbursements.
18. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one day after deposit with an
overnight courier, or if mailed, five (5) days after the date of deposit in the
United States mails, as follows:
If to the Company, to:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12866
Attn: Chief Operating Officer
Fax No.: (518) 584-6363
7
<PAGE>
with copies to:
North Castle Partners, L.L.C.
60 Arch Street
Greenwich, CT 06830
Telecopy: (203) 618-1860
Telephone: (203) 862-3200
Attention: Peter J. Shabecoff
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
If to the Executive, to:
Robin Prever
c/o Saratoga Beverage Group, Inc.
1000 American Superior Blvd.
Winter Haven, FL 33884
Fax: (941) 299-6713
with a copy to:
Diane J. Geller, Esq.
Ruden, McClosky, Smith, Schuster & Russell, P.A.
200 E. Broward Blvd.
Ft. Lauderdale, FL. 33301
Fax: (954) 764-4996
Tel: (954) 527-2424
Any notice delivered personally or by courier under this Section 18 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified in postage prepaid, return receipt requested, shall be
deemed given on the date telecopied or mailed.
19. Condition Precedent. This Agreement shall be of no force and effect if
the Merger (as defined in the Merger Agreement) does not become effective and
shall automatically expire if the Merger Agreement is terminated.
20. Severability. If any court of competent jurisdiction shall at any time
determine that, but for the provisions of this paragraph, any part of this
Agreement is illegal, void as against public policy or otherwise unenforceable,
the relevant part will automatically be amended to the extent necessary to make
it sufficiently narrow in scope, time and geographic area to be legally
enforceable. All other terms will remain in full force and effect. Further, if
the Executive raises any question as to the enforceability of any part of the
terms of this Agreement, including, without limitation, the covenants contained
in Section 14, the Executive specifically agrees that she will comply fully
with this Agreement unless and until the entry of an award to the contrary.
21. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
8
<PAGE>
22. Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED IN ALL RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT,
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS RULES THEREOF TO THE EXTENT THAT THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE COUNTY OF NEW
YORK SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS
OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN
RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. EACH PARTY HEREBY
WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING
FOR THE INTERPRETATION AND ENFORCEMENT HEREOF, OR ANY SUCH DOCUMENT OR IN
RESPECT OF ANY SUCH TRANSACTION, THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT
BE BROUGHT OR IS NOT MAINTAINABLE IN SUCH COURTS OR THAT THE VENUE THEREOF MAY
NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE
ENFORCED IN OR BY SUCH COURTS. EACH PARTY HEREBY CONSENTS TO AND GRANTS ANY
SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT
MATTER OF ANY SUCH DISPUTE AND AGREE THAT THE MAILING OF PROCESS OR OTHER
PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED
IN SECTION 18 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE
VALID AND SUFFICIENT SERVICE THEREOF.
23. Arbitration. Any dispute, controversy, or question arising under, out
of, or relating to this Agreement (or the breach thereof) or, Executive's
employment with the Company or termination thereof, shall be referred for
arbitration to be held in Albany, New York (or such other place as the parties
and the arbitrator shall agree) to a neutral arbitrator selected by the
Executive and the Company and this shall be the exclusive and sole means for
resolving such dispute (other than for injunctive relief under this Agreement).
The arbitration shall be conducted in accordance with the Employment
Arbitration Rules (the "Rules") of the American Arbitration Association (the
"AAA") in effect at the time of the arbitration, except that the arbitrator
shall be selected by alternatively striking from a list of five arbitrators
supplied by the AAA, and the decision of the arbitrator shall be governed by
the rule of law. Such right to submit a dispute arising hereunder to
arbitration and the decision of the neutral arbitrator shall be final,
conclusive and binding on all parties and interested persons and no action at
law or in equity shall be instituted or, if instituted, further prosecuted by
either party other than to enforce the award of the neutral arbitrator. The
arbitrator shall take submissions and hear testimony, if necessary, and shall
render a written decision as promptly as possible. The arbitrator may require
discovery for good cause shown. Each party shall bear its own costs and
expenses incurred in connection with any such arbitration; provided that the
arbitrator shall be entitled to award to the prevailing party reimbursement of
its reasonable legal costs and expenses (including with respect to the
arbitrator and the AAA).
24. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
25. Withholdings. All payments to the Executive under this Agreement shall
be reduced by all applicable withholding required by federal, state or local
law.
26. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
ROBIN PREVER
/s/ Robin Prever
---------------------------------------
Robin Prever
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Kim James
- ----------------------------------------
Name: Kim James
Title: Chief Financial Officer
10
<PAGE>
NONCOMPETITION AGREEMENT
This AGREEMENT, is entered into as of this 5th day of January 2000, by and
between SARATOGA BEVERAGE GROUP, INC., a Delaware corporation (the "Company")
and ROBIN PREVER (the "Shareholder").
W I T N E S S E T H :
WHEREAS, NCP-SBG, L.P., a Delaware limited partnership (the "Purchaser"),
NCP-SBG Recapitalization Corp., a Delaware corporation and the Company have
entered into a Stock Purchase Agreement and Agreement and Plan of Merger, dated
as of the date hereof (as the same may be amended from time to time, the
"Merger Agreement");
WHEREAS, the Shareholder is a significant shareholder of the Company and
will have shares of Class A Common Stock of the Company, par value $.01 per
share and Class B Common Stock of the Company, par value $.01 per share
converted into the right to receive the Per Share Merger Consideration (as
defined in the Merger Agreement) or a number of shares of the Surviving
Corporation Common Stock (as defined in the Merger Agreement) pursuant to the
Merger Agreement; and
WHEREAS, the Company recognizes and the Shareholder agrees that, as a
significant shareholder and key employee of the Company prior to the
consummation of the transactions contemplated by the Merger Agreement, the
Shareholder obtained and will obtain confidential information concerning the
business operations of the Company and that such information could be of great
value to the Company's competitors and could be used to compete unfairly with
the Company and that the if the Shareholder were to compete with the Company
she could cause the Company great harm; and
WHEREAS, the Purchaser has informed the Company and the Shareholder, and
the Company and the Shareholder acknowledge and agree that the Shareholder's
entering into this Agreement is a material inducement to the Purchaser's
agreeing to enter into the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Shareholder hereby agree as follows:
1. Payments with Respect to Restrictive Covenants. In consideration for
the restrictive covenants hereunder, the Company shall pay the Shareholder
$750,000 at or promptly following the Effective Time (as defined in the Merger
Agreement).
2. Non-Competition and Non-Disparagement. From the Effective Time through
the fifth anniversary thereof (the "Restriction Period"), the Shareholder shall
not, except with the prior written consent of the Board of Directors of the
Company (the "Board") (i) directly or indirectly, own any interest in, operate,
join, control or participate as a partner, director, principal, officer, or
agent of, enter into the employment of, act as a consultant to, or perform any
services for any entity which has material operations which compete with any
refrigerated beverage and water business in which the Company or its immediate
Affiliates is engaged, or in which any of the foregoing has documented plans to
become engaged of which the Shareholder has knowledge at the time of the
Shareholder's termination of employment or (ii) directly or indirectly engage
in any conduct or make any statement, whether in commercial or noncommercial
speech, disparaging or criticizing in any way the Company or any Subsidiary or
Affiliate thereof, or any products or services offered by any of these, or
engage in any other conduct or make any other statement that could be
reasonably expected to impair the goodwill of the Company or any Subsidiary or
Affiliate thereof, the reputation of the products of the Company or any
Subsidiary or Affiliate thereof or the marketing of such products, in each case
except to the extent required by law, and then only after consultation with the
Company to the extent possible. Notwithstanding anything herein to the
contrary, (a) the foregoing shall not prevent the
1
<PAGE>
Shareholder from acquiring as an investment securities representing not more
than five percent (5%) of the outstanding voting securities of any
publicly-held corporation and (b) the Shareholder may be employed by or provide
services to, an investment banking firm or consulting firm that provides
services to entities described in such paragraph, provided that Shareholder
does not personally represent or provide services to such entities.
3. Injunctive Relief with Respect to Covenants; Certain Acknowledgments.
(a) The Shareholder acknowledges and agrees that the covenants,
obligations and agreements of the Shareholder contained hereunder relate to
special, unique and extraordinary matters and that a violation of any of the
terms of such covenants, obligations or agreements may cause the Company
irreparable injury for which adequate remedies are not available at law.
Therefore, the Shareholder agrees that the Company shall be entitled to an
injunction, restraining order or such other equitable relief (without the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain the Shareholder from committing any
violation of such covenants, obligations or agreements. These injunctive
remedies are cumulative and in addition to any other rights and remedies the
Company may have. The Shareholder further agrees that she will not assert any
claim that the proceeds received with respect to the receipt of the Per Share
Merger Consideration or shares of the Surviving Corporation Common Stock in
exchange for her shares pursuant to the Merger Agreement are not sufficient
consideration for entering into the restrictive covenants hereunder.
(b) The Shareholder acknowledges and agrees that the Shareholder has had
and will have a prominent role in the management of the business, and the
development of the goodwill, of the Company and its Affiliates and their
relations and contacts with the principal customers and suppliers of the
Company and its Affiliates in the United States of America and the rest of the
world, all of which constitute valuable goodwill of, and could be used by the
Shareholder to compete unfairly with, the Company and its Affiliates the
covenants and restrictions hereunder are intended to protect the legitimate
interests of the Company and its Affiliates in their respective goodwill, trade
secrets and other confidential and proprietary information and that the
Shareholder desires to be bound by such covenants and restrictions. The
Shareholder further acknowledges and agrees that her entering into this
Agreement was a material inducement to the Purchaser to enter into the Merger
Agreement and that the choice of governing law and arbitration set forth in
Section 7(b) is reasonable, appropriate and convenient for each party.
(c) The Shareholder represents that her economic means and circumstances
are such that the provisions of this Agreement, including the restrictive
covenants hereunder, will not prevent her from providing for herself and her
family on a basis satisfactory to her and them.
(d) If any court of competent jurisdiction shall at any time determine
that, but for the provisions of this paragraph, any part of this Agreement is
illegal, void as against public policy or otherwise unenforceable, the relevant
part will automatically be amended to the extent necessary to make it
sufficiently narrow in scope, time and geographic area to be legally
enforceable. All other terms will remain in full force and effect.
4. No Punitive or Emotional Damages. The parties hereto agree that neither
the Shareholder nor the Company shall be entitled to seek or obtain punitive,
exemplary or similar damages of any kind from the other or, in the case of the
Shareholder, from the Company's officers, directors, employees or shareholders,
or to seek or obtain damages or compensation for emotional distress, as a
result of any dispute, controversy or claim arising out of, relating to or in
connection with this Agreement, or the performance, breach, termination or
validity thereof. Nothing herein shall preclude an award of compensatory or
punitive damages against any other third party.
5. Breach of Restrictive Covenants. In the event that the Shareholder
breaches this Agreement and following the receipt of a written determination
pursuant to Section 7(b), the Shareholder shall be obligated to repay the
amount transferred to her pursuant to Section 1 of this Agreement. Such
repayment shall in no way affect or limit any other remedies or damages that
the Company may have hereunder.
2
<PAGE>
6. Entire Agreement. Except as otherwise expressly provided herein, this
Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof, and all promises, representations,
understandings, arrangements and prior agreements relating to such subject
matter (including those made to or with the Shareholder by any other person or
entity) are merged herein and superseded hereby.
7. Miscellaneous.
(a) Binding Effect. This Agreement shall be binding on and inure to the
benefit of the Company and its successors and permitted assigns. This Agreement
shall also be binding on and inure to the benefit of the Shareholder and her
heirs, executors, administrators and legal representatives. There are no
promises, representations, inducements or statements between the parties
related to the subject matter hereof other than those that are expressly
contained herein. The Shareholder acknowledges that she is entering into this
Agreement of her own free will and accord, and with no duress, that she has
been represented and fully advised by competent counsel in entering into this
Agreement, that she has read this Agreement and that she understands it and its
legal consequences.
(b) Governing Law; Arbitration. (i) This Agreement shall be governed by
and constructed in accordance with the laws of the State of New York as the
same may be applied to contracts entered into and to be performed exclusively
in the State of New York.
(ii) Any dispute, controversy, or question arising under, out of, or
relating to this Agreement (or the breach thereof), shall be referred for
arbitration to be held in New York County, New York (or such other place as the
parties and the arbitrator shall agree) to a neutral arbitrator selected by the
Shareholder and the Company and this shall be the exclusive and sole means for
resolving such dispute (other than for injunctive relief under this Agreement).
The arbitration shall be conducted in accordance with the Employment
Arbitration Rules (the "Rules") of the American Arbitration Association (the
"AAA") in effect at the time of the arbitration, except that the arbitrator
shall be selected by alternatively striking from a list of five arbitrators
supplied by the AAA, and the decision of the arbitrator shall be governed by
the rule of law. Such right to submit a dispute arising hereunder to
arbitration and the decision of the neutral arbitrator shall be final,
conclusive and binding on all parties and interested persons and no action at
law or in equity shall be instituted or, if instituted, further prosecuted by
either party other than to enforce the award of the neutral arbitrator. The
arbitrator shall take submissions and hear testimony, if necessary, and shall
render a written decision as promptly as possible. The arbitrator may require
discovery for good cause shown. Each party shall bear its own costs and
expenses incurred in connection with any such arbitration; provided that the
arbitrator shall be entitled to award to the prevailing party reimbursement of
its reasonable legal costs and expenses (including with respect to the
arbitrator and the AAA).
(c) Amendments. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is approved by the
Board or a person authorized thereby and is agreed to in writing by the
Shareholder and, in the case of any such modification, waiver or discharge
affecting the rights or obligations the Company, is approved by the Board or a
person authorized thereby. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No waiver of any provision of this Agreement
shall be implied from any course of dealing between or among the parties hereto
or from any failure by any party hereto to assert its rights hereunder on any
occasion or series of occasions.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
(e) Notices. Any notice or other communication required or permitted to be
delivered under this Agreement shall be (i) in writing, (ii) delivered
personally, by courier service or by certified or
3
<PAGE>
registered mail, first-class postage prepaid and return receipt requested,
(iii) deemed to have been received on the date of delivery or on the third
business day after the mailing thereof, and (iv) addressed as follows (or to
such other address as the party entitled to notice shall hereafter designate in
accordance with the terms hereof):
(A) if to the Company, to it at:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12866
Attn: Chief Operating Officer
Fax No.: (518) 584-6363
with copies to:
North Castle Partners, L.L.C.
60 Arch Street
Greenwich, CT 06830
Telecopy: (203) 618-1860
Telephone: (203) 862-3200
Attention: Peter J. Shabecoff, Esq.
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
(B) if to the Shareholder, to her at:
Robin Prever
c/o Saratoga Beverage Group, Inc.
1000 American Superior Blvd.
Winter Haven, FL 33884
Fax: (941) 299-6713
with a copy to:
Diane J. Geller, Esq.
Ruden, McClosky, Smith, Schuster & Russell, P.A.
200 E. Broward Blvd.
Ft. Lauderdale, FL. 33301
Fax: (954) 764-4996
Tel: (954) 527-2424
(f) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute
one and the same instrument.
(g) Headings. The section and other headings contained in this Agreement
are for the convenience of the parties only and are not intended to be a part
hereof or to affect the meaning or interpretation hereof.
4
<PAGE>
(h) Certain Definitions.
"Affiliate": with respect to any Person, means any other Person that,
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with the first Person, including but
not limited to a Subsidiary of the first Person, a Person of which the first
Person is a Subsidiary, or another Subsidiary of a Person of which the first
Person is also a Subsidiary.
"Control": with respect to any Person, means the possession, directly or
indirectly, severally or jointly, of the power to direct or cause the direction
of the management policies of such Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or executor,
or otherwise.
"Subsidiary": with respect to any Person, each corporation or other Person
in which the first Person owns or Controls, directly or indirectly, capital
stock or other ownership interests representing 50% or more of the combined
voting power of the outstanding voting stock or other ownership interests of
such corporation or other Person.
The rest of this page has been intentionally left blank.
5
<PAGE>
IN WITNESS WHEREOF, the Company has duly executed this Agreement by its
authorized representatives and the Shareholder has hereunto set his hand, in
each case effective as of the date first above written.
SARATOGA BEVERAGE GROUP, INC.
By: Kim James
-----------------------------
Name: Kim James
Title: Chief Financial Officer
ROBIN PREVER
/s/ Robin Prever
-----------------------------
6
<PAGE>
EXHIBIT G
================================================================================
SARATOGA BEVERAGE GROUP, INC.
STOCKHOLDERS AGREEMENT
-----------------------
Dated as of January 5, 2000
-----------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I
GOVERNANCE AND MANAGEMENT OF THE COMPANY
Section 1.1. Board of Directors ..................................................... G-1
Section 1.2. Governance ............................................................. G-2
Section 1.3. Indemnification of Directors and Officers .............................. G-2
ARTICLE II
RESTRICTIONS ON TRANSFER
Section 2.1. Restrictions on Transfer ............................................... G-2
Section 2.2. Transfers After Second Anniversary of Closing Public Offering, Change of
Control or Exit Event .................................................. G-3
Section 2.3. Tag-Along Rights ....................................................... G-3
Section 2.4. Take-Along Rights ...................................................... G-3
Section 2.5. Transfer of Covered Securities to Affiliate of NCP-SBG ................. G-4
Section 2.6. Hold Back Agreements ................................................... G-4
ARTICLE III
OTHER AGREEMENTS
Section 3.1. Right of First Refusal ................................................. G-5
Section 3.2. Issuance of Additional Shares of Equity Securities ..................... G-6
Section 3.3. Future Acquisitions .................................................... G-6
ARTICLE IV
DEFINITIONS
Section 4.1. Definitions; Construction .............................................. G-6
ARTICLE V
MISCELLANEOUS
Section 5.1. Notices ................................................................ G-8
Section 5.2. Remedies ............................................................... G-8
Section 5.3. Governing Law, etc. .................................................... G-9
Section 5.4. Binding Effect ......................................................... G-10
Section 5.5. Assignment ............................................................. G-10
Section 5.6. No Third Party Beneficiaries ........................................... G-10
Section 5.7. Amendment; Waivers, etc. ............................................... G-10
Section 5.8. Legend on Stock Certificates ........................................... G-10
Section 5.9. Entire Agreement ....................................................... G-11
Section 5.10. Severability ........................................................... G-11
Section 5.11. Headings; Counterparts ................................................. G-11
Section 5.12. Subsequent Stockholders ................................................ G-11
Section 5.13. Reports ................................................................ G-11
Section 5.14. Certain Agreements ..................................................... G-11
Section 5.15. Effectiveness .......................................................... G-11
</TABLE>
i
<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of January 5, 2000,
among Saratoga Beverage Group, Inc., a Delaware corporation (the "Company"),
NCP-SBG, L.P., a Delaware limited partnership ("NCP-SBG"), and the Persons
listed on the signature pages hereto, and each other person who is, or becomes,
a party to this Agreement pursuant to Section 5.12 hereof (collectively, with
NCP-SBG and the Persons listed on the signature pages hereto, the
"Stockholders"). Capitalized terms used herein without definition shall have
the meanings indicated in Article IV.
WHEREAS, upon the terms and subject to the conditions of the Stock
Purchase Agreement and Agreement and Plan of Merger, dated as of the date
hereof (the "Recapitalization Agreement"), among the Company, NCP-SBG and
NCP-SBG Recapitalization Corp., NCP-SBG will acquire shares (the "Purchased
Shares") of common stock, par value $0.01 per share (the "Common Stock"), of
the Company;
WHEREAS, the parties hereto wish to set forth certain rights and
obligations that shall attach to the ownership of Common Stock held by the
Stockholders; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Recapitalization Agreement that the parties hereto enter
into this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
GOVERNANCE AND MANAGEMENT OF THE COMPANY
Section 1.1. Board of Directors. (a) Composition. Subject to the
provisions of this Agreement, the Board of Directors of the Company (the
"Board") will consist initially of seven members: (i) four members nominated by
NCP-SBG, and (ii) three members nominated by Robin Prever. Subject to the
provisions of this Agreement, each Stockholder entitled to vote shall vote
their shares of Common Stock so as to effect the provisions of this Section
1.1(a).
(b) Nominees. NCP-SBG shall nominate all persons for election to the
Board, except that, for so long as she is the Chief Executive Officer of the
Company, (i) Robin Prever shall be entitled to nominate three directors,
provided that if Robin Prever is no longer the Chief Executive Officer of the
Company, then so long as the Rollover Stockholders collectively own at least 5%
of the outstanding Common Stock of the Company, such Rollover Stockholders
collectively shall be entitled to nominate one director. Each Stockholder
entitled to vote shall vote their shares of Common Stock so as to elect such
nominees to the Board.
(c) Removal and Replacement of Nominees. Any director nominated by a party
hereto may be removed at any time, with or without cause, by such party, and
each Stockholder entitled to vote thereon shall vote their shares of Common
Stock as may be required to effect such removal, including voting its shares
for such removal. In addition, at such time as Robin Prever is no longer Chief
Executive Officer of the Company, the Stockholders shall vote their shares of
Common Stock to remove at least two directors nominated by Robin Prever if such
directors shall not have resigned. At any time a vacancy shall be created on
the Board as a result of the death, disability, retirement, resignation or
removal of a director nominated by a party hereto, with or without cause, then
such party shall have the right to nominate a replacement for any director
nominated by it in accordance with Sections 1.1(b), and each Stockholder
entitled to vote shall vote their shares of Common Stock so as to elect such
replacement.
(d) Fees and Expenses. The Company will cause each non-employee director
of the Board to be reimbursed for all reasonable out-of-pocket costs and
expenses incurred by him or her in connection with serving as a director. No
director nominated by NCP-SBG who is an officer or employee of North Castle
Partners II, L.L.C. ("NCP") or any Affiliate thereof (other than any portfolio
company
1
<PAGE>
controlled by NCP or controlled by any other private investment fund under
common control with NCP) shall be entitled to any fee with respect to his or
her service as a director of the Board at any time at which NCP is providing
consulting services to the Company and its subsidiaries pursuant to the
Consulting Agreement, dated as of the date hereof by and between the Company
and NCP.
(e) Chairperson. The Chairperson of the Board shall be designated by
NCP-SBG from among the directors of the Company.
Section 1.2. Governance. (a) Charter and Bylaws. The provisions of the
Company's Certificate of Incorporation and Bylaws will be consistent with the
terms of this Agreement.
(b) Board Approval. All actions requiring the approval of the Board shall
be approved (A) at a meeting of the Board, by a majority of the total number of
directors then fixed as constituting the whole board, or (B) without a meeting
by the unanimous written consent of all the members of the Board, in each case
except as required by law.
Section 1.3. Indemnification of Directors and Officers. The Bylaws shall
provide for indemnification of the directors and officers of the Company to the
greatest extent permitted by applicable law.
ARTICLE II
RESTRICTIONS ON TRANSFER
Section 2.1. Restrictions on Transfer. (a) Until the first to occur of (w)
a Public Offering, (x) a Change of Control, (y) the second anniversary of the
Closing under the Recapitalization Agreement (the "Closing"), and (z) an Exit
Event, no Stockholder other than NCP-SBG and its Affiliates may, without the
consent of NCP-SBG (which consent may not be unreasonably withheld), sell,
transfer, pledge, encumber or otherwise dispose of any Covered Security or any
interest therein to any Person except as follows:
(i) to any Family Member of such Stockholder upon the death of such
Stockholder, provided that such Family Member delivers to the Company a
certificate of the transferee, to the effect that the transferee is a
Family Member of the transferor;
(ii) to any Family Member other than upon the death of such
Stockholder, provided that such Family Member delivers to the Company a
certificate of the transferee, to the effect that the transferee is a
Family Member of the transferor;
(iii) to the Company or NCP-SBG or any of its Affiliates or designees;
(iv) pursuant to Sections 2.3 and 2.4; or
(v) in connection with a transaction that results in a Change of
Control;
provided that, in the case of a transfer with NCP-SBG's consent or pursuant to
clauses (i) or (ii) above, (A) the transferor delivers to the Company an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Company, to the effect that the transfer is not a Prohibited Transfer,
and (B) the transferee becomes a party to this Agreement in the manner provided
in Section 5.12.
(b) Each Stockholder shall give the Company and the other Stockholders
prompt notice of any actual transfer of any Covered Security. Any sale,
transfer, pledge, encumbrance or other disposition of any Covered Security
other than as permitted by this Agreement shall be void ab initio and of no
effect.
(c) Notwithstanding anything contained herein to the contrary, each
Rollover Stockholder may, without the consent of NCP-SBG, sell or transfer any
Covered Security to another Rollover Stockholder, subject to compliance with
applicable laws and contractual agreements and delivery to the Company of an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Company, to the effect that the transfer is not a Prohibited Transfer.
2
<PAGE>
(d) Notwithstanding the provisions of Section 2.1(a), Mr. Cox may pledge
or encumber his Covered Securities or grant a security interest therein without
the consent of NCP-SGB, provided, that any subsequent sale, transfer or other
disposition pursuant to such pledge, encumbrance or security interest shall
require the consent of NCP-SBG.
Section 2.2. Transfers After Second Anniversary of Closing Public
Offering, Change of Control or Exit Event. (a) Following the first to occur of
the second anniversary of the Closing, an initial Public Offering, a Change of
Control and an Exit Event, and subject to Article III, any Stockholder may
transfer Covered Securities to any Person, subject to compliance with
applicable laws and contractual agreements.
(b) Opinion of Counsel. An additional condition to any transfer pursuant
to Sections 2.2(a) shall be that, except with respect to a transfer of the type
described in Section 2.1(a)(iii) or a transfer made pursuant to a registered
public offering, the transferee must deliver to the Company an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to the
Company, to the effect that such transfer is not required to be registered
under the Securities Act.
Section 2.3. Tag-Along Rights. If prior to a Public Offering any of
NCP-SBG or its Affiliates desire to transfer in excess of 10% of the maximum
amount of Common Stock ever owned in the aggregate by NCP-SBG and its
Affiliates (the "Tag-Along Minimum"), to a Person who is not an Affiliate of
NCP-SBG (a "Tag-Along Buyer"), on a cumulative basis, in one or a series of
transactions, then NCP-SBG shall deliver written notice (a "Tag-Along Notice")
to the Company and the other Stockholders, which notice shall state (i) the
name and address of the Tag-Along Buyer, (ii) the per share amount (the
"Tag-Along Price") and form of consideration NCP-SBG proposes to receive for
its shares of Common Stock, and (iii) the number of shares of Common Stock
NCP-SBG proposes to sell (the "Tag-Along Shares") and shall be accompanied by
drafts of purchase and sale documentation (the "Tag-Along Purchase Agreement")
setting forth the terms and conditions of payment of such consideration and all
other material terms and conditions of such transfer (the "Tag-Along Terms").
During the 15 Business Day period following receipt of such notice by the
Company and the other Stockholders, the other Stockholders shall have the right
(a "Tag-Along Right"), exercised by delivery of a written notice to NCP-SBG and
the Company, to participate in such sale to the Tag- Along Buyer on and subject
to the same price, terms and conditions offered to NCP-SBG, on a pro rata basis
determined as the quotient obtained by dividing (A) the number of shares of
Common Stock then held by each Stockholder so electing to sell (each such
Person, an "Accepting Stockholder") by (B) the aggregate number of shares of
Common Stock then held by NCP-SBG and Affiliates and by all of the Accepting
Stockholders who are transferring shares to the Tag-Along Buyer. If the
Tag-Along Right shall not have been exercised prior to the expiration of the 15
Business Day period, then at any time during the 90 days following the
expiration of the 15 Business Day period, subject to extension for not more
than an additional 60 days to the extent reasonably required to comply with
applicable laws in connection with such sale, NCP-SBG and its Affiliates may
sell the Tag-Along Shares to the Tag-Along Buyer at the Tag-Along Price and on
the Tag-Along Terms. Upon request from NCP-SBG, the Company will provide
NCP-SBG with a Stockholder List.
Section 2.4. Take-Along Rights. (a) Take-Along Notice. If NCP-SBG intends
to effect a sale or transfer (a "Take-Along Sale") of all or substantially all
of its shares of Common Stock to a Person who is not an Affiliate (a
"Take-Along Buyer") prior to a Public Offering and elects to exercise its
rights under this Section 2.4, then NCP-SBG shall deliver written notice (a
"Take-Along Notice") to the Company and the other Stockholders, which notice
shall (i) state (w) that NCP-SBG wishes to exercise its rights under this
Section 2.4 with respect to such transfer, (x) the name and address of the
Take-Along Buyer and (y) the per share amount and form of consideration NCP-SBG
proposes to receive for its shares of Common Stock, (ii) be accompanied by
drafts of purchase and sale documentation setting forth the terms and
conditions of payment of such consideration and all other material terms and
conditions of such transfer (the "Take-Along Purchase Agreement"), (iii)
contain an offer (the "Take-Along Offer") by the Take-Along Buyer to purchase
from the other Stockholders all of their shares of Common Stock, on and subject
to the same price, terms and conditions offered
3
<PAGE>
to NCP-SBG and (iv) state the anticipated time and place of the closing of such
transfer (a "Take-Along Closing"), which (subject to such terms and conditions)
shall occur not fewer than 15 nor more than 90 days after the date such
Take-Along Notice is delivered, provided that if such Take-Along Closing shall
not occur prior to the expiration of such 90-day period, NCP-SBG shall be
entitled to deliver additional Take-Along Notices with respect to such
Take-Along Offer. Upon the request of NCP-SBG, the Company shall provide
NCP-SBG with a Stockholder List.
(b) Conditions to Take-Along. Upon delivery of a Take-Along Notice, each
of the other Stockholders shall transfer all of its shares of Common Stock
pursuant to the Take-Along Offer, as such offer may be modified from time to
time, if NCP-SBG transfers all of its shares of Common Stock to the Take-Along
Buyer at the Take-Along Closing and if all shares of Common Stock held by
NCP-SBG and the other Stockholders are sold to the Take-Along Buyer at the same
price, and on the same terms and conditions. No Stockholder other than NCP-SBG
and its Affiliates shall be obligated to make any representation or warranty to
the Take-Along Buyer with respect to, or agree to indemnify the Take-Along
Buyer against, any matter other than (i) title to such Stockholder's shares of
Common Stock to be sold pursuant to the Take-Along Offer and (ii) authority and
legal capacity of such Stockholder to sell such shares or incur any
out-of-pocket costs in connection with such transaction other than such
Stockholder's pro rata share of any transaction expenses payable in connection
with the Take-Along Closing. Within five Business Days prior to the closing
contemplated by the Take-Along Notice, each of the other Stockholders shall (i)
deliver or cause to be delivered to NCP-SBG or an agent acting on its behalf
certificates representing such other Stockholder's shares of Common Stock, duly
endorsed for transfer or accompanied by duly executed stock powers, and (ii)
execute and deliver to NCP-SBG or an agent acting on its behalf a limited power
of attorney and a letter of transmittal and custody agreement in favor of
NCP-SBG or an agent acting on its behalf, and in form and substance reasonably
satisfactory to NCP-SBG, appointing NCP-SBG or an agent acting on its behalf as
the true and lawful attorney-in-fact and custodian for such other Stockholder
with respect to the Take-Along Purchase Agreement and the transactions
contemplated thereby, with full power of substitution, and authorizing NCP-SBG
or such agent to execute and deliver a purchase and sale agreement
substantially in the form of the Take-Along Purchase Agreement and otherwise in
accordance with the terms of this Section 2.4 and to take such actions as
NCP-SBG may reasonably deem necessary or appropriate to effect the sale and
transfer of the shares of Common Stock to the Take-Along Buyer, upon receipt of
the purchase price therefor set forth in the Take-Along Notice at the
Take-Along Closing, free and clear of any Liens, options and voting agreements,
together with all other documents delivered with such Notice and required to be
executed in connection with the sale thereof pursuant to the Take-Along Offer.
NCP-SBG or such agent shall hold such shares and other documents in trust for
such other Stockholder for release against payment to such Stockholder of such
Stockholder's net proceeds in accordance with the contemplated transaction. If,
within 15 days after delivery of such shares and other documents to NCP-SBG or
an agent acting on its behalf, NCP-SBG or such agent has not completed the sale
of all of the shares of Common Stock owned by NCP-SBG and the other
Stockholders to the Take-Along Buyer and another Take-Along Notice with respect
to such Take-Along Offer has not been sent to the other Stockholders, NCP-SBG
or such agent shall return to each other Stockholder all certificates
representing the shares and all other documents that such other Stockholder
delivered in connection with such sale. Promptly after the Take-Along Closing,
NCP-SBG or an agent acting on its behalf shall furnish such other evidence of
the completion and time of completion of such sale and the terms thereof as may
reasonably be requested by any of the other Stockholders.
Section 2.5. Transfer of Covered Securities to Affiliate of NCP-SBG. In
the event that any Covered Securities are transferred to any Affiliate of
NCP-SBG, such transfer to such Affiliate shall be of no effect and shall be
void ab initio unless such Affiliate agrees in writing to become a party to
this Agreement.
Section 2.6. Hold Back Agreements. If and whenever the Company proposes to
register any of its equity securities under the Securities Act, whether or not
for its own account (other than pursuant to a Special Registration), or is
required to use its reasonable best efforts to effect the registration of
4
<PAGE>
any Registrable Securities (as such term is defined in the Registration Rights
Agreement, dated as of the date hereof, by and between the Company, NCP-SBG and
the other parties thereto (the "Registration Rights Agreement")) under the
Securities Act pursuant to Sections 3.1 or 3.2 of the Registration Rights
Agreement, each party hereto, if required by the managing underwriter in an
underwritten offering, agrees not to effect (other than pursuant to such
registration) any public sale or distribution, including, but not limited to,
any sale pursuant to Rule 144 or Rule 144A, of any Registrable Securities, any
other equity securities of the Company or any securities convertible into or
exchangeable or exercisable for any equity securities of the Company for 90
days (or 180 days, if the managing underwriter so requires) after, and during
the 20 days prior to, the effective date of such registration, to the extent
timely notified in writing by the Company or the managing underwriter, and the
Company agrees to cause each holder of any Equity Security, or of any security
convertible into or exchangeable or exercisable for any Equity Security, of the
Company purchased from the Company at any time other than in a Public Offering
to enter into a similar agreement with the Company. The Company further agrees
not to effect (other than pursuant to such registration or pursuant to a
Special Registration) any public sale or distribution, or to file any
registration statement (other than such registration or a Special Registration)
covering any, of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 20 days prior to,
and for 90 days (or 180 days, if the managing underwriter so requires) after,
the effective date of such registration if required by the managing
underwriter.
ARTICLE III
OTHER AGREEMENTS
Section 3.1. Right of First Refusal. Prior to an initial Public Offering,
if any Stockholder other than NCP-SBG and its Affiliates (a "Selling Holder")
desires to transfer any Covered Securities pursuant to Section 2.1(a) following
an offer (which offer must be in writing, be irrevocable by its terms for at
least 30 Business Days and be a bona fide offer) from any prospective purchaser
to purchase all or any part of such Covered Securities owned by such Selling
Holder, such Selling Holder shall give notice (the "Notice of Offer") in
writing to the Company and to NCP-SBG (i) designating the number of shares of
Covered Securities that such Selling Holder proposes to sell (the "Offered
Shares"), (ii) identifying the prospective purchaser thereof (the "Potential
Purchaser") and its address and (iii) specifying the price (the "Offer Price")
and terms (the "Offer Terms") upon which such Selling Holder desires to sell
the same. During the 20 Business Day period following receipt of such notice by
the Company and NCP-SBG (the "Refusal Period"), such Selling Holder shall not
be permitted to accept such offer, but may submit a new Notice of Offer in
respect of any revised offer in accordance with and subject to this Section
2.3. During the first ten Business Days of the Refusal Period, the Company
shall have the right to purchase from the Selling Holder at the Offer Price and
on the Offer Terms all, any portion of the Offered Shares. If the Company shall
not have exercised such right with respect to all Covered Securities after ten
Business Days, NCP- SBG or any Affiliate or designee of NCP-SBG, including any
pooled investment vehicle organized by the managing member of NCP-SBG or by any
of its Affiliates, shall have the same right of first refusal with respect to
any such remaining Covered Securities for the remainder of the Refusal Period.
The rights provided hereunder shall be exercised by written notice to the
Selling Holder and the Company or NCP-SBG, as the case may be, given at any
time during the Refusal Period. If such right is exercised, the Company or
NCP-SBG (or its Affiliate or designee), as the case may be, shall deliver to
the Selling Holder payment of the Offer Price in accordance with the Offer
Terms, against delivery of appropriately endorsed certificates or other
instruments representing the Offered Shares, provided that the Company and
NCP-SBG shall not be required to consummate such purchase on fewer than 20
Business Days from the date of acceptance of the offer. If the Company and
NCP-SBG fail, in the aggregate, to exercise their right of first refusal for
all of the Offered Shares during the Refusal Period, then they shall have no
right to purchase any Offered Shares, and the Selling Holder may, for a period
of up to 120 days, sell to the Potential Purchaser the Offered Shares at the
Offer Price and on the Offer Terms.
5
<PAGE>
Section 3.2. Issuance of Additional Shares of Equity Securities. In the
case of the proposed sale or issuance of, or the proposed granting by the
Company of, any equity securities of the Company, or any securities convertible
into equity securities of the Company, to NCP-SBG or any of its Affiliates
following the Effective Time, the Rollover Stockholders shall have the right,
exercisable within 20 Business Days after the Company has given notice, which
notice shall include copies of all material documents setting forth the terms
and conditions of the proposed sale, issuance or grant, to the Rollover
Stockholders of such proposed sale, issuance or grant, to purchase their
respective pro rata share (based on such Stockholder's percentage ownership of
the common stock of the Company) of the equity securities (or securities
convertible into equity securities) proposed to be issued or granted on the
same terms as such equity securities (or securities convertible into equity
securities) are offered to NCP-SGB or its Affiliates.
Section 3.3. Future Acquisitions. The Company and NCP-SBG agree, and
NCP-SPG agrees to cause its Affiliates and the respective officers and
directors of such Affiliates, to pursue all future acquisitions, mergers and
recapitalizations involving businesses in the refrigerated juice industry
(other than minority investments by NCP-SGB or any of its affiliates) through
(i) the Company, with such entities to be acquired, owned and operated by the
Company, or (ii) any other company, provided that the Rollover Stockholders
shall have had an opportunity to exchange their respective shares of common
stock of the Company for shares of common stock of an equivalent value in such
other company in connection with any such transaction which results in the
Company not being the top-tier holding company for investments by NCP-SGB in
the refrigerated juice industry.
ARTICLE IV
DEFINITIONS
Section 4.1. Definitions; Construction. Whenever used in this Agreement,
the following terms shall have the respective meanings given to them below or
in the Sections indicated below:
Affiliate: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person, including but not limited to a
Subsidiary of the first Person, a Person of which the first Person is a
Subsidiary, or another Subsidiary of a Person of which the first Person is
also a Subsidiary. "Control" (including the terms "controlled by" and
"under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management policies of
a person, whether through the ownership of voting securities, by contract
or credit arrangement, as trustee or executor, or otherwise. With respect
to NCP-SBG, the term Affiliate explicitly includes the Fund, NCP II
Co-Investment Fund, L.P., any other investment vehicle now or in the future
managed by North Castle Partners, L.L.C. and any Person with coinvestment
rights with respect to investments made by the Fund.
Board: as defined in Section 1.1(a).
Business Day: any day other than a Saturday, Sunday or other day on
which the commercial banks in New York City are authorized or required to
close.
Change of Control: means, with respect to the Company, the first to
occur after the Effective Time of the following events:
(1) the acquisition by any person, entity or group (as defined in
section 13(d) of the Exchange Act) (other than (w) the Company and its
subsidiaries, (x) any employee benefit plan of the Company or its
subsidiaries or (y) the Fund or any Affiliate or partner thereof),
through one transaction or a series of transactions of 50% or more of
the combined voting power of the then outstanding voting securities of
the Company;
(2) the merger or consolidation of the Company as a result of which
persons who were Stockholders of the Company immediately prior to such
merger or consolidation, do not, immediately thereafter, own, directly
or indirectly, more than 50% of the combined voting power entitled to
vote generally in the election of directors of the merged or
consolidated company;
6
<PAGE>
(3) the liquidation or dissolution of the Company (other than (x) a
dissolution occurring upon a merger or consolidation thereof (y) a
liquidation of the Company into its subsidiary or (z) a liquidation or
dissolution that is incident to a reorganization); and
(4) the sale, transfer or other disposition of all or substantially
all of the assets of the Company through one transaction or a series of
related transactions to one or more persons or entities that are not,
immediately prior to such sale, transfer or other disposition,
Affiliates of the Fund.
Closing: as defined in Section 2.1(a).
Covered Security: all of the shares of Common Stock and any other
security, option, warrant or other right that does or may allow the holder
thereof to receive Common Stock, owned from time to time by any of the
Stockholders.
Equity Security: means (i) any Common Stock or other voting securities,
(ii) any securities of the Company convertible into or exchangeable for
Common Stock or other voting securities or (iii) any options, rights or
warrants (or any similar securities) issued by the Company to acquire
common stock or other voting securities.
Exchange Act: as defined in Section 2.2(a).
Exit Event: any sale, transfer, merger or other transaction as a result
of which NCP-SBG and its Affiliates sell or otherwise dispose of all or
substantially all of their Common Stock, including in any dissolution or
liquidation of the Company.
Family Member: with respect to any Stockholder, (i) a spouse, sibling
or any lineal ancestor or descendant, (ii) a trust or trusts of which such
family members are the sole beneficiaries or charitable remainder trusts in
which such family members have an interest or (iii) a partnership or
limited liability company in which such family members are the only
partners or members, as the case may be.
Fund: North Castle Partners II, L.P.
NCP: as defined in Section 1.1(d).
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, governmental authority or
other entity.
Prohibited Transfer: any transfer of a Covered Security to a Person
which (a) may not be effected without registering the securities involved
under the Securities Act, (b) would result in the assets of the Company
constituting Plan Assets as such term is defined in the Department of Labor
regulations promulgated under the Employee Retirement Income Security Act
of 1974, as amended, (c) would cause the Company to be, be controlled by or
under common control with an "investment company" for purposes of the
Investment Company Act of 1940, as amended, or (d) would require any
securities of the Company to be registered under the Exchange Act.
Public Offering: any underwritten sale of Common Stock to the public
pursuant to an effective registration statement under the Securities Act
after which at least 20% of the outstanding shares of Common Stock shall
have been registered under the Securities Act and such shares may be freely
traded.
Purchased Shares: as defined in the recitals to this Agreement.
Rollover Stockholders: shall be Robin Prever, Anthony Malatino, Steven
Bogen, Steel Partners II, L.P., Pershing Keen Nominee Limited and Jurg
Walker.
Securities Act: the Securities Act of 1933, as amended.
Special Registration: the registration of shares of equity securities
and/or options or other rights in respect thereof to be offered solely to
directors, members of management, employees, consultants or sales agents,
distributors or similar representatives of the Company or its direct or
indirect subsidiaries, solely on Form S-8 or any successor form.
7
<PAGE>
Stockholder: as defined in the introduction to this Agreement.
Stockholder List: at any applicable time, the list of the name and
addresses of the Stockholders at such time.
ARTICLE V
MISCELLANEOUS
Section 5.1. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, with a copy
sent by (a), (b), or (c) above, or telegram, as follows:
(i) if to NCP-SBG:
NCP-SBG, L.P.
c/o North Castle Partners, L.L.C.
60 Arch Street
Greenwich, CT 06830
Fax: (203) 618-1860
Tel: (203) 862-3250
Attention: Peter J. Shabecoff
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Fax: (212) 909-6836
Tel: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
(ii) if to the Company:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12366
Fax: (518) 584-0386
Tel: (518) 584-6363 X-11
Attention: Robin Prever
(iii) if to any other Person who is a party, or to any Person who becomes a
party to this Agreement pursuant to Section 5.12 hereof, to the name
and address specified for such Person on the signature pages hereto or
in Schedule A hereto;
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
Section 5.2. Remedies. Each Stockholder acknowledges that the other
Stockholders and the Company would be irreparably damaged in the event of a
breach or a threatened breach by such Stockholder or the Company of any of its
obligations under this Agreement (including without limitation the covenants
set forth in Section 3.3) and the Company and each Stockholder agrees that, in
the event of a breach or a threatened breach by the Company or such Stockholder
of any such
8
<PAGE>
obligation, each of the other Stockholders and the Company shall, in addition
to any other rights and remedies available to them in respect of such breach,
be entitled to an injunction from a court of competent jurisdiction (without
any requirement to post bond) granting them specific performance by such
Stockholder of its obligations under this Agreement (including without
limitation the covenants set forth in Section 3.3). In the event that any
Stockholder or the Company shall file suit to enforce the covenants contained
in this Agreement (including without limitation the covenants set forth in
Section 3.3) (or obtain any other remedy in respect of any breach thereof), the
prevailing party in the suit shall be entitled to recover, in addition to all
other damages to which it may be entitled, the costs incurred by such party in
conducting the suit, including reasonable attorney's fees and expenses.
Section 5.3. Governing Law, etc. (a) THIS AGREEMENT SHALL BE GOVERNED IN
ALL RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS RULES THEREOF TO THE EXTENT ANY SUCH RULES WOULD REQUIRE OR PERMIT THE
APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, EXCEPT TO THE EXTENT THAT
THE CORPORATE LAW OF THE STATE OF INCORPORATION OF THE COMPANY SPECIFICALLY AND
MANDATORILY APPLIES. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF
THE UNITED STATES OF AMERICA LOCATED IN THE STATE, CITY AND COUNTY OF NEW YORK
SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF
THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN
RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. EACH PARTY HERETO
HEREBY WAIVES, AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR
PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT
OR IN RESPECT OF ANY SUCH TRANSACTION, THAT IT IS NOT SUBJECT TO SUCH
JURISDICTION, THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT
MAINTAINABLE IN SUCH COURTS, THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR
THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS. EACH PARTY HERETO HEREBY CONSENTS TO AND GRANTS ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY
SUCH DISPUTE AND AGREES THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 5.1 OR IN
SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT
SERVICE THEREOF.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (2) SUCH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (3) SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (4) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 5.3(b).
9
<PAGE>
Section 5.4. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 5.5. Assignment. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent of
the Company, NCP-SBG, and any purported assignment or other transfer without
such consent shall be void and unenforceable; provided that NCP-SBG may assign
this Agreement or any of their rights and obligations hereunder to any of their
respective Affiliates or any other Person.
Section 5.6. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto and
their respective heirs, successors and permitted assigns.
Section 5.7. Amendment; Waivers, etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by NCP-SBG and the party against
whom enforcement of the amendment, modification, discharge or waiver is sought.
Any such waiver shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the rights of the
party granting such waiver in any other respect or at any other time. Neither
the waiver by any of the parties hereto of a breach of or a default under any
of the provisions of this Agreement, nor the failure by any of the parties, on
one or more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of
any other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights and remedies herein
provided are cumulative and none is exclusive of any other, or of any rights or
remedies that any party may otherwise have at law or in equity.
Section 5.8. Legend on Stock Certificates. A copy of this Agreement shall
be filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing Covered Securities which are subject to
this Agreement shall be endorsed with a legend substantially to the following
effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF (EACH, A "TRANSFER")
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS SUCH TRANSFER IS (A) EXEMPT FROM REGISTRATION OR
IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS IN THE OPINION OF
COUNSEL TO THE STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND
SUBSTANCE OF WHICH OPINION ARE, REASONABLY SATISFACTORY TO THE ISSUER AND
(B) IN COMPLIANCE WITH THE STOCKHOLDERS AGREEMENT OF THE ISSUER, DATED AS
OF JANUARY 5, 2000 AND ANY AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS THERETO
(THE "STOCKHOLDERS AGREEMENT").
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER SET FORTH IN (I) A STOCKHOLDERS AGREEMENT AND (II)
A REGISTRATION RIGHTS AGREEMENT, COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE OFFICES OF THE COMPANY. NO TRANSFER OF SUCH SECURITIES
WILL BE MADE ON THE BOOKS OF THE COMPANY, AND SUCH TRANSFER SHALL BE
VOIDABLE, UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF
SUCH AGREEMENTS.
Any stock certificate issued at any time in exchange or substitution for a
certificate bearing such legend (except a new certificate issued upon the
completion of a public distribution of securities of the Company represented
thereby or otherwise if the holder of the Shares represented by such
certificate
10
<PAGE>
shall have delivered to the Company an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to the Company, that the Act permits
such certificate to be issued without such legend or with a legend modified as
set forth in such opinion) shall also bear such legend. The provisions of this
Agreement shall be binding upon, and shall inure to the benefit of, the
Stockholders and all subsequent holders of Covered Securities who acquired the
same directly or indirectly from a Stockholder in a transaction or series of
transactions not involving any Public Offering. The Company agrees that it will
not transfer on its books any certificate representing Covered Securities in
violation of the provisions of this Agreement.
Section 5.9. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
Section 5.10. Severability. If any provision, including any phrase,
sentence, clause, section or subsection, of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering such provision in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision herein contained invalid, inoperative, or unenforceable to any extent
whatsoever.
Section 5.11. Headings; Counterparts. The headings contained in this
Agreement are for purposes of convenience only and shall not affect the meaning
or interpretation of this Agreement. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
Section 5.12. Subsequent Stockholders. Each of the parties hereto agrees
that in order for any Person who after the date of this Agreement is offered
shares of Common Stock or securities exercisable for or convertible into shares
of Common Stock (or any interest therein) to become a party to this Agreement,
both the Company and such Person must execute Schedule A hereto and duly
executed copies thereof must be delivered to NCP-SBG in accordance with Section
5.1. The Company shall maintain a register of all parties to this Agreement
which shall be available for review by any party hereto. Any transfer of
Covered Securities (or any interest therein) to a transferee required hereby to
become a party to this Agreement shall be of no effect and shall be void ab
initio unless such transferee becomes a party to this Agreement as provided in
the previous sentence.
Section 5.13. Reports. Within 60 days after the end of each fiscal
quarter, the Company shall furnish to each Stockholder an unaudited financial
report prepared in accordance with generally accepted accounting principles
applied on a consistent basis setting forth as of the end of such fiscal
quarter, a balance sheet of the Company and an income statement and a cash flow
statement for the Company for such fiscal quarter.
Section 5.14. Certain Agreements. The Stockholders party to that certain
Stockholders' Agreement, dated as of October 13, 1998, by and among the
Company, Steven Bogen, Robin Prever and Anthony Malatino, and that certain
Stockholders' Agreement, dated as of October 22, 1998, between Robin Prever and
Anthony Malatino, agree to terminate or cause to be terminated, as of the
Effective Time, such stockholders' agreements.
Section 5.15. Effectiveness. The effectiveness of this Agreement is
conditioned upon the occurrence of the Effective Time as contemplated by the
Recapitalization Agreement. If the Effective Time does not occur, or the
Recapitalization Agreement is terminated in accordance with its terms, this
Agreement shall be of no force or effect.
11
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Kim James
------------------------------------
Name: Kim James
Title: Chief Financial Officer
NCP-SBG, L.P.
By: NCP-SBG, GP, L.L.C.,
its General Partner
By: /s/ Peter J. Shabecoff
------------------------------------
Name: Peter J. Shabecoff
Title: Executive Vice President
/s/ Robin Prever Address: 4301 North Ocean Blvd.
- ------------------------------------- A-1703
ROBIN PREVER Boca Raton, FL 33431
/s/ Anthony Malatino Address: c/o Morgan Stanley Dean Witter
- ------------------------------------- 340 Broadway
ANTHONY MALATINO Saratoga Springs, NY 12866
/s/ Steven Bogen Address: 81 Dahlia Street
- ------------------------------------- Staten Island, NY 10312
STEVEN BOGEN
STEEL PARTNERS II, L.P. Address: c/o Steel Partners II, L.P.
150 East 52nd St., 21st Floor
By: STEEL PARTNERS, L.L.C., New York, NY 10022
its General Partner
By: /s/ Warren Lichtenstein
----------------------------------
Name: Warren Lichtenstein
Title: Managing Member
[Signature page for Stockholders Agreement]
12
<PAGE>
PERSHING SECURITIES LIMITED Address: Capstan House
#1 Clove Crescent
East India Dock
London E14 2BH
/s/ Christiane Ann Chambers England
By: ----------------------------------
Name: Christiane Ann Chambers
Title: Compliance Officer
Address: c/o Investa AG
/s/ Jurg Walker Harestrasse 4
---------------------------------- Birsfelden, Switzerland 4127
JURG WALKER
[Signature page for Stockholders Agreement]
13
<PAGE>
STOCKHOLDERS AGREEMENT
SCHEDULE A
Reference is made to the Stockholders Agreement, dated January , 2000,
between Saratoga Beverage Group, Inc., NCP-SBG, L.P., and the other parties
thereto (the "Stockholders Agreement"). The undersigned agrees, by execution
hereof, to become a party to, and to be subject to the rights and obligations
under, the Stockholders Agreement.
----------------------------------------
Name:
Title:
Address:
Date:
SARATOGA BEVERAGE GROUP, INC.
By:
---------------------------
Name:
Title:
14
<PAGE>
================================================================================
SARATOGA BEVERAGE GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
-----------------------
Dated as of January 5, 2000
-----------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
-----
1. Effectiveness as to Registrable Securities ..................... I-1
2. Definitions; Construction ...................................... I-1
3. Registration ................................................... I-4
3.1 Registration on Request .................................. I-4
(a) Requests ............................................. I-4
(b) Obligation to Effect Registration .................... I-4
(c) Registration Statement Form .......................... I-5
(d) Expenses ............................................. I-5
(e) Inclusion of Other Securities ........................ I-6
(f) Effective Registration Statement ..................... I-6
(g) Pro Rata Allocation .................................. I-6
3.2 Incidental Registration .................................. I-6
3.3 Registration Procedures .................................. I-7
3.4 Underwritten Offerings ................................... I-10
(a) Underwritten Offerings Exclusive ..................... I-10
(b) Underwriting Agreement ............................... I-10
(c) Selection of Underwriters ............................ I-10
(d) Incidental Underwritten Offerings .................... I-11
(e) Hold Back Agreements ................................. I-11
3.5 Preparation; Reasonable Investigation .................... I-11
3.6 Other Registrations ...................................... I-12
3.7 Indemnification .......................................... I-12
(a) Indemnification by the Company ....................... I-12
(b) Indemnification by the Sellers ....................... I-13
(c) Notices of Claims, etc. .............................. I-13
(d) Other Indemnification ................................ I-13
(e) Other Remedies ....................................... I-14
(f) Officers and Directors ............................... I-14
4. Miscellaneous ......................................... ... I-14
4.1 Rule 144; Legended Securities; etc. ...................... I-14
4.2 Amendments and Waivers ................................... I-14
4.3 Beneficial Owners ........................................ I-15
4.4 Successors, Assigns and Transferees ...................... I-15
4.5 Notices .................................................. I-15
4.6 No Inconsistent Agreements ............................... I-16
4.7 Remedies; Attorneys' Fees ................................ I-16
4.8 Stock Splits, etc. ....................................... I-16
4.9 Severability ............................................. I-16
4.10 Headings ................................................. I-16
4.11 Counterparts ............................................. I-16
4.12 Governing Law ............................................ I-17
4.13 No Third Party Beneficiaries ............................. I-17
4.14 Consent to Jurisdiction .................................. I-17
4.15 Waiver of Jury Trial ..................................... I-17
4.16 Effectiveness ............................................ I-17
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of January 5,
2000, among Saratoga Beverage Group, Inc., a Delaware corporation (the
"Company"), NCP-SBG, L.P., a Delaware limited partnership ("NCP-SBG") and the
undersigned stockholders of the Company (the "Continuing Shareholders").
Capitalized terms used in this Agreement have the meanings indicated in Section
2.
WHEREAS, the Company is a party to a Stock Purchase Agreement and Agreement
and Plan of Merger, dated as of the date hereof (the "Recapitalization
Agreement"), with NCP-SBG, and NCP-SBG Recapitalization Corp., pursuant to which
and subject to the terms and conditions contained therein, (i) NCP-SBG
Recapitalization Corp. shall merge with and into the Company, and (ii) NCP-SBG
will purchase shares of the common stock, par value $0.01 per share, of the
Company (the "Common Stock");
WHEREAS, to induce NCP-SBG to enter into the Recapitalization Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement for the benefit of NCP-SBG and each Holder (as defined below);
WHEREAS, the execution and delivery of this Agreement is a condition to the
obligations of NCP-SBG under the Recapitalization Agreement; and
WHEREAS, the Company may in the future issue or sell (either directly or
pursuant to options or other rights) additional shares of Common Stock to (i)
certain shareholders of businesses acquired by the Company or one of its
Subsidiaries, (ii) certain directors, executive officers and key employees of
the Company or one of its Subsidiaries, and (iii) certain other purchasers, in
each case pursuant to stock subscription, merger, acquisition or purchase
agreements or stock option or rights agreements, plans or arrangements, the
terms of which are not inconsistent with the terms of this Agreement or any
Stockholders Agreement (collectively, the "Stock Subscription Agreements");
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
conditions contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Effectiveness as to Registrable Securities. This Agreement shall take
effect at the Effective Time (as defined in the Recapitalization Agreement)
with respect to any Registrable Securities issued pursuant to the
Recapitalization Agreement and Registrable Securities issued and outstanding as
of the date hereof. With respect to any Common Stock issued after the Effective
Time (other than Common Stock issuable upon exercise of options or conversion
of other securities outstanding as of the date hereof and included in the
definition of Registrable Securities), this Agreement shall become effective
only upon the issuance or sale of such Common Stock to any party pursuant to
any Stock Subscription Agreement that provides that such Common Stock shall
constitute Registrable Securities and that the shares of Common Stock issued or
sold thereunder are entitled to the rights and subject to the obligations
created hereunder, provided that such issuance or sale shall have been
consented to in writing by the Board of Directors of the Company (the "Board").
2. Definitions; Construction. (a) For purposes of this Agreement, the
following terms have the following respective meanings:
Affiliate: with respect to any Person, any other Person directly or
indirectly Controlling, Controlled by or under common Control with such first
Person. "Control" means the power to direct or cause the direction of
management or policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
Ancillary Agreements: as defined in the Recapitalization Agreement.
Agreement: as defined in the Preamble to this Agreement.
Board: as defined in Section 1.
1
<PAGE>
Business Day: a day other than a Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required to close.
Closing: the closing under the Recapitalization Agreement.
Common Stock: as defined in the recitals to this Agreement.
Company: as defined in the preamble to this Agreement.
Continuing Shareholders: as defined in the preamble to this Agreement.
Distributee: any person that is a partner of NCP-SBG or NCP-Cofund, or any
person that is a member, shareholder or partner of a Distributee to which
Registrable Securities are transferred or distributed by NCP-SBG, NCP-Cofund or
any Distributee.
DTC: the Depository Trust Company.
Exchange Act: the Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations thereunder which shall
be in effect at the time. Any reference to a particular section thereof shall
include a reference to the corresponding section, if any, of any such successor
federal statute, and the rules and regulations thereunder.
Holder: any holder of Registrable Securities that has received such
Registrable Securities in compliance with the Ancillary Agreements and
applicable law.
NASD: the National Association of Securities Dealers, Inc.
NCP-Cofund: means NCP Co-Investment Fund, L.P.
NCP-SBG: as defined in the preamble to this Agreement.
Person: any natural person, firm, partnership, association, corporation,
company, trust, business trust, governmental entity or other entity.
Prospectus: the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
Public Offering: an underwritten public offering of Common Stock led by at
least one underwriter of nationally recognized standing.
Recapitalization Agreement: as defined in the recitals hereto.
Registrable Securities: (a) (i) shares of Common Stock issued by the
Company pursuant to the Recapitalization Agreement to NCP-SBG or NCP-Cofund,
the Continuing Shareholders, or any of their Affiliates, and (ii) shares of
Common Stock issuable pursuant to any Stock Subscription Agreement (including
upon exercise of options or warrants) that provides that such Common Stock
shall constitute Registrable Securities, except for any such Common Stock
issued pursuant to an effective registration statement under the Securities Act
on Form S-8, Form S-4, Form S-1 or any successor form to any thereof (unless
such Common Stock is held by a Continuing Shareholder who is an affiliate
(within the meaning of Rule 144) of the Company) and (b) any securities issued
or issuable with respect to any shares of Common Stock referred to in the
foregoing clauses (x) upon any conversion or exchange thereof, (y) by way of
stock dividend or other distribution, stock split or reverse stock split or (z)
in connection with a combination of shares, recapitalization, merger,
consolidation, exchange offer or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (A) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
Registration Statement, unless such
2
<PAGE>
securities are acquired and held by a Continuing Shareholder who is an
affiliate (within the meaning of Rule 144), (B) such securities shall have been
distributed to the public in reliance upon Rule 144, (C) such securities have
been held, or deemed, by virtue of tacking holding periods as contemplated by
Rule 144, to be held for a period of two years by a Person who obtained such
securities pursuant to any Stock Subscription Agreement and who has not been an
affiliate (within the meaning of Rule 144) of the Company within the three
months preceding any proposed disposition of such securities, (D) subject to
the provisions of Section 4.1(b)(ii), such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
law then in force, (E) such securities shall have been acquired by the Company,
or (F) with respect to any such securities acquired by a Continuing Shareholder
pursuant to the exemption from the registration requirements of the Securities
Act contained in Rule 701 (or any successor provision) thereunder, at any time
90 days following the date the Company registers a class of equity securities
under Section 12 of the Exchange Act.
Registration Expenses: all fees and expenses incident to the performance
of or compliance with the provisions of this Agreement, whether or not any
registration statement is filed or becomes effective, including, without
limitation, all (i) registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or blue sky laws (including, without
limitation, fees and disbursements of counsel for the underwriter or
underwriters in connection with blue sky qualifications of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as provided in Section
3.3(e))), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with DTC and of printing prospectuses), (iii) fees and disbursements of all
independent certified public accountants referred to in Section 3.3 (including,
without limitation, the reasonable expenses of any special audit and "comfort"
letters required by or incident to such performance), (iv) the fees and
expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to Rule 2720 of the NASD Rules
of Conduct, (v) liability insurance under the Securities Act or any other
securities laws, if the Company desires such insurance, (vi) fees and expenses
of all attorneys, advisers, appraisers and other persons retained by the
Company or any Subsidiary of the Company, (vii) internal expenses of the
Company and its Subsidiaries (including, without limitation, all salaries and
expenses of officers and employees of the Company and its Subsidiaries
performing legal or accounting duties), (viii) the expense of any annual audit,
(ix) the expenses relating to printing, word processing and distributing all
registration statements, underwriting agreements, securities sales agreements
and any other documents necessary in order to comply with this Agreement, and
(x) the reasonable out-of-pocket expenses of the Holders of the Registrable
Securities being registered in such registration incurred in connection
therewith including, without limitation, the reasonable fees and disbursements
of not more than one counsel (together with appropriate local counsel) chosen
by the holders of a majority of Registrable Securities included in such
registration. Registration Expenses shall not include any underwriting
discounts or commissions or any transfer taxes payable in respect of the sale
of Registrable Securities by the Holders thereof.
Registration Statement: any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
Requisite Percentage of Shareholders: as of any date of determination, the
holder or holders of at least 35% (by number of shares) of Registrable
Securities (other than any Registrable Securities obtainable upon the exercise
of any option).
Rule 144: Rule 144 (or any successor provision) under the Securities Act.
3
<PAGE>
Rule 144A: Rule 144A (or any successor provision) under the Securities
Act.
Rule 145: Rule 145 (or any successor provision) under the Securities Act.
SEC: the Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act or the Exchange Act.
Securities Act: the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations thereunder which shall be in
effect at the time. Any reference to a particular section thereof shall include
a reference to the corresponding section, if any, of any such successor federal
statute, and the rules and regulations thereunder.
Stockholders Agreement: any agreement between the Company and any of its
stockholders.
Special Registration: the registration of shares of equity securities
and/or options or other rights in respect thereof to be offered solely to
directors, members of management, employees, consultants or sales agents,
distributors or similar representatives of the Company or its direct or
indirect Subsidiaries, solely on Form S-8 or any successor form.
Stock Subscription Agreement: as defined in the recitals to this
Agreement.
Subsidiary: with respect to any Person, any corporation or Person, a
majority of the outstanding voting stock or other equity interests of which is
owned, directly or indirectly, by that Person.
underwritten registration or underwritten offering: a registration in
which securities of the Company (including Registrable Securities) are sold to
an underwriter for reoffering to the public.
(b) Any reference in this Agreement to a statute shall be to such statute,
as amended from time to time, and to the rules and regulations promulgated
thereunder. For the purposes of this Agreement, the terms "holder," "held,"
"owner," and "owned" shall be construed as set forth in Section 4.3.
3. Registration.
3.1 Registration on Request.
(a) Requests. Subject to the provisions of Section 3.6, (i) at any time or
from time to time after the date hereof, the Requisite Percentage of
Shareholders shall have the right to make written requests that the Company
effect one or more registrations under the Securities Act of all or part of the
Registrable Securities of such Holder or Holders, which requests shall specify
the intended method of disposition thereof, including whether the registration
requested is for an underwritten offering.
(b) Obligation to Effect Registration. Within 10 days after receipt by the
Company of any request for registration pursuant to Section 3.1(a), the Company
shall give written notice of such requested registration to all Holders, and
thereupon will use its reasonable best efforts to effect the registration under
the Securities Act of:
(i) the Registrable Securities which the Company has been so requested
to register pursuant to Section 3.1(a); and
(ii) all other Registrable Securities which the Company has been
requested to register by the Holders thereof by written request given to
the Company within 20 days after the Company has given such written notice
(which request shall specify the intended method of disposition of such
Registrable Securities),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the preceding sentence:
(x) the Company shall not be required to effect a registration
requested pursuant to Section 3.1 if the aggregate number of Registrable
Securities referred to in clauses (i) and (ii) of this Section 3.1(b)
included in such registration shall be less than 10% of the number of
Purchased Shares (as defined in the Recapitalization Agreement); and
4
<PAGE>
(y) if the Board determines in its good faith judgment, after
consultation with a firm of nationally recognized underwriters, that there
will be an adverse effect on a then-contemplated initial Public Offering of
the Common Stock, the Holders requesting such registration shall be given
notice of such fact and shall be deemed to have withdrawn such request and
such registration shall not be deemed to have been effected or requested
pursuant to this Section 3.1; and
(z) the Company shall be entitled to postpone for a reasonable period
of time not to exceed 180 days from the date a request pursuant to Section
3.1(a) is received, the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to this Section 3.1, if
the Board of Directors of the Company (i) in good faith determines at such
time that such registration and offering would materially adversely affect
or interfere with any proposed or pending financing, acquisition, corporate
reorganization or other material transaction or the conduct or outcome of
any material litigation involving the Company or any of its Subsidiaries,
and (ii) as promptly as practicable gives the relevant Holders written
notice of such postponement, setting forth the duration of and reasons for
such postponement; provided, however, that the Company shall not effect
such a postponement more than once in any 360 day period. If the Company
shall so postpone the filing of a registration statement, the Holder or
Holders making the request pursuant to Section 3.1(a) shall within 10 days
after receipt of the notice of postponement advise the Company in writing
whether or not it has determined to withdraw its request for registration.
Failure by such Holder or Holders to timely notify the Company of its
determination shall for all purposes be treated as a withdrawal of the
request for registration. In the event of a withdrawal, such request for
registration shall not be deemed exercised for purposes of determining
whether such Holder or Holders still have the right to make a request for
registration pursuant to this Section 3.1.
(c) Registration Statement Form. Each registration requested pursuant to
this Section 3.1 shall be effected by the filing of a registration statement on
Form S-1, Form S-2 or Form S-3 (or any other form which includes substantially
the same information as would be required to be included in a registration
statement on such forms as presently constituted), unless the use of a
different form is (i) required by law or (ii) permitted by law and agreed to in
writing by the Holders of at least a majority (by number of shares) of the
Registrable Securities as to which registration has been requested pursuant to
this Section 3.1. At any time after the Company has issued and sold any shares
of its capital stock registered under an effective registration statement under
the Securities Act, or after the Company shall have registered any class of
equity securities pursuant to Section 12 of the Exchange Act, it will use its
reasonable best efforts to qualify for registration on Form S-2 or Form S-3 (or
any other comparable form hereinafter adopted).
(d) Expenses. The Company will pay all Registration Expenses in connection
with (i) the first four registrations that are effected as requested under
Section 3.1(a)(i). The Registration Expenses in connection with each other
registration, if any, requested under this Section 3.1 shall be apportioned
among the Holders whose Registrable Securities are then being registered, on
the basis of the respective amounts of Registrable Securities then being
registered by them or on their behalf. However, in the case of all
registrations requested under Section 3.1(a), the Company shall pay all amounts
in respect of (i) any allocation of salaries of personnel of the Company and
its Subsidiaries or other general overhead expenses of the Company and its
Subsidiaries or other expenses for the preparation of financial statements or
other data normally prepared by the Company and its Subsidiaries in the
ordinary course of its business, (ii) the expenses of any officers' and
directors' liability insurance, (iii) the expenses and fees for listing the
securities to be registered on each exchange on which similar securities issued
by the Company are then listed or, if no such securities are then listed, on an
exchange selected by the Company, and (iv) all fees associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel as may be
required by the rules and regulations of the NASD). Notwithstanding the
provisions of this section 3.1(d) or of Section 3.2, each seller of Registrable
Securities shall pay all Registration Expenses to the extent required to be
paid by such seller by applicable law.
5
<PAGE>
(e) Inclusion of Other Securities. The Company shall not register
securities (other than Registrable Securities) for sale for the account of any
Person other than the Company in any registration requested pursuant to Section
3.1(a) unless permitted to do so by the written consent of Holders holding at
least a majority (by num ber of shares) of the Registrable Securities proposed
to be sold in such registration.
(f) Effective Registration Statement. A registration requested pursuant to
Section 3.1(a) shall not be deemed to have been effected unless it is declared
effective by the SEC and remains effective for the period specified in Section
3.3(b). Notwithstanding the preceding sentence, a registration requested
pursuant to Section 3.1(a) that does not become effective after the Company has
filed a Registration Statement with respect thereto by reason of the refusal to
proceed of the Holder or Holders of the Registrable Securities requesting
registration shall be deemed to have been effected by the Company at the
request of such Holder or Holders.
(g) Pro Rata Allocation. If the Holders of a majority (by number of
shares) of the Registrable Securities for which registration is being requested
pursuant to Section 3.1(a) determine, based on consultation with the managing
underwriters or, in an offering which is not underwritten, with an investment
banker, that the number of securities to be sold in any such offering should be
limited due to market conditions or otherwise, Holders of Registrable
Securities proposing to sell their securities in such registration shall share
pro rata in the number of securities being offered (as determined by the
Holders holding a majority of the Registrable Securities for which registration
is being re quested in consultation with the managing underwriters or
investment banker, as the case may be) and registered for their account, such
sharing to be based on the number of Registrable Securities as to which
registration was requested by such Holders.
3.2 Incidental Registration. If the Company at any time proposes to
register any of its equity securities (as defined in the Exchange Act) under
the Securities Act (other than pursuant to Section 3.1 or pursuant to a Special
Registration), whether or not for sale for its own account, and the
registration form to be used may be used for the registration of Registrable
Securities, it shall each such time give prompt written notice to all Holders
of Registrable Securities of its intention to do so and, upon the written
request of any Holder of Registrable Securities given to the Company within 30
days after the Company has given any such notice (which request shall specify
the Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company will use its reasonable
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Holders thereof, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, provided that:
(a) if such registration shall be in connection with the initial Public
Offering, the Company shall not include any Registrable Securities in such
proposed registration if the Board shall have determined, after
consultation with the managing underwriters for such offering, that it is
not in the best interests of the Company to include any Registrable
Securities in such registration, provided that, if the Board makes such a
determination, the Company shall not include in such registration any
securities not being sold for the account of the Company;
(b) if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company shall
determine for any reason not to register such securities, the Company may,
at its election, give written notice of such determination to each Holder
that was previously notified of such registration and, thereupon, shall not
register any Registrable Securities in connection with such registration
(but shall nevertheless pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any Holders to
request that a registration be effected under Section 3.1;
(c) if the Company shall be advised in writing by the managing
underwriters (or, in connection with an offering which is not underwritten,
by an investment banker) that in their or its opinion the number of
securities requested to be included in such registration (whether by the
6
<PAGE>
Company, pursuant to this Section 3.2 or pursuant to any other rights
granted by the Company to a holder or holders of its securities to request
or demand such registration or inclusion of any such securities in any such
registration) exceeds the number of such securities which can be sold in
such offering:
(i) the Company shall include in such registration the number (if any)
of Registrable Securities so requested to be included which in the opinion
of such underwriters or investment banker, as the case may be, can be sold
and shall not include in such registration any securities (other than
securities being sold by the Company, which shall have priority in being
included in such registration) so requested to be included other than
Registrable Securities unless all Registrable Securities requested to be so
included are included therein; and
(ii) if in the opinion of such underwriters or investment banker, as
the case may be, some but not all of the Registrable Securities may be so
included, all Holders of Registrable Securities requested to be included
therein shall share pro rata in the number of shares of Registrable
Securities included in such Public Offering on the basis of the number of
Registrable Securities requested to be included therein by such Holders,
provided that, in the case of a registration initially requested or
demanded by a holder or holders of securities other than Registrable
Securities, the Holders of the Registrable Securities requested to be
included therein and the holders of such other securities shall share pro
rata (based on the number of shares if the requested or demanded
registration is to cover only Common Stock and, if not, based on the
proposed offering price of the total number of securities included in such
Public Offering requested to be included therein),
and the Company shall so provide in any registration agreement hereinafter
entered into with respect to any of its securities; and
(d) if prior to the effective date of the registration statement filed in
connection with such registration, the Company is informed by the managing
underwriter (or, in connection with an offering which is not underwritten,
by an investment banker) that the price at which such securities are to be
sold is a price below that price which the requesting Holders shall have
indicated to be acceptable, the Company shall promptly notify the
requesting Holders of such fact, and each such requesting Holder shall have
the right to withdraw its request to have its Registrable Securities
included in such registration statement.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2.
No registration effected under this Section 3.2 shall relieve the Company from
its obligation to effect registrations upon request under Section 3.1. The
Company shall not be obligated to cause any "incidental" registration to be
underwritten.
3.3 Registration Procedures. If and whenever the Company is required to
use its reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 and 3.2, the
Company shall:
(a) subject to clauses (x), (y) and (z) of Section 3.1(b), prepare and
file with the SEC, as soon as practicable, a Registration Statement with
respect to such securities, make all required filings with the NASD and use
its reasonable best efforts to cause such Registration Statement to become
effective;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith
and such other documents as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
Registration Statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such Registration Statement, but in
no event for a period of more than six months after such Registration
Statement becomes effective;
7
<PAGE>
(c) furnish to counsel (if any) selected by the Holders of a majority
(by number of shares) of the Registrable Securities covered by such
registration statement copies of all documents proposed to be filed with
the SEC in connection with such registration, which documents will be
subject to the review of such counsel;
(d) furnish to each seller of Registrable Securities, without charge,
such number of conformed copies of such Registration Statement and of each
such amendment and supplement thereto (in each case, including all exhibits
and documents required to be filed therewith (other than those filed on a
confidential basis), except that the Company shall not be obligated to
furnish any seller of securities with more than two copies of such exhibits
and documents), such number of copies of the Prospectus included in such
Registration Statement (including each preliminary prospectus and any
summary prospectus) in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request in
order to facilitate the disposition of the securities owned by such seller;
(e) use its reasonable best efforts (x) to register or qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
request, (y) to keep such registration or qualification in effect for so
long as such Registration Statement remains in effect and (z) to do any and
all other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, subject
itself to taxation in any jurisdiction wherein it is not so subject, or
take any action which would subject it to general service of process in any
jurisdiction wherein it is not so subject;
(f) in connection with a Public Offering only, use its reasonable best
efforts to furnish to each seller of Registrable Securities a signed
counterpart, addressed to the sellers, copies of:
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the , and
(ii) a "comfort" letter signed by the independent public
accountants who have issued an audit report on the Company's financial
statements included in the Registration Statement,
each covering substantially the same matters with respect to the
Registration Statement (and the Prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities;
(g) (i) notify each Holder of Registrable Securities subject to such
Registration Statement if such Registration Statement, at the time it or
any amendment thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, upon
discovery by the Company of such material misstatement or omission, and, as
promptly as practicable, prepare and file with the SEC a post-effective
amendment to such Registration Statement and use its reasonable best
efforts to cause such post-effective amendment to become effective such
that such Registration Statement, as so amended, shall not contain an
untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and (ii) notify each Holder of Registrable Securities subject
to such Registration Statement, at any time when a Prospectus relating
thereto is required to be delivered under the Securities Act, if the
Prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, upon discovery by the Company of such material
misstatement or omission or upon discovery by the Company of the happening
of any event as a
8
<PAGE>
result of which the Company believes there would be a material misstatement
or omission, and, as promptly as is practicable, prepare and furnish to
such Holder a reasonable number of copies of a supplement to, or an
amendment of, such Prospectus as may be necessary so that, as thereafter
delivered to purchasers of such securities as required under the Securities
Act, such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(h) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
of the Company complying with the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act;
(i) notify each Holder of any Registrable Securities covered by such
Registration Statement (i) when such Registration Statement, or any
post-effective amendment to such Registration Statement, shall have become
effective, or any amendment of or supplement to the Prospectus used in
connection therewith shall have been filed, (ii) of any request by the SEC
to amend such Registration Statement or to amend or supplement such
Prospectus or for additional information, (iii) of the issuance by the SEC
of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation or threatening of any proceedings
for any of such purposes, and (iv) of the suspension of the qualification
of such securities for offering or sale in any jurisdiction, or of the
institution of any proceedings for any of such purposes;
(j) use its reasonable best efforts (i) (A) to list such securities on
any securities exchange on which the Common Stock is then listed or, if no
Common Stock is then listed, on an exchange selected by the Company, if
such listing is then permitted under the rules of such exchange or (B) if
such listing is not practicable or the Board determines that quotation as a
NASDAQ National Market System security is preferable, to secure designation
of such securities as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 under the Exchange Act and (ii) to provide and
cause to be maintained a transfer agent and registrar for such Registrable
Securities not later than the effective date of such registration
statement; and
(k) use its reasonable best efforts to obtain the lifting of any stop
order that might be issued suspending the effectiveness of such
Registration Statement or any order preventing or suspending the use of any
preliminary prospectus, provided that if the Company is unable to obtain
the lifting of any such stop order in connection with a registration
pursuant to Section 3.1(a), the request for registration shall not be
deemed exercised for purposes of determining whether such registration has
been effected for purposes of Section 3.1(a) or (d).
The Company may require each Holder of any Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such Holder and the distribution of such securities as
the Company may from time to time reasonably request in writing and as shall be
required by law or regulations of the SEC in connection therewith. Each such
Holder agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
The Company agrees not to file or make any amendment to any Registration
Statement with respect to any Registrable Securities, or any amendment of or
supplement to the Prospectus used in connection therewith, which refers to any
seller of any securities covered thereby by name, or otherwise identifies such
seller as the holder of any securities of the Company, without the consent of
such seller, such consent not to be unreasonably withheld, except that no such
consent shall be required for any disclosure that is required by law or
regulations of the SEC .
By the acquisition of Registrable Securities, each Holder shall be deemed
to have agreed that upon receipt of any notice from the Company pursuant to
Section 3.3(g), such Holder will promptly discontinue such Holder's disposition
of Registrable Securities pursuant to the Registration Statement
9
<PAGE>
covering such Registrable Securities until such Holder shall have received, in
the case of clause (i) of Section 3.3(g), notice from the Company that such
Registration Statement has been amended, as contemplated by Section 3.3(g); or,
in the case of clause (ii) of Section 3.3(g), copies of the supplemented or
amended Prospectus contemplated by Section 3.3(g). If so directed by the
Company, each Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, in such Holder's possession of the
Prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event that the Company shall give any such notice, the period
mentioned in Section 3.3(b) shall be extended by the number of days during the
period from and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities covered by
such Registration Statement shall have received the copies of the supplemented
or amended Prospectus contemplated by Section 3.3(g).
Although shares of Common Stock issuable upon the exercise of certain
options are included in the definition of Registrable Securities, the Company
shall, in respect of any such Registrable Securities requested to be registered
pursuant hereto, be required to include in any registration statement only
shares of Common Stock issuable upon exercise of such options and only if the
Company has received assurances, reasonably satisfactory to it, that such
options will be exercised promptly after such Registration Statement has become
effective or the sale to an underwriter has been consummated so that only
Common Stock shall be distributed to the public under such registration
statement.
3.4 Underwritten Offerings. The provisions of this Section 3.4 do not
establish additional registration rights but instead set forth procedures
applicable, in addi tion to those set forth in Sections 3.1 through 3.3, to any
registration that is an underwritten offering.
(a) Underwritten Offerings Exclusive. Whenever a registration requested
pursuant to Section 3.1 is for an underwritten offering, only securities that
are to be distributed by the underwriters may be included in the registration.
(b) Underwriting Agreement. If requested by the underwriters for any
underwritten offering by Holders pursuant to a registration requested under
Section 3.1, the Company shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to the Holders of a majority (by number of shares) of the
Registrable Securities to be covered by such registration and to the
underwriters and to contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in agreements
of this type, including, but not limited to, indemnities to the effect and to
the extent provided in Section 3.7, provisions for the delivery of officers'
certificates, opinions of counsel and accountants' "comfort" letters and
hold-back arrangements. The Holders of Registrable Securities to be distributed
by such underwriters shall be parties to such underwriting agreement and may,
at their option, require that any or all of the representations and warranties
by, and the agreements on the part of, the Company to and for the benefit of
such underwriters be made to and for the benefit of such Holders and that any
or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement shall also be conditions precedent to the
obligations of such Holders. If any condition to the obligations under such
underwriting agreement are not met or waived, and such failure to be met or
waived is not attributable to the fault of the Holders requesting a demand
registration pursuant to Section 3.1(a), such request for registration shall
not be deemed exercised for purposes of determining whether such registration
has been effected for purposes of Section 3.1. No such Holder shall be required
by the Company to make any representations or warranties to, or agreements
with, the Company or the underwriters other than as set forth in Sections
3.4(e) and 3.7(b), and representations, warranties or agreements regarding such
Holder and such Holder's intended method of distribution and any other
representations required by applicable law.
(c) Selection of Underwriters. Whenever a registration requested pursuant
to Section 3.1(a) is for an underwritten offering, the Company shall have the
right to select one or more underwriters to administer the offering at least
one of which shall be an underwriter of nationally recognized standing
10
<PAGE>
satisfactory to the Holders of a majority (by number of shares) of the
Registrable Securities to be included in such registration. If the Company at
any time proposes to register any of its securities under the Securities Act
for sale for its own account and such securities are to be distributed by or
through one or more underwriters, the Company shall have the right to select
one or more underwriters to administer the offering at least one of which shall
be an underwriter of nationally recognized standing.
(d) Incidental Underwritten Offerings. Subject to the provisions of the
proviso to the first sentence of Section 3.2, if the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than pursuant to Section 3.1 or pursuant to a Special Registration),
whether or not for its own account, and such securities are to be distributed
by or through one or more underwriters, the Company will give prompt written
notice to all Holders of its intention to do so and, if requested by any
Holder, will use its reasonable best efforts to arrange for such underwriters
to include the Registrable Securities to be offered and sold by such holder
among those to be distributed by such underwriters. The Holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such Holders and
that any or all of the conditions precedent to the obligations of the
underwriters under such underwriting agreement shall also be conditions
precedent to the obligations of such Holders. No such Holder shall be required
by the Company to make any representations or warranties to, or agreements
with, the Company or the underwriters other than as set forth in Sections
3.4(e) and 3.7(b), and representations, warranties or agreements regarding such
Holder and such Holder's intended method of distribution and any other
representations required by applicable law.
(e) Hold Back Agreements. If and whenever the Company proposes to register
any of its equity securities under the Securities Act, whether or not for its
own account (other than pursuant to a Special Registration), or is required to
use its reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 3.1 or 3.2, each
Holder, if required by the managing underwriter in an underwritten offering,
agrees by acquisition of such Registrable Securities not to effect (other than
pursuant to such registration) any public sale or distribution, including, but
not limited to, any sale pursuant to Rule 144 or Rule 144A, of any Registrable
Securities, any other equity securities of the Company or any securities
convertible into or exchangeable or exercisable for any equity securities of
the Company for 180 days after, and during the 20 days prior to, the effective
date of such registration, to the extent timely notified in writing by the
Company or the managing underwriter, and the Company agrees to cause each
holder of any equity security, or of any security convertible into or
exchangeable or exercisable for any equity security, of the Company purchased
from the Company at any time other than in a public offering to enter into a
similar agreement with the Company. The Company further agrees not to effect
(other than pursuant to such registration or pursuant to a Special
Registration) any public sale or distribution, or to file any Registration
Statement (other than such registration or a Special Registration) covering
any, of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 20 days prior to,
and for 180 days after, the effective date of such registration if required by
the managing underwriter.
3.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each Registration Statement registering Registrable
Securities under the Securities Act, the Company shall give the Holders of such
Registrable Securities so to be registered and their underwriters, if any, and
their respective counsel and accountants, the reasonable opportunity to
participate in the preparation of such Registration Statement, each Prospectus
included therein or filed with the SEC, and each amendment thereof or
supplement thereto, and shall give each of them such access to all pertinent
financial, corporate and other documents and properties of the Company and its
Subsidiaries, and such opportunities to discuss the business of the Company
with its officers, directors, employees and
11
<PAGE>
the independent public accountants who have issued audit reports on its
financial statements as shall be necessary, in the opinion of such Holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
3.6 Other Registrations. If and whenever the Company is required to use
its reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 3.1 or 3.2, and if such
registration shall not have been withdrawn or abandoned, the Company shall not
be obligated to and shall not file any Registration Statement with respect to
any of its securities (including Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own accord or at the
request or demand of any holder or holders of such securities, until a period
of 180 days shall have elapsed from the effective date of such previous
registration, and the Company shall so provide in any registration rights
agreement with respect to any of its equity securities.
3.7 Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any Registrable Securities under the Securities Act pursuant to Section 3.1,
3.2 or 3.4(d), the Company shall indemnify and hold harmless the seller of such
securities, its directors, officers, and employees, each other person who
participates as an underwriter, broker or dealer in the offering or sale of
such securities and each other person, if any, who controls such seller or any
such participating person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director, officer, employee, participating person or controlling person
may become subject under the Securities Act or otherwise (including, without
limitation, the reasonable fees of legal counsel incurred in connection with
any claim for indemnity hereunder), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement under which such securities were
registered under the Securities Act, any Prospectus or preliminary prospectus
included therein, or any amendment or supplement thereto, or (ii) any omission
or alleged omission to state a material fact required to be stated in any such
Registration Statement, Prospectus, preliminary prospectus, amendment or
supplement or necessary to make the statements therein not misleading; and the
Company shall reimburse such seller and each such director, officer, employee,
participating person and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding as such expenses are
incurred; provided that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or omission made in any such Registration
Statement, Prospectus, preliminary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such seller or participating person expressly for use in the
preparation thereof and provided, further, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the Prospectus, if such untrue
statement or alleged untrue statement or omission or alleged omission is
completely corrected in an amendment or supplement to the Prospectus and the
seller of Registrable Securities thereafter fails to deliver such Prospectus as
so amended or supplemented prior to or concurrently with the sale of
Registrable Securities to the person asserting such loss, claim, damage,
liability or expense after the Company had furnished such seller with a
sufficient number of copies of the same or if the seller received notice from
the Company of the existence of such untrue statement or alleged untrue
statement or omission or alleged omission and the seller continued to dispose
of Registrable Securities prior to the time of the receipt of either (A) an
amended or supplemented prospectus which completely corrected such untrue
statement or omission or (B) a notice from the Company that the use of the
exist ing Prospectus may be resumed. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, employee, participating person or controlling
person and shall survive the transfer of such securities by such seller.
12
<PAGE>
(b) Indemnification by the Sellers. In the event of any registration of
any Registrable Securities under the Securities Act pursuant to Section 3.1,
3.2 or 3.4(d), each of the prospective sellers of such securities, will
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall sign such Registration Statement, and each
other person, if any, who controls the Company or any such participating person
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which the Company or any such director, officer, employee,
participating person or controlling person may become subject under the
Securities Act or otherwise (including, without limitation, the reasonable fees
of legal counsel incurred in connection with any claim for indemnity
hereunder), insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act, any Prospectus or preliminary prospectus included therein, or
any amendment or supplement thereto, or any omission or alleged omission to
state a material fact with respect to such seller required to be stated in any
such Registration Statement, Prospectus, preliminary prospectus, amendment or
supplement or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller expressly for use in the
preparation of any such Registration Statement, Prospectus, preliminary
prospectus, amendment or supplement; provided that the liability of each such
seller shall be in proportion to and limited to the net amount received by such
seller (after deducting any underwriting discount and expenses) from the sale
of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer, employee,
participating person or controlling person.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding paragraphs of this Section 3.7, such indemnified
party shall, if such indemnified party is to seek indemnification in respect
thereof from an indemnifying party hereunder, give written notice to the latter
of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided therein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 3.7 unless the failure to provide prompt written notice shall cause
actual prejudice to the indemnifying party. In case any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate therein and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, provided that if such
indemnified party and the indemnifying party reasonably determine, based upon
advice of their respective independent counsel, that a conflict of interest may
exist between the indemnified party and the indemnifying party with respect to
such action and that it is advisable for such indemnified party to be
represented by separate counsel, such indemnified party may retain other
counsel, reasonably satisfactory to the indemnifying party, to represent such
indemnified party, and the indemnifying party shall pay all reasonable fees and
expenses of such counsel. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of such indemnified party,
which consent shall not be unreasonably withheld, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in
the preceding paragraphs of this Section 3.7 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of such Registrable
Securities under any federal or state law or regulation of governmental
authority other than the Securities Act.
13
<PAGE>
(e) Other Remedies. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
and the indemnified party shall contribute to the amount paid or payable by the
indemnifying party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and the indemnified party on the
other or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, or provides a lesser sum to the indemnified party than the
amount hereinafter calculated, in such proportion as is appropriate to reflect
not only the relative fault of the indemnifying party on the one hand and the
indemnified party on the other but also the relative benefits received by the
indemnifying party and the indemnified party from the offering of Registrable
Securities (taking into account the portion of the proceeds of the offering
realized by each such party) as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any party's obligation to contribute pursuant to this
Section 3.7(e) is several (in proportion to the relative value of their
Registrable Securities covered by a Registration Statement) and not joint with
the obligations of any other party. No party shall be liable for contribution
under this Section 3.7(e) except to the extent and under such circumstances as
such party would have been liable to indemnify under this Section 3.7 if such
indemnification were enforceable under applicable law.
(f) Officers and Directors. As used in this Section 3.7, the terms
"officers" and "directors" shall include the partners of Holders which are
partnerships and the members of Holders which are limited liability companies.
4. Miscellaneous.
4.1 Rule 144; Legended Securities; etc. (a) If the Company shall have
filed a registration statement pursuant to Section 12 of the Exchange Act or a
registration statement pursuant to the Securities Act relating to any class of
equity securities (other than a registration statement pursuant to a Special
Registration), the Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities,
make publicly available such information as necessary to permit sales pursuant
to Rule 144 or Rule 145), and shall take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell shares of Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 or
Rule 145. Upon the request of any Holder, the Company shall deliver to such
Holder a written statement as to whether it has complied with such
requirements.
(b) The Company shall issue new certificates for Registrable Securities
without a legend restricting further transfer under the Securities Act if (i)
such securities have been sold to the public pursuant to an effective
Registration Statement under the Securities Act (other than Form S-8 if the
Holder of such Registrable Securities is an affiliate of the Company) or Rule
144, or (ii) (x) such issuance is otherwise permitted under the Securities Act,
(y) the Holder of such shares has delivered to the Company an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to the
Company, to such effect, and (z) the Holder of such shares expressly requests
the issuance of such certificates in writing.
4.2 Amendments and Waivers. This Agreement may be amended, modified or
supplemented, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to act, of NCP-SBG and the Holders of a majority of the Registrable Securities
held by the Continuing Stockholders. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders may be given by
14
<PAGE>
Holders of at least a majority of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement; provided, however, that the
provisions of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding sentence. No
amendment, modification or discharge of this Agreement, and no waiver
hereunder, shall be valid or binding unless set forth in writing. Any such
waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party or
parties granting such waiver in any other respect or at any other time.
4.3 Beneficial Owners. For the purposes of this Agreement, the "holder" or
"owner" of any Registrable Securities that are Custody Shares shall be the
Beneficial Owner of such Custody Shares and Custody Shares shall be deemed
"held" or "owned" by the Beneficial Owner thereof. In the event that any other
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and unless notice is
otherwise given to the Company by the record owner, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
Holder or Holders pursuant to this Agreement or any determination of any number
or percentage of shares of Registrable Securities held by any Holder or Holders
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
4.4 Successors, Assigns and Transferees. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns and transferees. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the
Company shall also be for the benefit of and enforceable by any subsequent
holder of any Registrable Securities, subject to the provisions respecting the
minimum numbers or percentages of shares of Registrable Securities required in
order to be entitled to certain rights, or take certain actions, contained
herein.
4.5 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, with a copy
sent by (a), (b), or (c) above, or telegram, as follows:
(i) if to the Company:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12366
Fax: (518) 584-0386
Tel: (518) 584-6363 X-11
Attention: Robin Prever
(ii) if to NCP-SBG or NCP-Cofund, to such Holder:
c/o North Castle Partners, L.L.C.
60 Arch Street
Greenwich, CT 06830
Fax: (203) 618-1860
Tel.: (203) 862-3200
Attention: Peter J. Shabecoff
15
<PAGE>
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax: (212) 909-6836
Tel.: (212) 909-6486
Attention: Franci J. Blassberg, Esq.
(iii) if to any Continuing Shareholder, to such Continuing Shareholder
at the address set forth opposite such shareholder's name on the signature
pages hereto;
(iv) if to any Holder not a party to this Agreement, to the name and
address of such Holder in the stock record books of the Company;
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
4.6 No Inconsistent Agreements. The Company shall not hereafter enter into
any agreement, or amend any existing agreement, with respect to its securities
if such agreement would be inconsistent with the rights granted to the Holders
by this Agreement.
4.7 Remedies; Attorneys' Fees. Each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, shall be entitled to specific performance
of its rights under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of any provision of this Agreement and hereby agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.
As between the parties to this Agreement, in any action or proceeding brought
to enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorney's fees in addition to its costs and expenses and
any other available remedy.
4.8 Stock Splits, etc. Each party hereto or beneficiary hereof agrees that
it will vote to effect a stock split (forward or reverse, as the case may be)
with respect to any Registrable Securities in connection with any registration
of such Registrable Securities hereunder, or otherwise, if the managing
underwriter shall advise the Company in writing (or, in connection with an
offering that is not underwritten, if an investment banker shall advise the
Company in writing) that in their or its opinion such a stock split would
facilitate or increase the likelihood of success of the offering. Each party
hereto agrees that any number of shares of Common Stock referred to in this
Agreement shall be equitably adjusted to reflect any stock split, stock
dividend, stock combination, recapitalization or similar transaction.
4.9 Severability. If any clause, provision or section of this Agreement
shall be invalid, illegal or unenforceable, the invalidity, illegality or
unenforceability of such clause, provision or section shall not affect the
enforceability or validity of any of the remaining clauses, provisions or
sections hereof to the extent permitted by applicable law. The invalidity of
any one or more phrases, sentences, clauses, Sections or subsections of this
Agreement shall not affect the remaining portions of this Agreement.
4.10 Headings. The headings contained in this Agreement are for purposes
of convenience only and shall not affect the meaning or interpretation of this
Agreement.
4.11 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which together constitute
one and the same instrument.
16
<PAGE>
4.12 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
giving effect to its principles or rules of conflict of laws to the extent that
the application of the laws of any other jurisdiction would be required
thereby.
4.13 No Third Party Beneficiaries. Except as provided in Sections 3.7 and
4.4, nothing in this Agreement shall confer any rights upon any person or
entity other than the parties hereto, each such party's respective successors
and permitted assigns.
4.14 Consent to Jurisdiction. Each party irrevocably submits to the
personal exclusive jurisdiction of the United States District Court for the
Southern District of New York for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
(and, to the extent permitted under applicable rules of procedure, agrees not
to commence any action, suit or proceeding relating hereto except in such
court). Each party further agrees that service of any process, summons, notice
or document hand delivered or sent by registered mail to such party's
respective address set forth in Section 4.5 will be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in the
United States District Court for the Southern District of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in such court that any such action, suit or proceeding brought in such court
has been brought in an inconvenient forum.
4.15 Waiver of Jury Trial. EACH PARTY HERETO AND EACH PERSON CLAIMING THE
BENEFITS OF ANY PROVISION HEREOF HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
4.16 Effectiveness. The effectiveness of this Agreement is conditioned
upon the occurrence of the Effective Time as contemplated by the
Recapitalization Agreement. If the Effective Time does not occur, or the
Recapitalization Agreement is terminated in accordance with its terms, this
Agreement shall be of no force or effect.
17
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or
caused this Agreement to be executed on its behalf as of the date first written
above.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Kim James
------------------------------------
Name: Kim James
Title: Chief Financial Officer
NCP-SBG, L.P.
By: NCP-SBG, GP, L.L.C.,
its General Partner
By: /s/ Peter J. Shabecoff
------------------------------------
Name: Peter J. Shabecoff
Title: Executive Vice President
/s/ Robin Prever Address: 4301 North Ocean Blvd.
- ------------------------------------- A-1703 Boca Raton, FL 33431
ROBIN PREVER
/s/ Anthony Malatino Address: c/o Morgan Stanley Dean Witter
- ------------------------------------- 340 Broadway
ANTHONY MALATINO Saratoga Springs, NY 12866
/s/ Steven Bogen Address: 81 Dahlia Street
- -------------------------------------
Staten Island, NY 10312
STEVEN BOGEN
[Signature page for Registration Rights Agreement]
18
<PAGE>
STEEL PARTNERS II, L.P. Address: c/o Steel Partners II, L.P.
By: STEEL PARTNERS, L.L.C., 150 East 52nd St. 2st Floor
its General Partner New York, NY 10022
By: /s/ Warren Lichtenstein
-------------------------------
Name: Warren Lichtenstein
Title: Managing Member
[Signature page for Registration Rights Agreement]
19
<PAGE>
PERSHING SECURITIES LIMITED Address: Capstan House
#1 Clove Crescent
East India Dock
London E14 2BH
/s/ Christiane Ann Chambers England
By:-----------------------------------
Name: Christiane Ann Chambers
Title: Compliance Officer
[Signature page for Registration Rights Agreement]
20
<PAGE>
/s/ Jurg Walker Address: c/o Investa AG
- ------------------------------------- Harestrasse 4
JURG WALKER Birsfelden, Switzerland 4127
[Signature page for Registration Rights Agreement]
21
<PAGE>
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, dated as of January 5, 2000 (the "Agreement"),
by and between Saratoga Beverage Group, Inc., a Delaware corporation (the
"Company"), and North Castle Partners, L.L.C. ("North Castle"),
W I T N E S S E T H:
WHEREAS, the Company, NCP-SBG, L.P. ("NCP-SBG") and NCP-SBG
Recapitalization Corp. have entered into a Stock Purchase Agreement and
Agreement and Plan of Merger, dated as of the date hereof (the "Recapitalization
Agreement"), pursuant to which NCP-SBG Recapitalization Corp. shall merge with
and into the Company (the "Merger"), and NCP-SBG will, subject to the terms and
conditions contained in the Recapitalization Agreement, purchase shares of
common stock, par value $0.01 per share, of the Company (the "Stock Purchase");
WHEREAS, immediately following the Merger and Stock Purchase, NCP-SBG will
be the largest stockholder of the Company and NCP-Cofund, L.P. (the
"NCP-Cofund") will be a stockholder of the Company;
WHEREAS, the general partner of NCP-SBG is NCP-SBG GP, L.L.C. ("NCP-SBG
GP"), the sole member of NCP-SBG GP is North Castle Partners II, L.P. (the
"North Castle Fund"), the North Castle Fund is managed by North Castle, the
general partner of the North Castle Fund is NCP GP II, L.P. ("NCP-GP II"), the
general partner of NCP GP II is North Castle GP II, L.L.C. ("NCP-GP LLC") and
the general partner of the NCP-Cofund is NCP Co-Investment GP, LLC
("Co-Investment GP");
WHEREAS, the Company and North Castle are entering into this Agreement
pursuant to the Recapitalization Agreement;
WHEREAS, in connection with the Merger, the Company will prepare and file
with the Securities and Exchange Commission (the "Commission") a Schedule 13E-3
(as the same may be amended from time to time, the "13E-3");
WHEREAS, in connection with the solicitation by the Company of proxies of
its stockholders to vote in favor of the Merger, the Company will prepare and
file with the Commission a proxy statement on Schedule 14A (as the same may be
amended from time to time, the "Proxy Statement");
WHEREAS, in order to finance the transactions contemplated by the
Recapitalization Agreement, refinance existing debt and provide liquidity for
ongoing business needs, the Company (a) will enter into a new credit agreement
(the "Credit Agreement Financing"), and (b) will offer and sell senior
subordinated notes (the "Senior Subordinated Notes") in a private placement
offering to institutional investors (the "Senior Subordinated Note Offering",
and together with the Credit Agreement Financing, the "Financing");
WHEREAS, North Castle has performed for NCP-SBG Recapitalization Corp.,
which will at the Effective Time (as defined in the Recapitalization Agreement)
be merged with and into the Company, with the Company as the surviving
corporation and will perform financial, management advisory and other services
(all of such services the "Transaction Services") for the Company in connection
with the Merger and the Stock Purchase, including but not limited to services in
connection with (i) the retention of various financial and other advisors and
consultants in connection with the Merger and the Stock Purchase, (ii) the
preparation, negotiation, execution and delivery of the commitment, fee and
engagement letters, registration rights and purchase agreement, credit
agreements, guarantees, mortgages, pledge agreements and other security
agreements, and other agreements, instruments and documents, relating to the
Financing, (iii) the preparation and circulation of an information memorandum
and other materials in connection with the Financing, (iv) the preparation,
filing and circulation of the Proxy Statement and 13E-3 and related materials to
the stockholders of the Company, and (v) the structuring, implementation and
consummation of the foregoing transactions;
1
<PAGE>
WHEREAS, the Company and its Affiliates from time to time in the future
(a) may offer and sell or cause to be offered and sold equity or debt
securities (such offerings, collectively, the "Subsequent Offerings"),
including without limitation (i) offer ings of shares of common stock and/or
options to purchase such shares to employees, directors, managers and
consultants of and to the Company ("Management Offerings"), and (ii) offerings
of debt securities to refinance any indebtedness of the Company and its
Affiliates or for other corporate purposes, and (b) may repurchase, redeem or
otherwise acquire securities of the Company and its Affiliates (any such
repurchase or redemption being referred to herein as a "Redemption");
WHEREAS, the Company desires to receive financial and managerial advisory
services from North Castle, and North Castle desires to provide such services to
the Company;
WHEREAS, the parties hereto recognize that claims might be made against and
liabilities incurred by North Castle, NCP-SBG, NCP-SBG GP, the North Castle
Fund, NCP-Cofund, NCP GP II, NCP GP LLC, Co-Investment GP or related persons or
Affiliates, under applicable securities laws or otherwise, in connection with
the Merger, the Stock Purchase or any Securities Offerings, or relating to other
actions or omissions of or by the Company, or relating to the provision by North
Castle of services to the Company and its Affiliates, and the parties hereto
accordingly wish to provide for North Castle, NCP-SBG, NCP-SBG GP, the North
Castle Fund, NCP-Cofund, NCP GP II, NCP GP LLC, Co-Investment GP and related
persons and Affiliates to be indemnified in respect of any such claims and
liabilities; and
WHEREAS, the parties hereto recognize that claims might be made against and
liabilities incurred by directors and officers of the Company and its
subsidiaries in connection with their acting in such capacity, and accordingly
wish to provide for such directors and officers to be indemnified to the fullest
extent permitted by law in respect of any such claims and liabilities;
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom,
the parties hereto hereby agree as follows:
1. Definitions.
"13E-3" shall have the meaning set forth in the fifth recital.
"Agreement" shall have the meaning set forth in the preamble.
"Affiliate" of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first Person, and with respect to a natural person shall
include any child, stepchild, grandchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, and shall include adoptive relationships. "Control" (including
the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
Change of Control: means, with respect to the Company, the first to occur
after the Effective Time of the following events:
(1) the acquisition by any person, entity or group (as defined in
section 13(d) of the Exchange Act) (other than (w) the Company and its
subsidiaries, (x) any employee benefit plan of the Company or its
subsidiaries or (y) North Castle or any Affiliate or partner thereof),
through one transaction or a series of transactions of 50% or more of the
combined voting power of the then outstanding voting securities of the
Company;
(2) the merger or consolidation of the Company as a result of which
persons who were stockholders of the Company immediately prior to such
merger or consolidation, do not, immediately thereafter, own, directly or
indirectly, more than 50% of the combined voting power entitled to vote
generally in the election of directors of the merged or consolidated
company;
2
<PAGE>
(3) the liquidation or dissolution of the Company (other than (x) a
dissolution occurring upon a merger or consolidation thereof (y) a
liquidation of the Company into its subsidiary or (z) a liquidation or
dissolution that is incident to a reorganization); and
(4) the sale, transfer or other disposition of all or substantially all
of the assets of the Company through one transaction or a series of related
transactions to one or more persons or entities that are not, immediately
prior to such sale, transfer or other disposition, Affiliates of North
Castle.
"Claim" means, with respect to any Indemnitee, any claim against such
Indemnitee involving any Obligation with respect to which such Indemnitee may
be entitled to be defended and indemnified by the Company under this Agreement.
"Co-Investment GP" shall have the meaning set forth in the third recital.
"Commission" shall have the meaning set forth in the fifth recital.
"Company" shall have the meaning set forth in the preamble.
"Continuing Services" shall have the meaning set forth in Section 3(a).
"Continuing Services Fee" shall have the meaning set forth in Section
4(b).
"Designated Director" shall have the meaning set forth in Section 4(b).
"Expenses" shall have the meaning set forth in Section 4(c).
"Financing" shall have the meaning set forth in the fifth recital.
"Indemnitee" means each of North Castle, NCP-SBG, NCP-SBG GP, the North
Castle Fund, the NCP-Cofund, NCP GP II, NCP GP LLC, Co-Investment GP, their
respective successors and assigns, and each of their respective directors,
officers, partners, members, managers, employees, agents, advisors,
representatives and controlling persons (within the meaning of the Securities
Act).
"Information" shall have the meaning set forth in Section 3(b).
"Management Offerings" shall have the meaning set forth in the ninth
recital.
"Merger" shall have the meaning as set forth in the first recital.
"NCP-SBG" shall have the meaning set forth in the first recital.
"NCP-SBG GP" shall have the meaning set forth in the third recital.
"NCP-Cofund" shall have the meaning set forth in the second recital.
"NCP-GP II" shall have the meaning set forth in the third recital.
"NCP-GP LLC" shall have the meaning set forth in the third recital.
"North Castle" shall have the meaning set forth in the preamble.
"North Castle Fund" shall have the meaning set forth in the third recital.
"Notice of Claim" shall have the meaning set forth in Section 9(a).
"Notice of Payment" shall have the meaning set forth in Section 9(c).
"Obligations" means, collectively, any and all claims, obligations,
liabilities, causes of actions, actions, suits, proceedings, investigations,
judgments, decrees, losses, damages, fees, costs and expenses (including
without limitation interest, penalties and fees and disbursements of attorneys,
accountants, investment bankers and other professional advisors), in each case
whether incurred, arising or existing with respect to third parties or
otherwise at any time or from time to time.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, trust, or unincorporated organization.
3
<PAGE>
"Proxy Statement" shall have the meaning set forth in the sixth recital.
"Recapitalization Agreement" shall have the meaning set forth in the first
recital.
"Related Document" means the Recapitalization Agreement, the Proxy
Statement, the 13E-3 and any other agreement, certificate, instrument or other
document to which the Company or any subsidiary thereof may be a party or by
which it or any of its properties or assets may be bound or affected from time
to time relating in any way to the Merger, Stock Purchase, Financing, any
Securities Offering or any of the transactions contemplated thereby.
"Redemption" shall have the meaning set forth in the ninth recital.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Offerings" means any Redemption, any Management Offering and
any other Subsequent Offering.
"Senior Subordinated Notes" shall have the meaning set forth in the
seventh recital.
"Senior Subordinated Note Offering" shall have the meaning set forth in
the seventh recital.
"Subsequent Offerings" shall have the meaning set forth in the ninth
recital.
"Stock Purchase" shall have the meaning set forth in the first recital.
"Transaction Services" shall have the meaning set forth in the eighth
recital.
2. Engagement. The Company hereby engages North Castle as a consultant,
and North Castle hereby agrees to provide financial and managerial advisory
services to the Company, all on the terms and subject to the conditions set
forth below.
3. Services, etc. (a) North Castle hereby agrees during the term of this
Agreement to assist, advise and consult with the Board of Directors and
management of the Company in such manner and on such business, management and
financial matters, and provide such other financial and other advisory services
(collectively, the "Continuing Services"), as may be reasonably requested from
time to time by the Board of Directors of the Company, including but not
limited to assistance, advice or consultation in:
(i) establishing and maintaining banking, legal and other business
relationships for the Company;
(ii) developing and implementing corporate and business strategy and
planning for the Company, including plans and programs for improving
operating, marketing and financial performance, budgeting of future
corporate investments, acquisition and divestiture strategies, and
reorganizational programs;
(iii) arranging future debt and equity financings and refinancings; and
(iv) providing professional employees to serve as directors or officers
of the Company.
(b) The Company will furnish North Castle with such information as North
Castle reasonably believes appropriate to its engagement hereunder (all such
information so furnished being referred to herein as the "Information"). The
Company recognizes and confirms that (i) North Castle will use and rely
primarily on the Information and on information available from generally
recognized public sources in performing the services to be performed hereunder
and (ii) North Castle does not assume responsibility for the accuracy or
completeness of the Information and such other information.
4. Compensation; Expenses. (a) The Company agrees to pay to North Castle
at the Effective Time (as defined under the Recapitalization Agreement)
$1,150,000 as compensation for the Transaction Services.
(b) The Company agrees to pay to North Castle, as compensation for the
Continuing Services rendered and to be rendered by North Castle hereunder, an
annual fee (the "Continuing Services
4
<PAGE>
Fee"), equal to $550,000 payable quarterly in advance on each March 31, June
30, September 30 and December 31 during the term of this Agreement. Such
Continuing Services Fee shall be increased up to a maximum of 2% of the
aggregate equity investment in the Company of NCP-SBG and its Affiliated
coinvestors from time to time, provided that in no event shall such Continuing
Service Fee exceed $1.25 million per annum and provided further that the
Continuing Service Fee may not be decreased without the prior written consent
of North Castle. In addition, in connection with any acquisition of any
business or company by the Company or any of its subsidiaries or disposition of
the Company, whether by way of asset or stock purchase, merger, consolidation,
recapitalization or other similar transaction, the Company shall pay to North
Castle a transaction fee equal to 2% of the enterprise value of the acquired
company or business or the Company, as the case may be. If any employee of
North Castle shall be elected to serve on the Board of Directors or as an
officer of the Company (a "Designated Director"), in consideration of the
Continuing Services Fee being paid to North Castle, North Castle shall cause
such Designated Director to waive any and all fees and other compensation
(including stock options) to which such director or officer would otherwise be
entitled as a director or officer for any period for which the Continuing
Services Fee or any installment thereof is paid and for which such Designated
Director continues to be employed by North Castle.
(c) The Company agrees to reimburse North Castle for such travel and other
reasonable out-of-pocket expenses ("Expenses") incurred by North Castle and its
employees, agents and advisors in the course or on account of rendering of the
Continuing Services, including but not limited to any reasonable fees and
expenses of legal, accounting, consulting or other professional advisors to
North Castle engaged in connection with the Continuing Services and any
reasonable expenses incurred by any Designated Director in connection with the
performance of his duties as a director or officer of the Company or any
subsidiary thereof. North Castle shall submit monthly expense statements, which
shall be payable within thirty days from the date of such submission.
5. Term, etc. (a) This Agreement shall be effective as of the Effective
Time (as defined in the Recapitalization Agreement) and shall remain in effect
until, and shall terminate upon, the earlier to occur of (x) the tenth
anniversary of the date hereof and (y) the date on which a Change of Control
occurs. North Castle may terminate this Agreement at any time on 30 days' prior
notice to the Company. The provisions of this Agreement shall survive any
termination of this Agreement, except for the provisions of Sections 2, 3 and
4. The effectiveness of this Agreement is conditioned upon the occurrence of
the Effective Time as contemplated by the Recapitalization Agreement. If the
Effective Time does not occur, or the Recapitalization Agreement terminates by
its terms, this Agreement shall be of no force or effect.
(b) Except as provided under Section 5(a) in the case of a Change of
Control, upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Company, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such conveyance, transfer or lease is made, shall succeed to, and be
substituted for, the Company under this Agreement with the same effect as if
such successor corporation had been a party thereto. Except as provided under
Section 5(a) in the case of a Change of Control, no such consolidation, merger
or conveyance, transfer or lease of all or substantially all of the assets of
the Company shall have the effect of terminating this Agreement or of releasing
the Company or any such successor corporation from its obligations hereunder.
(c) Upon any termination of this Agreement, (i) any prepaid installment of
the Continuing Services Fee or portion thereof (pro rated, with respect to the
quarter in which such termination occurs, for the portion of such quarter
following such termination), shall be immediately refunded to the Company, net
of any of the amounts described in Clause (ii) of this Section 5(c), and (ii)
any unpaid and unreimbursed Expenses that shall have been incurred prior to
such termination (whether or not such Expenses shall than have become payable),
shall be immediately paid or reimbursed, as the case may be, by the Company. In
the event of the liquidation of the Company, all amounts due North Castle
hereunder shall be paid to North Castle before any liquidating distributions or
similar payments are made to stockholders of the Company.
5
<PAGE>
6. Independent Contractor Status. The parties agree that North Castle
shall perform services hereunder as an independent contractor, retaining
control over and responsibility for its own operations and personnel. Neither
North Castle nor any of its employees or agents shall, solely by virtue of this
Agreement or the arrangements hereunder, be considered employees or agents of
the Company nor shall any of them have authority to contract in the name of or
bind the Company, except (a) to the extent that any professional employee of
North Castle may be serving as a director or officer of the Company pursuant to
Section 3(a)(iv) hereof or (b) as expressly agreed to in writing by the
Company.
7. Indemnification. The Company agrees to indemnify, defend and hold
harmless each Indemnitee:
(a) from and against any and all Obligations, except to the extent that
any such Obligation is found in a final judgment by a court of competent
jurisdiction to have resulted from the gross negligence or intentional
misconduct of an Indemnitee, whether incurred with respect to third parties
or otherwise, in any way resulting from, arising out of or in connection
with, based upon or relating to (A) the Securities Act, the Securities
Exchange Act of 1934, as amended, or any other applicable securities or
other laws, in connection with the Merger, the Stock Purchase, any
Securities Offering, any Related Document or any of the transactions
contemplated thereby, except obligations arising out of or based upon an
untrue statement or omission made in any Securities Offering or any Related
Document furnished by an Indemnitee in writing for the purpose of
preparation thereof, (B) any other action or failure to act of the Company
and its subsidiaries, or any of its predecessors, whether such action or
failure has occurred or is yet to occur or (C) the performance by North
Castle of management consulting, monitoring, financial advisory or other
services for the Company (whether performed prior to the date hereof,
hereafter, pursuant hereto or otherwise); and
(b) to the fullest extent permitted by applicable law, from and against
any and all Obligations in any way resulting from, arising out of or in
connection with, based upon or relating to (A) the fact that such
Indemnitee is or was a shareholder, director or officer of the Company or
is or was serving at the request of the Company as a director, officer,
employee or agent of or advisor or consultant to another corporation,
partnership, joint venture, trust or other enterprise, or (B) any breach or
alleged breach by such Indemnitee of his or her fiduciary duty as a
shareholder, director or officer of the Company;
in each case including but not limited to any and all fees, costs and expenses
(including without limitation fees and disbursements of attorneys) incurred by
or on behalf of any Indemnitee in asserting, exercising or enforcing any of its
rights, powers, privileges or remedies in respect of this Agreement.
8. Contribution. (a) If for any reason the indemnity provided for in
Section 7 is unavailable other than pursuant to its express terms, or is
insufficient to hold harmless any Indemnitee from any of the Obligations
covered by such indemnity, then the Company shall contribute to the amount paid
or payable by such Indemnitee as a result of such Obligation in such proportion
as is appropriate to reflect (i) the relative fault of the Company, on the one
hand, and the Indemnitees, on the other, in connection with the state of facts
giving rise to such Obligation, (ii) if such Obligation results from, arises
out of, is based upon or relates to the Merger, Stock Purchase or any
Securities Offering, the relative benefits received by the Company, on the one
hand, and the Indemnitees, on the other, from the Merger, Stock Purchase or
Securities Offering, and (iii) if required by applicable law, any other
relevant equitable considerations.
(b) For purposes of Section 8(a), the relative fault of the Company, on
the one hand, and of the Indemnitees, on the other, shall be determined by
reference to, among other things, their respective relative intent, knowledge,
access to information and opportunity to correct the state of facts giving rise
to such Obligation. For purposes of Section 8(a), the relative benefits
received by the Company, on the one hand, and the Indemnitees, on the other,
shall be determined by weighing the direct monetary proceeds to the Company, on
the one hand, and the Indemnitees, on the other, from the Merger, Stock
Purchase or Securities Offering.
6
<PAGE>
(c) The parties hereto acknowledge and agree that it would not be just and
equitable if contributions pursuant to Section 8(a) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in such Section. The Company shall not
be liable under Section 8(a) for contribution to the amount paid or payable by
any Indemnitee except to the extent and under such circumstances that the
Company would have been liable to indemnify, defend and hold harmless such
Indemnitee under Section 7, if such indemnity were enforceable under applicable
law. No Indemnitee shall be entitled to contribution from the Company with
respect to any Obligation in the event that any Indemnitee is finally
judicially determined to be guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) in connection with such
Obligation and the Company is not guilty of such fraudulent misrepresentation.
9. Indemnification Procedures. (a) Whenever any Indemnitee shall have
actual knowledge of the reasonable likelihood of the assertion of a Claim,
North Castle (acting on its own behalf or, if requested in writing by any such
Indemnitee other than itself, on behalf of such Indemnitee) or such Indemnitee
shall notify the Company in writing of the Claim (the "Notice of Claim") with
reasonable promptness after such Indemnitee has such knowledge relating to such
Claim and has notified North Castle thereof. The Notice of Claim shall specify
all material facts known to North Castle (or if given by such Indemnitee, such
Indemnitee) that may give rise to such Claim and the monetary amount or an
estimate of the monetary amount of the Obligation involved if North Castle (or
if given by such Indemnitee, such Indemnitee) has knowledge of such amount or a
reasonable basis for making such an estimate. The failure of North Castle or
such Indemnitee to give such Notice of Claim shall not relieve the Company of
its indemnification obligations under this Agreement except to the extent that
such omission results in a failure of actual notice to the Company and the
Company is materially prejudiced as a result of the failure to give such Notice
of Claim. The Company shall, at its expense, undertake the defense of such
Claim with attorneys of its own choosing reasonably satisfactory to North
Castle. North Castle may participate in such defense with counsel of North
Castle's choosing at the expense of the Company. If in the exercise of their
good faith judgment any one or more other Indemnitee reasonably determines that
the Claim presents an actual or potential conflict of interest with North
Castle, such Indemnitee or Indemnitees may participate in the defense of the
Claim with one counsel for all such Indemnitees, at the choosing of such
Indemnitees and at the expense of the Company. In the event that the Company
does not undertake the defense of the Claim within a reasonable time after
North Castle has given the Notice of Claim, or in the event that North Castle
shall in good faith determine that the defense of any claim by the Company is
inadequate or may conflict with the interests of any Indemnitee, North Castle
may, at the expense of the Company and after giving notice to the Company of
such action, undertake the defense of the Claim and compromise or settle the
Claim, all for the account of and at the risk of the Company. In the defense of
any Claim, the Company shall not, except with the consent of North Castle (or,
in the case of any entry of any judgment or settlement that is binding on any
other Indemnitee, such other Indemnitee), consent to entry of any judgment or
enter into any settlement that includes any injunctive or other non-monetary
relief, or that does not include as an unconditional term thereof the giving by
the person or persons asserting such Claim to such Indemnitee of a release from
all liability with respect to such Claim. In each case, North Castle and each
other Indemnitee seeking indemnification hereunder will cooperate with the
Company, so long as the Company is conducting the defense of the Claim, in the
preparation for and the prosecution of the defense of such Claim, including
making available evidence within the control of North Castle or such
Indemnitee, as the case may be, and persons needed as witnesses who are
employed by North Castle or such Indemnitee, as the case may be, in each case
as reasonably needed for such defense and at cost, which cost, to the extent
reasonably incurred, shall be paid by the Company.
(b) The Company hereby agrees to advance costs and expenses, including
attorney's fees, incurred by North Castle (acting on its own behalf or, if
requested by any such Indemnitee other than itself, on behalf of such
Indemnitee) or any Indemnitee in defending any Claim in advance of the final
disposition of such Claim upon receipt of an undertaking by or on behalf of
North Castle or such Indemnitee to repay amounts so advanced if it shall
ultimately be determined that North Castle or such Indemnitee is not entitled
to be indemnified by the Company as authorized by this Agreement.
7
<PAGE>
(c) Each Indemnitee shall notify the Company in writing of the amount of
any Claim actually paid by such Indemnitee (the "Notice of Payment"). The
amount of any Claim actually paid by an Indemnitee shall bear simple interest
at the rate equal to the Bank of America prime rate as of the date of such
payment plus 2% per annum, from the date the Company receives the Notice of
Payment to the date on which the Company shall repay the amount of such Claim
plus interest thereon to such Indemnitee.
10. Certain Covenants. The Company agrees to perform its obligations under
this Agreement. The rights of each Indemnitee to be indemnified under any other
agreement, document, certificate or instrument or applicable law are
independent of and in addition to any rights of such Indemnitee to be
indemnified under this Agreement. The rights of each Indemnitee and the
obligations of the Company hereunder shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnitee. The
Company shall implement and maintain in full force and effect any and all
corporate articles or charter and by-law provisions that may be necessary or
appropriate to enable it to carry out its obligations hereunder to the fullest
extent permitted by applicable corporate law, including without limitation a
provision of its articles or certificate of incorporation eliminating liability
of a director for breach of fiduciary duty to the fullest extent permitted by
applicable corporate law, as it may be amended from time to time.
11. Third-Party Beneficiaries. All Indemnitees not signatories to this
Agreement are intended third-party beneficiaries of this Agreement.
12. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
13. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, with a copy
sent by (a), (b), or (c) above, or telegram, as follows:
If to the Company, to:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12366
Telephone: (518) 584-6363 x11
Telecopy: (518) 584-0380
Attention: Chief Executive Officer
If to North Castle or any other Indemnitee, to:
North Castle Partners, L.L.C.
60 Arch Street
Greenwich, CT 06830
Telephone: (203) 862-3200
Telecopy: (203) 618-1860
Attention: Peter J. Shabecoff
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
Attention: Franci J. Blassberg
8
<PAGE>
or, in each case, at such other address as may be specified in writing to the
other party hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
14. Entire Agreement. This Agreement (a) contains the complete and entire
understanding and agreement of North Castle and the Company with respect to the
subject matter hereof and (b) supersedes all prior and contemporaneous
understandings, conditions and agreements, oral or written, express or implied,
in respect of the subject matter hereof, including but not limited to in
respect of the engagement of North Castle in connection with the subject matter
hereof. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party or Indemnitee may otherwise
have at law or in equity or otherwise, including, without limitation, pursuant
to the Registration Rights Agreement and the Stockholders Agreement, each dated
as of the date hereof, by and between the Company, NCP-SBG and the other
parties thereto. There are no representations or warranties of North Castle in
connection with this Agreement or the services to be provided hereunder, except
as expressly made and contained in this Agreement.
15. Headings. The headings contained in this Agreement are for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement.
16. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
17. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns and to each Indemnitee, provided that, neither North
Castle nor the Company may assign any of its rights or obligations under this
Agreement without the express written consent of the other party hereto.
Subject to Section 11, this Agreement is not intended to confer any right or
remedy upon any person other than the parties to this Agreement and their
respective successors and permitted assigns and each Indemnitee.
18. Governing Law. This Agreement shall be governed in all respects
including as to validity, interpretations and effects by the laws of the State
of New York, without giving effect to its principles or rules of conflict of
laws to the extent such principles or rules would require or permit the
application of the laws of another jurisdiction. Each of the Company and North
Castle hereby irrevocably submit to the exclusive jurisdiction of the courts of
the State of New York and the Federal courts of the United States of America,
in each case located in the State, City and County of New York, solely in
respect of the interpretation and enforcement of the provisions of this
Agreement, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof, that
it is not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in such courts or that the venue thereof may not
be appropriate or that this Agreement may not be enforced in or by such courts,
and the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a New York State or
Federal court. The Company and North Castle hereby consent to and grant any
such court jurisdiction over the person of such parties and over the subject
matter of any such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
13, or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
19. Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY
9
<PAGE>
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR
VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (C) IT MAKES THIS WAIVER VOLUNTARILY, AND (D) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 19.
20. Future Acquisitions. The Company and North Castle agree, and North
Castle agrees to cause its Affiliates and the respective officers and directors
of such Affiliates, to pursue all future acquisitions, mergers and
recapitalizations involving businesses in the refrigerated juice industry
(other than minority investments by North Castle or any of its Affiliates)
through (i) the Company, with such entities to be acquired, owned and operated
by the Company, or (ii) any other company, provided that the Rollover
Stockholders (as defined in the Stockholders Agreement, dated as of the date
hereof, among the Company, NCP-SBG and the other parties thereto) shall have
had an opportunity to exchange their respective shares of common stock of the
Company for shares of common stock of an equivalent value in such other company
in connection with any such transaction which results in the Company not being
the top-tier holding company for investments by North Castle in the
refrigerated juice industry.
21. Amendment; Waivers. No amendment, modification, supplement or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, supplement, discharge or waiver is
sought (and in the case of the Company, approved by resolution of the Board of
Directors of the Company), provided that Sections 4(a) and 4(b) may not be
amended to increase the fees payable to North Castle or otherwise be amended in
a manner that is adverse to the Company, nor may the term hereof be extended,
without the consent of a majority of the members of the Board of Directors of
the Company who are not nominees of the NCP-SBG under the Shareholder
Agreement, dated as of the date hereof, among the Company, NCP-SBG and the
other parties thereto. Any such waiver shall constitute a waiver only with
respect to the specific matter described in such writing and shall in no way
impair the rights of the party or Indemnitee granting such waiver in any other
respect or at any other time. Neither the waiver by any of the parties hereto
or any Indemnitee of a breach of or a default under any of the provisions of
this Agreement, nor the failure by any party hereto or any Indemnitee on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, powers or privilege hereunder, shall be construed as a
waiver of any other breach or default of a similar nature, or as a waiver of
any of such provisions, rights, power or privileges hereunder.
10
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
NORTH CASTLE PARTNERS, L.L.C.
By: /s/ Peter J. Shabecoff
-----------------------------------
Name: Peter J. Shabecoff
Title: Managing Director
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Kim James
-----------------------------------
Name: Kim James
Title: Chief Financial Officer
11
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
[x] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SARATOGA BEVERAGE GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
Class A Common Stock, $.01 par value per share
Class B Common Stock, $.01 par value per share
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
5,433,173
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
The filing fee was determined based upon (a) 4,910,218 issued and
outstanding shares of Class A common stock, par value $.01 per
share, which does not include 550,000 shares which will be rolled
over into the surviving corporation, and 522,955 issued and
outstanding shares of Class B common stock, par value $.01 per share
(together, the "Shares"), of Saratoga Beverage Group, Inc. as of
January 14, 2000, and (b) the merger consideration of $6.00 per
Share (the "Merger Consideration"), plus $3,590,345 payable to
holders of options and warrants to purchase Shares in exchange for
the cancellation of such options and warrants.
<PAGE>
The payment of the filing fee, calculated in accordance with
Regulation 240.0-11 under the Securities Exchange Act of 1934, as
amended, equals one-fiftieth of one percent of the value of the
Shares (and options and warrants to purchase Shares) for which the
Merger Consideration will be paid.
4) Proposed maximum aggregate value of transaction:
$ 36,189,383
- --------------------------------------------------------------------------------
5) Total fee paid:
$ 7,237.88
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[x] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
$ 7,237.88
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
Schedule 13E-3
- --------------------------------------------------------------------------------
3) Filing Parties:
Saratoga Beverage Group, Inc. and other filing parties
- --------------------------------------------------------------------------------
4) Date filed:
January 21, 2000
- --------------------------------------------------------------------------------
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
11 GEYSER ROAD
SARATOGA SPRINGS, NEW YORK 12866
February __, 2000
Dear Stockholder,
You are cordially invited to attend a special meeting of stockholders,
including any adjournment or postponement of the special meeting, of Saratoga
Beverage Group, Inc. to be held on March __, 2000 at 11:00 a.m., New York time,
at the offices of Swidler Berlin Shereff Friedman, LLP, Saratoga's corporate
counsel, located at The Chrysler Building, 405 Lexington Avenue, New York, New
York 10174.
At the special meeting, you will be asked to consider and vote upon a
proposal to approve and adopt a Stock Purchase Agreement and Agreement and Plan
of Merger, dated as of January 5, 2000, by and among Saratoga, NCP-SBG, L.P., a
Delaware limited partnership (the "Purchaser"), and NCP-SBG Recapitalization
Corp., a Delaware corporation ("MergerCo"), which were organized to effect the
merger and related transactions at the direction of North Castle Partners,
L.L.C., providing for the merger of MergerCo with and into Saratoga, with
Saratoga continuing as the surviving corporation. A copy of the merger agreement
is attached as Annex A to, and a description of the merger agreement is included
in, the accompanying Proxy Statement.
Pursuant to the merger agreement, all holders of shares of Class A
common stock, $.01 par value per share, and Class B common stock, $.01 par value
per share, of Saratoga will be entitled to receive $6.00 in cash in exchange for
each outstanding share of Class A common stock and Class B common stock held by
them at the effective time of the merger, except for (i) certain other
stockholders, including the Chief Executive Officer and certain directors of
Saratoga, who will convert a minimum of 550,000 and a maximum of 700,000 of
their shares of Class A common stock into shares of common stock of the
surviving corporation and continue to be stockholders of Saratoga (such
continuing stockholders, the "Continuing Stockholders"), (ii) shares held by
Saratoga as treasury stock, and (iii) dissenting stockholders who have perfected
their rights in accordance with Delaware law. Please see Annex C to the Proxy
Statement for the text of Section 262 of the Delaware General Corporation Law
which governs the rights of dissenting stockholders of corporations incorporated
in Delaware. The receipt of cash for Class A common stock and Class B common
stock pursuant to the merger will be a taxable transaction to Saratoga's
stockholders for federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be a taxable transaction under applicable state,
local, foreign and other tax laws.
Pursuant to Delaware law, the affirmative vote of holders of at least a
majority of the
<PAGE>
voting power of Saratoga entitled to vote is required to approve and adopt the
merger agreement. Under the terms of the certificate of incorporation of
Saratoga, each share of Class A common stock is entitled to one vote and each
share of Class B common stock is entitled to five votes and the classes vote
together as a single class. The Continuing Stockholders hold an aggregate of
1,877,262 shares of Class A common stock and 522,955 shares of Class B common
stock, representing approximately 55.63% of the outstanding voting power of
Saratoga. In connection with the execution of the merger agreement, each
Continuing Stockholder entered into a voting agreement with the Purchaser and
appointed the Purchaser as his, her or its irrevocable proxy to vote all of his,
her or its shares in favor of the approval and adoption of the merger agreement.
The voting agreements are subject to certain terms and conditions and terminate
upon termination of the merger agreement, including termination of the merger
agreement in connection with the acceptance by Saratoga of a company superior
proposal, as defined in the merger agreement. Accordingly, unless the merger
agreement is terminated in accordance with its terms, the adoption of the merger
agreement by Saratoga's stockholders is expected to occur irrespective of
whether or the manner in which Saratoga's other stockholders vote their shares
of Class A common stock.
Since the Continuing Stockholders include members of Saratoga's board,
the Saratoga board appointed a special committee of the board, comprised of two
non-employee directors of Saratoga who are not Continuing Stockholders, but who
will receive cash in exchange for their stock options upon consummation of the
merger, to negotiate the proposed merger, to consider the fairness of the
proposed merger to Saratoga and its stockholders, other than the Continuing
Stockholders, and to recommend to the board whether to proceed with the proposed
merger. In connection with its review and consideration of the proposed merger,
the special committee retained Schroder & Co. Inc. to act as its financial
advisor. On January 5, 2000, Schroders delivered its oral opinion, which was
subsequently confirmed in writing, to the special committee to the effect that,
as of the date of its opinion, the merger consideration of $6.00 in cash per
share of common stock to be received in the merger by Saratoga's stockholders
other than the Continuing Stockholders, is fair to those stockholders from a
financial point of view. A copy of Schroders' opinion is attached as Annex B to,
and a description of its opinion is included in, the accompanying Proxy
Statement.
The special committee has unanimously approved the merger as being fair
to and in the best interests of Saratoga and its stockholders, other than the
Continuing Stockholders, and, upon the recommendation of the special committee,
the board has also unanimously approved the merger as being fair to and in the
best interests of Saratoga and its stockholders, other than the Continuing
Stockholders. The board recommends that you vote FOR approval and adoption of
the merger agreement.
2
<PAGE>
Attached is a Notice of Special Meeting of Stockholders and a Proxy
Statement containing a discussion of the background of, reasons for and terms of
the merger. We urge you to read this material carefully. Whether or not you plan
to attend the special meeting, we ask that you sign and return the enclosed
proxy as promptly as possible. If you attend the special meeting, your proxy may
be revoked if you elect to vote in person. Your prompt cooperation will be
greatly appreciated.
Very truly yours,
Robin Prever
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
3
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MARCH __, 2000
To the Stockholders of Saratoga Beverage Group, Inc.:
Notice is hereby given that a special meeting of stockholders,
including any adjournment or postponement of the special meeting, of Saratoga
Beverage Group, Inc. will be held on March __, 2000 at 11:00 a.m., New York
time, at the offices of Swidler Berlin Shereff Friedman, LLP, Saratoga's
corporate counsel, located at The Chrysler Building, 405 Lexington Avenue, New
York, New York 10174 for the following purposes:
1. To consider and vote upon a proposal to approve and adopt a Stock
Purchase Agreement and Agreement and Plan of Merger, dated as of January 5,
2000, by and among Saratoga, NCP-SBG, L.P., a Delaware limited partnership (the
"Purchaser"), and NCP-SBG Recapitalization Corp., a Delaware corporation
("MergerCo"), which were organized to effect the merger and related transactions
at the direction of North Castle Partners, L.L.C., pursuant to which MergerCo
will be merged with and into Saratoga, with Saratoga continuing as the surviving
corporation. Pursuant to the merger, each share of Class A common stock, $.01
par value per share, and Class B common stock, $.01 par value per share, of
Saratoga issued and outstanding immediately prior to the effective time of the
merger (other than (i) shares held by Saratoga as treasury stock, (ii) a minimum
of 550,000 and a maximum of 700,000 shares of Class A common stock owned by
certain stockholders, including the Chief Executive Officer and certain
directors of Saratoga, who will convert a minimum of 550,000 and a maximum of
700,000 of their shares of Class A common stock into shares of common stock of
the surviving corporation, and (iii) shares as to which dissenters' rights have
been validly exercised), will be converted into the right to receive $6.00 in
cash, without interest. A copy of the merger agreement is included in the
attached Proxy Statement as Annex A thereto and is incorporated in this notice
by reference.
2. To transact any other business as may properly come before the
special meeting. Management is not aware of any other business.
Any stockholder who does not wish to accept the merger consideration of
$6.00 per share and who properly demands appraisal under Delaware law will have
the right to have the fair value of his or her shares determined by the Delaware
Chancery Court. A copy of the relevant provisions of Delaware law are included
in the attached Proxy Statement as Annex C thereto. This appraisal right is
subject to a number of restrictions and technical requirements described in the
attached Proxy Statement.
<PAGE>
Only stockholders of record as of the close of business on February __,
2000 will be entitled to notice of the special meeting and to vote at the
special meeting. Any stockholder will be able to examine a list of holders of
record, for any purpose related to the special meeting, during the 10-day period
before the special meeting. The list will be available at Saratoga's corporate
headquarters located at 11 Geyser Road, Saratoga Springs, New York 12866.
Approval and adoption of the merger agreement requires the affirmative vote by
at least a majority of the voting power represented by the shares entitled to
vote at the special meeting.
Certain stockholders of Saratoga holding an aggregate of 1,877,262
shares of Class A common stock and 522,955 shares of Class B common stock
representing approximately 55.63% of the outstanding voting power of Saratoga
will convert a minimum of 550,000 and a maximum of 700,000 of their shares of
Class A common stock into shares of common stock of the surviving corporation
and continue to be stockholders of Saratoga (such continuing stockholders, the
"Continuing Stockholders"). In connection with the execution of the merger
agreement, each Continuing Stockholder entered into a voting agreement with the
Purchaser and appointed the Purchaser as his, her or its irrevocable proxy to
vote all of his, her or its shares in favor of the approval and adoption of the
merger agreement. The voting agreements are subject to certain terms and
conditions and terminate upon termination of the merger agreement, including
termination of the merger agreement in connection with the acceptance by
Saratoga of a company superior proposal, as defined in the merger agreement.
Accordingly, unless the merger agreement is terminated in accordance with its
terms, the adoption of the merger agreement by Saratoga's stockholders is
expected to occur irrespective of whether or the manner in which Saratoga's
other stockholders vote their shares of Class A common stock.
By Order of the Board of Directors,
Irene Fonzi
Secretary
Saratoga Springs, New York
February __, 2000
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. UPON
APPROVAL OF THE MERGER, YOU WILL BE SENT INSTRUCTIONS REGARDING THE PROCEDURES
TO EXCHANGE YOUR EXISTING CERTIFICATES EVIDENCING COMMON STOCK OF SARATOGA FOR
THE CONSIDERATION TO BE PAID.
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF A STOCKHOLDER DECIDES TO ATTEND THE SPECIAL MEETING, HE OR SHE
MAY, IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
2
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MARCH __, 2000
INTRODUCTION
The enclosed proxy is solicited by and on behalf of the board of
directors of Saratoga Beverage Group, Inc. for use at the special meeting of
stockholders to be held on March __, 2000 at 11:00 a.m., New York time, at the
offices of Swidler Berlin Shereff Friedman, LLP, Saratoga's corporate counsel,
located at The Chrysler Building, 405 Lexington Avenue, New York, New York 10174
and any postponement or adjournment of the special meeting. The matters to be
considered and acted upon at the special meeting are described in the foregoing
notice of special meeting of stockholders and this document. This document and
the related form of proxy are being mailed on or about February __, 2000 to all
stockholders of record on February __, 2000. Shares of Saratoga's Class A common
stock, $.01 par value, and Class B common stock, $.01 per share, represented by
proxies, will be voted as described in this document or as otherwise specified
by the stockholder. Any proxy given by a stockholder may be revoked by the
stockholder at any time, prior to the voting of the proxy, by delivering a
written notice to the Secretary of Saratoga, by executing and delivering a
later-dated proxy or by attending the special meeting and voting in person.
At the special meeting, holders of the Class A common stock and Class B
common stock on February __, 2000 will consider and vote upon the approval and
adoption of a Stock Purchase Agreement and Agreement and Plan of Merger, dated
as of January 5, 2000, by and among Saratoga, NCP-SBG, L.P., a Delaware limited
partnership (the "Purchaser"), and NCP-SBG Recapitalization Corp., a Delaware
corporation ("MergerCo"). The merger agreement provides, subject to the approval
of the stockholders of Saratoga at the special meeting and subject to the
satisfaction or waiver of certain other conditions, that:
o MergerCo will be merged with and into Saratoga, with Saratoga
continuing as the surviving corporation of the merger;
o each share of Class A common stock and Class B common stock that is
outstanding at the effective time of the merger, excluding:
o a minimum of 550,000 and a maximum of 700,000 shares of Class
A common stock held by certain other stockholders, including
the Chief Executive Officer and certain directors of Saratoga,
who will convert a minimum of 550,000 and a
<PAGE>
maximum of 700,000 of their shares of Class A common stock
into shares of common stock of the surviving corporation and
will continue to be stockholders of Saratoga (such continuing
stockholders, the "Continuing Stockholders" and the shares of
such Continuing Stockholders that will not be converted into
the right to receive $6.00 per share in cash, without
interest, the "Rollover Stock"),
o shares held by Saratoga as treasury stock, and
o shares as to which dissenters' rights are perfected in
accordance with Delaware law,
will be converted into the right to receive $6.00 per share in cash, without
interest, subject to applicable back-up withholding taxes;
o each share of Rollover Stock will be converted into the right to
receive one share of common stock of Saratoga as the corporation
surviving the merger; and
o each existing option and warrant, whether vested or unvested, to
purchase shares of Class A common stock shall be canceled or
repurchased for an amount equal to the excess, if any, of $6.00 per
share of Class A common stock purchasable under each option and warrant
over the exercise price with respect to each share.
Pursuant to Delaware law, the affirmative vote of holders of at least a
majority of the voting power of Saratoga entitled to vote is required to approve
and adopt the merger agreement. Under the terms of the certificate of
incorporation of Saratoga, each share of Class A common stock is entitled to one
vote and each share of Class B common stock is entitled to five votes and the
classes vote together as a single class. The Continuing Stockholders hold an
aggregate of 1,877,262 shares of Class A common stock and 522,955 shares of
Class B common stock, representing approximately 55.63% of the outstanding
voting power of Saratoga. The identities of the Continuing Stockholders and the
number of shares of common stock they own that are Rollover Stock is set forth
in "The Merger--Interests of Certain Persons in the Merger." In connection with
the execution of the merger agreement, each Continuing Stockholder entered into
a voting agreement with the Purchaser and appointed the Purchaser as his, her or
its irrevocable proxy to vote all of his, her or its shares in favor of the
merger agreement. The voting agreements are subject to certain terms and
conditions and terminate upon termination of the merger agreement, including
termination of the merger agreement in connection with the acceptance by
Saratoga of a company superior proposal, as defined in the merger agreement.
Accordingly, unless the merger agreement is terminated in accordance with its
terms, the adoption of the merger agreement by Saratoga's stockholders is
expected to occur irrespective of whether or the manner in which Saratoga's
other stockholders vote their shares of Class A common stock.
Since the Continuing Stockholders include members of Saratoga's board,
the Saratoga board appointed a special committee of the board, comprised of two
non-employee directors of Saratoga who are not Continuing Stockholders, but who
will receive cash in exchange for their
ii
<PAGE>
stock options upon consummation of the merger, negotiate the proposed merger, to
consider the fairness of the proposed merger to Saratoga and its stockholders,
other than the Continuing Stockholders, and to recommend to the board whether to
proceed with the proposed merger. Based upon the unanimous recommendation of the
special committee, the board unanimously approved the merger agreement as being
advisable, fair to, and in the best interests of, Saratoga and holders of the
Class A common stock, other than the Continuing Stockholders, and is
recommending to Saratoga's stockholders that they approve and adopt the merger
agreement.
All shares of Class A common stock and Class B common stock represented
by properly executed proxies received prior to or at the special meeting and not
revoked will be voted in accordance with the instructions indicated in those
proxies. If no instructions are indicated, the proxies will be voted FOR the
adoption of the merger agreement and in the discretion of the persons named in
the proxy with respect to any other matters as may properly come before the
special meeting. A stockholder may revoke his or her proxy at any time prior to
its use by delivering to the Secretary of Saratoga a signed notice of revocation
or a later-dated and signed proxy or by attending the special meeting and voting
in person.
The persons named as proxies in the enclosed proxy are Robin Prever,
President and Chief Executive Officer of Saratoga, and Irene Fonzi, Secretary of
Saratoga. The costs of preparing, assembling and mailing the proxy, this
document and the other material enclosed and all clerical and other expenses of
solicitation will be borne by Saratoga. In addition to the solicitation of
proxies by use of the mails, directors, officers and employees of Saratoga,
without receiving additional compensation, may solicit proxies by telephone,
telecopier or personal interview. Saratoga also will request brokerage houses
and other custodians, nominees and fiduciaries to forward soliciting material to
the beneficial owners of Class A common stock and Class B common stock held of
record by those custodians and will reimburse those custodians for their
expenses in forwarding soliciting materials.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR
HAS THE SEC PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The board knows of no additional matters that will be presented for
consideration at the special meeting. Execution of the accompanying proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares of Class A common stock and Class B common stock covered by the proxy
in accordance with their best judgment on any other business that may properly
come before, and all matters incident to the conduct of, the special meeting, or
any adjournments or postponements of the special meeting.
iii
<PAGE>
Shares of Saratoga's Class A common stock are presently traded
over-the-counter on the NASDAQ SmallCap Market System under the symbol "TOGA".
On December 16, 1999, the last trading day preceding the public announcement of
a possible transaction by Saratoga with an unidentified investor, the closing
price of the Class A common stock on the NASDAQ SmallCap Market System was
$4.9688 per share. On February ___, 2000, the last trading day preceding the
mailing of this Proxy Statement, the closing price of the Class A common stock
on the NASDAQ SmallCap Market System was $[ ] per share.
The date of this document is February __, 2000.
iv
<PAGE>
AVAILABLE INFORMATION
Saratoga, the Purchaser and MergerCo, among others, have filed with the
SEC a Rule 13e-3 Transaction Statement on Schedule 13E-3 under the Exchange Act
with respect to the merger. This document does not contain all of the
information set forth in the Schedule 13E-3 and its exhibits, certain parts of
which are omitted in accordance with the rules and regulations of the SEC.
Saratoga is subject to the informational requirements of the Exchange Act and,
accordingly, files reports, documents and other information with the SEC.
The Schedule 13E-3 and its exhibits, as well as any reports, proxy
statements and other information filed by Saratoga, can be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices at
o Suite 1300, Seven World Trade Center, New York, New York 10048,
o Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and
o Suite 500 East, Tishman Building, 5757 Wilshire Boulevard, Los Angeles,
California 90036.
Copies of those materials also can be obtained at prescribed rates from
the Public Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC maintains an Internet site on the World Wide Web
at "http://www.sec.gov" which contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC.
Shares of Saratoga's Class A common stock are presently traded
over-the-counter on the NASDAQ SmallCap Market System under the symbol "TOGA".
Reports and other information concerning Saratoga can also be inspected at the
offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
Except as otherwise indicated in this document, all information
appearing in this document concerning Saratoga has been supplied by Saratoga,
and all information appearing in this document concerning the Purchaser and
MergerCo has been supplied by North Castle Partners, L.L.C., which is the
manager of North Capital Partners II, L.P., a private equity fund that controls
Purchaser and MergerCo, or is based upon publicly available documents on file
with the SEC and other public records. Saratoga assumes no responsibility for
the accuracy or completeness of the information furnished by North Castle or
contained in those documents and records other than those provided by Saratoga
or for any failure of North Castle to disclose events that may have occurred and
may affect the significance or accuracy of that information
v
<PAGE>
and that are unknown to Saratoga. Likewise, North Castle assumes no
responsibility for the accuracy or completeness of the information furnished by
Saratoga or contained in those documents and records other than those provided
by North Castle or for any failure by Saratoga to disclose events that may have
occurred and that may affect the significance or accuracy of that information
and that are unknown to North Castle.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS DOCUMENT IN CONNECTION WITH
THE SOLICITATION OF PROXIES MADE BY THIS DOCUMENT, AND, IF GIVEN OR MADE, THE
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY SARATOGA OR ANY OTHER PERSON.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Saratoga has incorporated certain important business and financial
information that is not included in or delivered with this document, including
any exhibits that are specifically incorporated by reference into that
information. The information that is not included in or delivered with this
document, including exhibits, is available without charge upon written or oral
request to Saratoga Beverage Group, Inc., 11 Geyser Road, Saratoga Springs, New
York 12866, telephone (518) 584-6363, Attention: Secretary.
The following documents filed by Saratoga with the SEC (File No.
33-62038NY) are hereby incorporated by reference into this document and made a
part hereof, and are being furnished simultaneously with this document:
o Saratoga's Annual Report on Form 10-KSB for the fiscal year
ended December 31 1998
o Saratoga's Quarterly Report on Form 10-QSB for the three
months ended March 31, 1999
o Saratoga's Quarterly Report on Form 10-QSB for the six months
ended June 30, 1999
o Saratoga's Quarterly Report on Form 10-QSB for the nine months
ended September 30, 1999
o Saratoga's Current Reports on Form 8-K with event dates of
January 29, 1999, November 22, 1999 and January 6, 2000
o the annexes to this document, including the merger agreement
attached hereto as Annex A
All documents and reports filed by Saratoga pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this document and prior
to the date of the Saratoga special meeting shall be deemed to be incorporated
by reference in this document and to be a part hereof from the dates of filing
of those documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or
vi
<PAGE>
superseded for purposes of this document to the extent that a statement
contained herein or in any other subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes that
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this document.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document may constitute
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and other statements which are other
than statements of historical facts. Forward-looking statements can be
identified by, among other things, the use of forward-looking terminology
including "believes," "expects," "may," "will," "should," "seeks," "pro forma"
or "anticipates," "intends" or the negative of any of these words, or other
variations of these words or comparable terminology, or by discussions of
strategy or intentions. Forward-looking statements involve a number of risks and
uncertainties. A number of factors could cause actual results, performance,
achievements of Saratoga, or industry results to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. These factors include, but are not limited to:
o whether or not the merger is consummated;
o the competitive environment in the retail beverage industry in general
and in Saratoga's specific market areas;
o changes in technology;
o the availability of and terms of financing;
o the effect of inflation;
o changes in costs and availability of goods and services, including
fruit prices;
o economic conditions in general and in Saratoga's specific market areas;
o changes in operating strategy or development plans;
o the ability to attract and retain qualified personnel;
o labor disturbances;
o changes in Saratoga's acquisition and capital expenditure plans; and
o other factors referenced in this document.
In addition, these forward-looking statements are necessarily dependent
upon assumptions, estimates and dates that may be incorrect or imprecise and
involve known and unknown risks, uncertainties and other factors. Accordingly,
any forward-looking statements included in this document do not purport to be
predictions of future events or circumstances and may not be realized. Given
these uncertainties, stockholders are cautioned not to place undue reliance on
these forward-looking statements. Saratoga disclaims any obligation to update
any of these factors or to publicly announce the results of any revisions to any
of the forward-looking statements contained in this document to reflect future
events or developments.
vii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION .........................................................................................
AVAILABLE INFORMATION.................................................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................................................
FORWARD-LOOKING STATEMENTS............................................................................
SUMMARY .............................................................................................
Overview ....................................................................................
Saratoga ....................................................................................
The Purchaser................................................................................
MergerCo ....................................................................................
The Special Meeting..........................................................................
Time, Date and Place of Meeting..............................................................
Matters to be Considered.....................................................................
Record Date; Voting Rights; Vote Required....................................................
Security Ownership of Management; Voting Agreement...........................................
Recommendation of the Special Committee and the Board of Directors...........................
Opinion of Financial Advisor to the Special Committee........................................
The Merger...................................................................................
Effective Time of the Merger.................................................................
Merger Consideration.........................................................................
Conditions to the Consummation of the Merger.................................................
Termination of the Merger Agreement..........................................................
Termination Fee..............................................................................
Merger Financing.............................................................................
Appraisal Rights.............................................................................
Interests of Certain Persons in the Merger...................................................
Certain Effects of the Transaction...........................................................
Plans for Saratoga After the Merger; Conduct of the Business of Saratoga if the Merger is
not Consummated.....................................................................
Material Federal Income Tax Consequences.....................................................
Accounting Treatment of the Merger...........................................................
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA.......................................................
SPECIAL FACTORS.......................................................................................
Certain Effects of the Merger................................................................
viii
<PAGE>
Background of the Merger.....................................................................
Recommendations of the Special Committee and the Board of Directors..........................
Reasons of Saratoga for the Merger; Fairness of the Merger...................................
Opinion of Financial Advisor to the Special Committee........................................
Plans for Saratoga after the Merger; Conduct of the Business of Saratoga if the Merger is
not Consummated.....................................................................
PRICE OF CLASS A COMMON STOCK.........................................................................
SARATOGA .............................................................................................
General ....................................................................................
Products ....................................................................................
Marketing and Sales..........................................................................
Distribution.................................................................................
Competition..................................................................................
Production...................................................................................
Suppliers....................................................................................
Major Customers..............................................................................
Trademarks...................................................................................
Government Regulation........................................................................
Seasonality..................................................................................
Employees....................................................................................
Properties...................................................................................
Legal Proceedings............................................................................
The Year 2000 Issue..........................................................................
THE SPECIAL MEETING...................................................................................
Matters to be Considered.....................................................................
Required Votes...............................................................................
Voting and Revocation of Proxies.............................................................
Record Date; Stock Entitled to Vote; Quorum..................................................
Appraisal Rights.............................................................................
Solicitation of Proxies......................................................................
THE MERGER............................................................................................
Overview ....................................................................................
Material Federal Income Tax Consequences.....................................................
Accounting Treatment of the Merger...........................................................
Interests of Certain Persons in the Merger...................................................
Option Information...........................................................................
Robin Prever Employment Agreement............................................................
Robin Prever Non-Competition Agreement.......................................................
Stockholders Agreement.......................................................................
Consulting Agreement.........................................................................
Voting Agreements............................................................................
ix
<PAGE>
Registration Rights Agreement................................................................
Merger Financing.............................................................................
CERTAIN PROVISIONS OF THE MERGER AGREEMENT............................................................
The Merger...................................................................................
Merger Consideration.........................................................................
Surrender and Payment........................................................................
The Surviving Corporation....................................................................
Representations and Warranties...............................................................
Certain Pre-Closing Covenants................................................................
Access and Information.......................................................................
Alternative Proposals........................................................................
Indemnification and Insurance................................................................
Best Efforts; Certain Filings................................................................
Conditions to the Consummation of the Merger.................................................
Termination..................................................................................
Termination Fee..............................................................................
Amendment and Waiver.........................................................................
Fees and Expenses............................................................................
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA.............................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
............................................................................................
PURCHASES OF COMMON STOCK BY, AND OTHER TRANSACTIONS WITH, CERTAIN PERSONS............................
REGULATORY CONSIDERATIONS.............................................................................
Antitrust....................................................................................
THE PURCHASER AND MERGERCO............................................................................
x
<PAGE>
DISSENTING STOCKHOLDERS' RIGHTS.......................................................................
INDEPENDENT AUDITORS..................................................................................
FUTURE STOCKHOLDER PROPOSALS..........................................................................
</TABLE>
ANNEXES
ANNEX A - Stock Purchase Agreement and Agreement and Plan of Merger (including
Exhibit A - Form of Certificate of Incorporation and Exhibit B - Form of
By-laws)
ANNEX B - Opinion of Schroder & Co. Inc.
ANNEX C - Rights of Dissenting Stockholders under the DGCL
ANNEX D - Form of Voting Agreements and Schedule of Parties to the
Voting Agreements
ENCLOSURES
o Saratoga's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998
o Saratoga's Quarterly Report on Form 10-QSB for the three months ended March
31, 1999
o Saratoga's Quarterly Report on Form 10-QSB for the six months ended June
30, 1999
o Saratoga's Quarterly Report on Form 10-QSB for the nine months ended
September 30, 1999
o Saratoga's Current Reports on Form 8-K with event dates of January 29,
1999, November 22, 1999 and January 6, 2000
xi
<PAGE>
SUMMARY
The following summary is intended only to highlight certain information
contained elsewhere in this document. This summary is not intended to be
complete and is qualified in its entirety by the more detailed information
contained elsewhere in this document, the exhibits and the documents otherwise
referred to in this document. Stockholders are urged to review this entire
document carefully, including the exhibits and those other documents.
OVERVIEW
Saratoga is furnishing this document to allow its stockholders to
consider and vote upon a proposal to approve and adopt the merger agreement with
the Purchaser and MergerCo. Pursuant to the merger agreement, MergerCo will be
merged with and into Saratoga with Saratoga as the surviving corporation.
Stockholders of Saratoga, other than the Continuing Stockholders, who do not
dissent from the merger as described in this document will receive $6.00 per
share in cash, without interest, for each share of common stock that they own at
the effective time of the merger.
As described in this document, two non-employee directors of Saratoga
who are not Continuing Stockholders were constituted as a special committee to
negotiate the terms of the merger agreement. In connection with the execution of
the merger agreement, both the board and the special committee determined that
the merger, the merger agreement and the transactions contemplated by the merger
agreement, including but not limited to the voting agreements described in this
document, were advisable, fair to, and in the best interests of, holders of the
Class A common stock and Class B common stock, other than the Continuing
Stockholders.
SARATOGA
Saratoga Beverage Group, Inc., formerly the Saratoga Spring Water
Company, was founded in 1872. Saratoga manufactures, markets and distributes
fresh squeezed and frozen fresh squeezed citrus juices, fresh fruit smoothies,
which are blends of juices and purees, and other non-carbonated beverages
marketed under the labels "Fresh Pik't," "the Fresh Juice Company," "Hansen's
Juices," "The Ultimate Juice" and "Just Pik't," and produces sparkling and
non-carbonated spring water products including Saratoga Splash.
Saratoga's principal executive offices are located at 11 Geyser Road,
Saratoga Springs, New York 12866 and its telephone number is (518) 584-6363.
1
<PAGE>
THE PURCHASER AND MERGERCO
The Purchaser is a newly formed Delaware limited partnership and
MergerCo is a newly formed Delaware corporation, both organized at the direction
of North Castle in connection with the transactions contemplated by the merger
agreement. The Purchaser and MergerCo were formed for the purpose of effecting
the transactions contemplated by the merger agreement and are not expected to
have significant assets or liabilities other than in connection with the
transactions contemplated by the merger agreement or to engage in any activities
other than those incident to their formations and the transactions contemplated
by the merger agreement and, in the case of the Purchaser, actions contemplated
by the voting agreements. The authorized capital stock of MergerCo consists of
1,000 shares of common stock, par value $0.01 per share, all of which shares
have been issued and are held by the Purchaser.
The principal executive offices of the Purchaser and MergerCo are c/o
North Castle Partners, L.L.C., 60 Arch Street, Greenwich, Connecticut 06830.
THE SPECIAL MEETING
TIME, DATE AND PLACE OF MEETING (SEE PAGE ___)
The special meeting will be held at the offices of Swidler Berlin
Shereff Friedman, LLP, Saratoga's corporate counsel, located at The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174, on March __, 2000,
starting at 11:00 a.m., local time.
MATTERS TO BE CONSIDERED
The special meeting has been called for the holders of the Class A
common stock and Class B common stock to consider and vote upon:
o a proposal to approve and adopt the merger agreement; and
o other matters as may properly come before the special meeting.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED (SEE PAGE ___)
Holders of record of Class A common stock and Class B common stock at
the close of business on February __, 2000, which is the record date, have the
right to receive notice of and to vote at the special meeting. At the special
meeting each share of Class A common stock is entitled to one vote and each
share of Class B common stock is entitled to five votes, and the classes vote
together as a single class, on each matter presented to the stockholders for a
vote. As of the record date, _____ shares of Class A common stock and 522,955
shares of Class B common stock were outstanding and held of record by ___
holders and two holders, respectively. The affirmative vote of the holders of a
majority of the voting power of Saratoga represented by the Class A common stock
and Class B common stock, voting as a single class, is required to approve and
adopt the merger agreement.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT; VOTING AGREEMENTS (SEE PAGE ___)
The Continuing Stockholders, including certain executive officers and
directors of Saratoga, hold an aggregate of 1,877,262 shares of Class A common
stock and 522,955 shares of Class B common stock, representing approximately
55.63% of the outstanding voting power of Saratoga. In connection with the
execution of the merger agreement, each Continuing Stockholder entered into a
voting agreement with the Purchaser and appointed the Purchaser as his, her or
its irrevocable proxy to vote all of his, her or its shares in favor of the
merger agreement. The voting agreements are subject to certain terms and
conditions and terminate upon termination of the merger agreement, including
termination of the merger agreement in connection with the acceptance by
Saratoga of a company superior proposal, as defined in the merger agreement.
Accordingly, unless the merger agreement is terminated in accordance with its
terms, the adoption of the merger agreement by Saratoga's stockholders is
expected to occur irrespective of whether or the manner in which Saratoga's
other stockholders vote their shares of Class A common stock.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS (SEE PAGE___)
Because the Continuing Stockholders include members of the board, the
board established the special committee to act on behalf of stockholders other
than the Continuing Stockholders for purposes of negotiating the price and other
terms of the transaction with the Purchaser and MergerCo and evaluating the
fairness of the merger, the merger agreement and the transactions contemplated
by the merger agreement. The special committee is composed solely of
non-employee directors who are not Continuing Stockholders. The members of the
special committee will cease to be directors of Saratoga upon completion of the
merger. On January 5, 2000, the merger agreement and the transactions
contemplated by the merger agreement, including but not limited to the voting
agreements, were unanimously approved by the board based upon the unanimous
recommendation of the special committee of the board.
The board of directors of Saratoga, based upon the unanimous
recommendation of the special committee, believes that the merger agreement and
the transactions contemplated by the merger agreement, including the merger, are
advisable, fair to and in the best interests of Saratoga stockholders, other
than the Continuing Stockholders, and unanimously recommends that you vote FOR
adoption of the merger agreement.
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE (SEE PAGE ___)
Schroder & Co. Inc. has served as financial advisor to the special
committee in connection with the merger. Schroders has rendered its opinion to
the special committee and the board that, as of the date of its opinion, the
consideration to be received pursuant to the merger by the stockholders, other
than the Continuing Stockholders, was fair from a financial point of view to
those holders. Schroders delivered its opinion orally to the special committee
at its meeting on January 5, 2000 and subsequently confirmed that opinion in
writing. A copy of
3
<PAGE>
Schroders' opinion is attached to this document as Exhibit B. Schroders' opinion
should be read in its entirety with respect to assumptions made, matters
considered, and limitations on the review undertaken by Schroders in rendering
its opinion.
THE MERGER
The merger agreement is attached as Annex A to this document. Saratoga
encourages you to read it, as it is the legal document governing the merger.
EFFECTIVE TIME OF THE MERGER (SEE PAGE ___)
Pursuant to the merger agreement, MergerCo will be merged with and into
Saratoga, with Saratoga as the surviving corporation. The merger will become
effective when the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or at a later time which is specified in the
certificate of merger.
MERGER CONSIDERATION (SEE PAGE ___)
At the effective time of the merger, each share of Class A common stock
and Class B common stock (other than Rollover Stock, shares held in treasury and
shares as to which appraisal rights have been validly perfected) will be
converted into the right to receive $6.00 per share in cash, without interest,
and each share of Rollover Stock will be converted into the right to receive one
share of common stock of the company surviving the merger.
CONDITIONS TO THE CONSUMMATION OF THE MERGER (SEE PAGE ___)
The obligations of the parties to the merger agreement to consummate
the merger are subject to the satisfaction or waiver of a number of conditions,
including Saratoga's stockholders adopting the merger agreement, Saratoga
obtaining adequate debt financing, the expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the absence of material adverse changes, as defined in the merger
agreement, to the business of Saratoga since January 5, 2000.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE ___)
Either the Purchaser or Saratoga may terminate the merger agreement
under certain circumstances, including if the merger has not been completed by
May 31, 2000.
TERMINATION FEE (SEE PAGE ___)
If the merger agreement is terminated under certain circumstances,
Saratoga will pay North Castle Partners, L.L.C. a termination fee of $1.2
million and reimburse North Castle Partners, L.L.C. for the fees and expenses
incurred by MergerCo and Purchaser in connection with the merger agreement and
the consummation of the transactions contemplated in the merger
4
<PAGE>
agreement in an amount not to exceed $300,000.
MERGER FINANCING (SEE PAGE ___)
The total amount of cash required to consummate the transactions
contemplated by the merger agreement, including payment of related fees and
expenses, is estimated to be approximately $60.66 million. The merger will be
financed from a combination of borrowings by Saratoga as the company surviving
the merger under senior credit facilities and the issuance by Saratoga of senior
subordinated notes and an equity investment in Saratoga by the Purchaser.
MergerCo has received commitment letters to provide the senior credit facilities
and to purchase the senior subordinated notes. The debt financing commitments
are subject to customary conditions, including the absence of any material
adverse change in the business, assets, operations or financial condition of
Saratoga and its subsidiaries since December 31, 1998. The equity investment by
the Purchaser is subject to the same conditions as the merger, including
Saratoga obtaining a minimum of $22.5 million of debt financing.
APPRAISAL RIGHTS (SEE PAGE ___)
If the merger is consummated, under applicable Delaware law, holders of
Class A common stock who follow the appropriate procedures, including filing a
written demand for appraisal with Saratoga prior to the special meeting, and who
do not vote in favor of the merger will be entitled to receive payment of the
fair value of their shares of common stock as appraised by the Delaware Chancery
Court. Under certain circumstances, a holder may forfeit the right to appraisal,
in which case the holder's shares will be treated as if they had been converted,
as of the effective time, into the right to receive the merger consideration,
without interest.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE ___)
Certain directors and executive officers of Saratoga had at the time
the merger agreement was negotiated and executed, and currently have, interests,
described in this document, that present them with direct conflicts of interest
in connection with the merger, including the fact that several of those persons
are Continuing Stockholders. The special committee and the board were and are
aware of the conflicts described in this document and considered them in
addition to the other matters described in this document.
CERTAIN EFFECTS OF THE TRANSACTION (SEE PAGE ___)
Following the merger, stockholders other than Continuing Stockholders
will cease to have any ownership interest in Saratoga or rights as holders of
shares. Stockholders other than Continuing Stockholders will no longer benefit
from any increases in the value of Saratoga and will no longer bear the risk of
any decreases in value of Saratoga. Following the merger, the Continuing
Stockholders will hold approximately 10%, and, after the stock purchase by the
Purchaser, the Purchaser will hold approximately 90%, of the common stock of
Saratoga as the company surviving the merger.
5
<PAGE>
As a result of the merger, Saratoga will be a privately held company
and there will be no public market for the common stock of Saratoga. In
addition, the Purchaser currently intends to cause Saratoga to terminate the
registration of the Class A common stock under the Exchange Act as soon after
consummation of the merger as the requirements for termination of registration
are met. After the registration is terminated, Saratoga will no longer be
required to file periodic reports with the SEC.
PLANS FOR SARATOGA AFTER THE MERGER; CONDUCT OF THE BUSINESS OF SARATOGA IF THE
MERGER IS NOT CONSUMMATED (SEE PAGE ___)
As contemplated by the stockholders agreement described in "The Merger
- -- Stockholders Agreement" and the employment agreement described in "The Merger
- -- Robin Prever Employment Agreement", North Castle and the Continuing
Stockholders intend for Saratoga to serve as the platform company to acquire
other companies in the refrigerated juice industry following the consummation of
the merger. In this connection, discussions with several other companies in the
refrigerated juice industry are currently underway. As contemplated by the
merger agreement and the stockholders agreement, the directors of Saratoga
immediately following the merger will be the directors of MergerCo at the time
of the merger and thereafter four directors will be nominated by the Purchaser
and three will be nominated by Robin Prever, as long as she is the Chief
Executive Officer of Saratoga, or if Ms. Prever is no longer Chief Executive
Officer, then the Continuing Stockholders may nominate one director, so long as
they own in the aggregate at least 5% of the outstanding common stock of
Saratoga.
Except as described above and elsewhere in this document, the changes
to the board of directors contemplated by the merger agreement and the
stockholders agreement, as well as the transactions set forth in the merger
agreement, including the financing of the merger, the Purchaser has no current
plans or proposals relating to any extraordinary corporate transactions
involving Saratoga or any of its subsidiaries, any sale or transfer or a
material amount of the assets of Saratoga or any of its subsidiaries, any change
in the present board of directors or management of Saratoga or any other
material change in Saratoga's present dividend rate or policy, indebtedness or
capitalization, corporate structure or business. The Purchaser currently intends
to cause Saratoga to terminate the registration of the Class A common stock
under the Exchange Act as soon after consummation of the merger as the
requirements for termination of registration are met. The Purchaser has no
plans, other than pursuant to the merger agreement, to acquire the shares of
Class A common stock held by the stockholders of Saratoga.
If the merger is not consummated, then Saratoga will continue to
operate its business in the ordinary course.
6
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE ___)
Stockholders, other than Continuing Stockholders, generally will
recognize capital gain or loss with respect to the disposition of shares of
common stock pursuant to the merger. See "The Merger - Material Federal Income
Tax Consequences."
EACH STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR
CONCERNING THE FEDERAL INCOME, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
OF THE MERGER.
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE ___)
Saratoga believes that the merger and the transactions will be
accounted for as a recapitalization under generally accepted accounting
principles. As a result, the transactions contemplated by the merger agreement
will not affect the historical basis of Saratoga's assets and liabilities.
7
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data as of and for the
years ended December 31, 1996, 1995 and 1994 are derived from Saratoga's audited
historical consolidated financial statements not included in this document. The
selected historical consolidated financial data of Saratoga as of and for the
years ended December 31, 1998 and 1997 are derived from and should be read in
conjunction with Saratoga's audited historical consolidated financial statements
incorporated by reference into this document and included with this document.
The selected historical consolidated financial data for the nine month periods
ended September 30, 1999 and 1998 and as of those dates are derived from and
should be read in conjunction with Saratoga's unaudited historical consolidated
financial statements incorporated by reference into this document and included
with this document. In the opinion of Saratoga's management, these nine month
consolidated historical financial statements include all adjustments, consisting
of normal recurring adjustments, necessary for a fair statement of the results
for the unaudited interim periods. The results for such interim periods are not
necessarily indicative of the results for the full year.
In addition, the following selected supplemental historical
consolidated financial data should be read in conjunction with Saratoga's
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this document.
(The remainder of this page intentionally left blank.)
8
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1998 1999*
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE (in thousands, except share and per share data)
Total revenue $ 6,235 $ 3,265 $ 4,375 $ 6,271 $ 8,881 $ 7,360 $ 38,522
Cost of goods sold, exclusive
of depreciation and
amortization and equipment
lease expense 4,633 2,395 2,749 3,763 5,523 4,470 29,232
Selling, general and
administrative expense 3,530 1,594 1,397 1,423 1,700 1,345 5,773
Depreciation, amortization
and equipment lease expense 320 339 442 405 566 420 1,199
Write-off of goodwill 222 - - - - - -
--------- --------- --------- --------- --------- --------- ---------
Operating (loss) income (2,470) (1,063) (213) 680 1,092 1,125 2,318
OTHER INCOME
(EXPENSE):
Interest income 50 21 5 52 169 128 56
Interest expense (32) (1) (15) (47) (80) (59) (1,213)
Net (loss) gain on disposal of
equipment (71) (2) - - - - 15
Other income (expense) - 121 75 127 (296) 90 36
--------- --------- --------- --------- --------- --------- ---------
(Loss) income before
minority interest and income
taxes (2,523) (924) (148) 812 885 1,284 1,212
Income applicable to minority
interest 53 - - - -
Provision for income taxes - - - 8 18 18 90
--------- --------- --------- --------- --------- --------- ---------
Net (loss) income ($2,470) ($924) ($148) $804 $867 $1,266 $1,122
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA
Net (loss) income per share,
Basic ($0.94) ($0.35) ($0.06) $0.28 $0.27 $0.40 $0.22
========= ========= ========= ========= ========= ========= =========
Diluted ($0.94) ($0.35) ($0.06) $0.25 $0.26 $0.36 $0.21
========= ========= ========= ========= ========= ========= =========
Weighted average number of
common shares outstanding,
Basic 2,614,377 2,626,179 2,626,651 2,924,589 3,166,327 3,164,515 5,106,006
========= ========= ========= ========= ========= ========= =========
Diluted 2,614,377 2,626,179 2,626,651 3,380,440 3,669,180 3,696,156 5,577,103
========= ========= ========= ========= ========= ========= =========
- ------------------------------ ------------ ------------- ------------ ------------ ------------ ------------ ------------
</TABLE>
*Nine Months Ended September 30, 1999 contains eight months of activity for The
Fresh Juice Company, Inc. from the date of acquisition on January 29, 1999.
9
<PAGE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
Year Ended December 31, Unaudited
----------------------------
1994 1995 1996 1997 1998 September 30, 1999
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $3,915 $2,990 $2,630 $5,705 $7,499 $38,378
Working capital $1,005 $ 255 $ 387 $2,513 $2,403 $ 5,523
Long term obligations -- -- $ 7 $1,501 $1,555 $21,735
Stockholder's equity $3,180 $2,176 $2,015 $2,914 $4,390 $10,847
Current ratio 2.37 1.31 1.64 2.95 2.55 1.95
(Loss)/return on average assets (0.48) (0.27) (0.05) 0.19 0.13 0.05
(Loss)/return on average
shareholder equity (0.56) (0.34) (0.06) 0.33 0.24 0.15
Book value per share $ 1.17 $ 0.80 $ 0.74 $ 0.98 $ 1.39 $ 2.03
</TABLE>
10
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The terms of the merger agreement are the result of negotiations
between representatives of Saratoga and representatives of the Purchaser,
including North Castle. The following is a brief discussion of the events that
led to the negotiation and execution of the merger agreement.
In the summer of 1998, Saratoga was looking for a $5 million equity
infusion in order to acquire The Fresh Juice Company, Inc. A representative of
Schroders introduced Robin Prever, the President and Chief Executive Officer of
Saratoga, to Brent Knudsen, a principal of North Castle. North Castle was
introduced as a private equity firm that specialized in equity financing for
healthy living and aging businesses. On September 17, 1998, North Castle
executed a confidentiality agreement with Saratoga.
On December 10, 1998, Ms. Prever met with Mr. Knudsen and discussed the
beverage industry in general, the possibility of an equity infusion by an
affiliate of North Castle, the strategy for the previously announced Fresh Juice
acquisition and Saratoga's financial performance through the third quarter of
1998. Saratoga ultimately decided not to seek to raise additional equity.
Thereafter, Ms. Prever and Mr. Knudsen spoke from time to time
regarding the beverage industry. At Mr. Knudsen's suggestion, on March 25, 1999,
representatives of North Castle and Saratoga met to discuss Saratoga's business
and the possibility of an equity infusion. Mr. Knudsen and Charles Baird, also a
principal of North Castle, stated that North Castle was very interested in the
"healthy beverage" business and that North Castle would consider the possibility
of a transaction between an affiliate of North Castle and Saratoga. Saratoga's
representatives stated that selling equity at the then current share price of
$2.19 was not attractive, as it would be dilutive to the existing stockholders
of Saratoga. The possibility of a convertible equity infusion was discussed.
From March 25, 1999 through May 17, 1999, the board continued to be
frustrated with Saratoga's stock price. At a board meeting on May 17, 1999, the
board discussed the stock price and Saratoga's alternatives to maximize
stockholder value.
In June 1999, Mr. Knudsen called Ms. Prever to arrange another meeting.
On June 29, 1999, Ms. Prever, Mr. Knudsen and Mr. Baird met and North Castle
proposed a leveraged recapitalization of Saratoga, pursuant to which an entity
managed by North Castle would become the major stockholder of Saratoga. The
parties agreed that some of Saratoga's existing stockholders, including Ms.
Prever, would own a portion of the equity of the recapitalized company. In
addition, the parties agreed that Ms. Prever would remain as the chief executive
officer of the recapitalized company.
11
<PAGE>
The following week, North Castle and its advisers visited Saratoga to
commence North Castle's due diligence investigation, which continued over the
next several weeks.
On August 10, 1999, North Castle made a presentation to the board of
directors of Saratoga explaining its investment philosophy. Shortly after the
meeting, North Castle proposed a leveraged recapitalization transaction of
Saratoga based on an enterprise value of $50 million, or approximately $4.66 per
share, in which certain stockholders, including certain directors of Saratoga,
would convert a portion of their existing equity in Saratoga into equity of the
recapitalized company. Since North Castle's proposed structure would result in
certain directors retaining equity in the recapitalized company, the board
determined that it would be advisable to form a special committee of independent
directors to negotiate with North Castle. Because Leonard Toboroff and William
Colaianni would not own any equity in the recapitalized company, they undertook
to begin negotiations with North Castle.
In September 1999, North Castle was informed that its $4.66 offer was
inadequate. Thereafter, North Castle proposed a leveraged recapitalization in
which stockholders other than the Continuing Stockholders would receive
approximately $5.35 per share in cash, based upon an enterprise value of $55
million, provided that certain directors, members of management and other
identified stockholders agreed to convert shares representing 25% of Saratoga's
equity into equity of the surviving corporation.
Discussions continued during the month of September between
representatives of North Castle and Mr. Toboroff and other representatives of
Saratoga. On September 21, 1999, Saratoga received a revised proposal from North
Castle in which the purchase price per share had been increased to $6.00 and the
continuing stockholders would retain a smaller portion of the equity of the
surviving corporation.
On September 22, 1999, the board met to discuss the most recent
proposal. At that meeting, the board of directors formally appointed a special
committee consisting of Mr. Toboroff, as chairman, and Mr. Colaianni to consider
the fairness of the most recent proposal to stockholders other than Continuing
Stockholders, to negotiate the most recent proposal with North Castle, and to
recommend to the board whether to proceed with the most recent proposal. The
special committee was authorized to retain counsel and a financial adviser to
assist in the negotiations with North Castle. Although some of the directors
were apprehensive about exchanging stock in a public company for stock in a
private company, subject to negotiating definitive documentation acceptable to
them, they agreed to roll over a portion of their stock holdings because it was
a prerequisite for North Castle's participation.
On September 22, 1999, the special committee interviewed the New York
law firm of Swidler Berlin Shereff Friedman, LLP, in order to determine whether
it should retain that firm as its counsel in this matter. After discussing the
firm's experience in matters of this kind, Swidler Berlin raised the issue that,
as the members of the special committee knew, Swidler Berlin had represented
Saratoga extensively in the past, including in connection with the acquisition
of Fresh Juice. The special committee, after due deliberation, concluded that it
would nonetheless be appropriate and desirable to obtain the benefits of the
experience of Swidler Berlin, and
12
<PAGE>
accordingly retained Swidler Berlin. The special committee also
discussed the retention of a financial advisor to assist the special committee.
The special committee discussed various advisors who might be appropriate to
assist the special committee. The special committee spoke with representatives
of Schroders, with whom the members were already familiar. The special committee
noted that Schroders had provided financial advice to Saratoga in connection
with its acquisition of Fresh Juice and was therefore intimately familiar with
Saratoga, and was aware that Schroders had introduced North Castle to Saratoga.
After due deliberation and extensive negotiations of the Schroders engagement
letter, the special committee determined that it would be appropriate and
desirable to obtain the benefits of the experience of Schroders and,
accordingly, retained Schroders.
On September 22, 1999, the special committee and its counsel negotiated
various points of a letter of intent with North Castle and a non-binding letter
of intent was signed by North Castle and Saratoga. The non-binding letter of
intent provided for, among other things:
o A purchase price per share of $6.00 based on an enterprise value of
approximately $58.5 million;
o Retention of a portion of the existing equity by continuing
stockholders;
o A 60-day no solicitation period;
o Customary conditions to the closing of the merger, including obtaining
necessary debt financing;
o A termination fee customary for similar transactions;
o A new employment agreement and non-competition agreement with Robin
Prever, Saratoga's Chief Executive Officer;
o Execution of voting agreements by the continuing stockholders; and
o Establishment of an option pool for the grant of options representing
10% of the fully diluted equity to directors, officers and employees of
Saratoga following the merger.
On or about October 11, 1999, North Castle circulated a draft merger
agreement to the special committee.
In late November and early December 1999, Ms. Prever and Kim James,
Saratoga's Chief Financial Officer, along with representatives of North Castle,
met with representatives of Bank of America and Key Mezzanine Corp. concerning
the financing required to consummate the merger. Bank of America had provided
financing for Saratoga in connection with the Fresh Juice acquisition and was
familiar with Saratoga and its business. Saratoga's management therefore
believed that Bank of America would be a likely source of additional funds in
connection with the proposed transaction.
On November 17, 1999, the exclusivity period contained in the letter of
intent was extended to December 21, 1999.
13
<PAGE>
Due to the increased volume in the trading of Class A common stock, on
December 17, 1999, Saratoga publicly announced, with the agreement of North
Castle, that it was in discussions with certain members of management and a
financial sponsor with respect to a going private transaction. The press release
stated that each holder, other than certain continuing stockholders, of Class A
common stock and Class B common stock would receive $6.00 per share in the
proposed transaction. Schroders, on behalf of the special committee, sent a copy
of the press release to 19 entities. During the week of December 20, 1999,
representatives of the special committee and North Castle continued to negotiate
the terms of the merger agreement and related agreements.
On December 23, 1999, the special committee met with Schroders and
Swidler Berlin, at which time Schroders and the special committee reviewed the
status of the financing commitments. The special committee, through its
advisers, informed North Castle that Saratoga was not satisfied with the terms
of the proposed financing commitments for the proposed transaction. At that
meeting, Schroders indicated that, based upon its preliminary work to date,
there was nothing which led it to conclude that, subject to the strengthening of
the financing commitments and completing its due diligence and analysis,
Schroders would not be in a position to opine that the $6.00 per share merger
consideration would fall in the range of fairness.
A board meeting followed the special committee meeting. The members of
the special committee informed the board of the status of the negotiation of the
proposed merger agreement and the financing commitments. Following the meeting,
representatives of the special committee advised North Castle that Saratoga was
not prepared to execute the merger agreement due to, among other things, the
proposed financing commitment letters. In addition, the special committee
believed that allowing additional time to elapse prior to the execution of the
merger agreement would provide the members of the special committee additional
comfort that a superior transaction was unlikely to be forthcoming.
Also on December 23, 1999, the special committee was notified that
lawsuits had been filed against Saratoga and its directors, alleging, among
other things, that the $6.00 per share price to be paid in the proposed
transaction is "unfair and inadequate consideration."
During the week of December 27, 1999, Swidler Berlin advised the
special committee that it would be advisable for it to retain Delaware counsel
in light of the fact that three lawsuits had been filed in Delaware courts in
connection with the proposed merger. The special committee determined to hire
the Wilmington firm of Young Conaway Stargatt & Taylor, LLP, which was known to
Swidler Berlin and which represented Mr. Toboroff in connection with litigation
unrelated to Saratoga. Young Conaway disclosed that the firm has served, and is
currently serving, as local Delaware counsel for Warren Lichtenstein, a director
of Saratoga, and Steel Partners, II, L.P., an affiliate of Mr. Lichtenstein, in
various unrelated matters. Young Conaway further disclosed that it did not
believe that the firm's representation of Mr. Lichtenstein and Steel Partners in
unrelated matters would preclude Young Conaway from providing appropriate
representation to the special committee. After due deliberation, the special
committee determined that it would be appropriate and desirable to obtain the
benefits of the
14
<PAGE>
experience of Young Conaway and, accordingly, retained Young Conaway.
Between December 23, 1999 and January 5, 2000, representatives of the
special committee further negotiated the merger agreement with representatives
of North Castle. During that period, representatives of the special committee
spoke with each of the financing sources for North Castle. In addition, as a
result of the continuing negotiations, North Castle agreed, subject to certain
terms and conditions, to contribute up to an additional $10 million in equity
financing if the $22.5 million of debt financing required to consummate the
merger would not be available without North Castle's additional equity
financing.
On January 5, 2000, the special committee met with representatives of
Schroders and Swidler Berlin. A representative of Young Conaway also attended
the meeting. Swidler Berlin reviewed the material terms of the proposed merger
agreement with the special committee, including the identity and level of
participation of the Continuing Stockholder in the merger. Schroders reviewed
the current status of the financing commitments with the special committee. In
addition, Schroders presented its analysis of the transaction and delivered
orally its opinion, which was subsequently confirmed in writing, that the merger
was fair to the holders of Class A common stock, other than the Continuing
Stockholders, from a financial point of view. In addition, representatives of
Swidler Berlin and Young Conaway provided legal advice to the special committee
regarding their fiduciary duties under Delaware law. Based in part on Schroders'
opinion, the special committee unanimously determined that the merger, the
merger agreement and the transactions contemplated by the merger agreement are
advisable, fair to and in the best interests of the stockholders other than the
Continuing Stockholders, and recommended that the board and the stockholders of
Saratoga approve and adopt the merger, the merger agreement and the transactions
contemplated by the merger agreement.
On January 5, 2000, during a telephone meeting of the entire board
which followed the special committee meeting, the board unanimously:
o determined that the merger, the merger agreement and the transactions
contemplated by the merger agreement, including but not limited to the
voting agreements, are advisable, fair to and in the best interests of
the stockholders other than the Continuing Stockholders;
o approved and authorized in all respects the merger, the merger
agreement and the transactions contemplated by the merger agreement and
authorized the execution and delivery of the merger agreement; and
o recommended that the stockholders of Saratoga approve and adopt the
merger, the merger agreement and the transactions contemplated by the
merger agreement.
On January 5, 2000, Saratoga, the Purchaser and MergerCo executed the
merger agreement and Saratoga issued a press release announcing the execution of
the merger agreement.
15
<PAGE>
CERTAIN EFFECTS OF THE MERGER
If the merger agreement is approved by the stockholders and the other
conditions to the closing of the merger are either satisfied or waived, MergerCo
will merge with and into Saratoga, with Saratoga as the surviving corporation.
Upon the consummation of the merger, each share of common stock of Saratoga
issued and outstanding immediately prior to the effective time of the merger,
other than
o shares held by Saratoga as treasury stock;
o the Rollover Stock held by the Continuing Stockholders; and
o shares as to which dissenters' rights have been validly exercised;
will be converted into the right to receive $6.00 in cash, without interest, and
each share of Rollover Stock will each be converted into the right to receive
one share of common stock of Saratoga as the corporation surviving the merger.
Following the merger, the Continuing Stockholders will hold approximately 10%,
and, after the stock purchase by the Purchaser, the Purchaser will hold
approximately 90%, of the common stock of Saratoga as the company surviving the
merger.
Upon consummation of the merger, the certificate of incorporation and
bylaws attached to the merger agreement as Annex A and Annex B, respectively,
will be the certificate of incorporation and bylaws of the surviving corporation
until amended in accordance with applicable law and the terms thereof. The
directors of MergerCo immediately prior to the merger will be the directors of
Saratoga immediately after the merger. The officers of Saratoga immediately
prior to the merger will be the officers of Saratoga immediately after the
merger.
After the merger, stockholders other than the Continuing Stockholders,
which include the Chief Executive Officer and certain directors of Saratoga,
with respect to the Rollover Stock will cease to have any ownership interest in
Saratoga or rights as holders of shares, and will no longer benefit from any
increases in the value of Saratoga or the payment of dividends on the Class A
common stock and will no longer bear the risk of any decreases in value of
Saratoga. The Purchaser, the Continuing Stockholders and any other security
holders of the surviving corporation will be the sole beneficiaries of any
future earnings and growth of Saratoga and will have the ability to benefit from
any divestitures, strategic acquisitions or other corporate opportunities that
may be pursued by Saratoga in the future.
As a result of the merger, Saratoga will be a privately held company
and there will be no public market for the Class A common stock. In addition,
the Purchaser currently intends to cause Saratoga to terminate the registration
of the Class A common stock under the Exchange Act as soon after consummation of
the merger as the requirements for termination of registration are met. After
the registration is terminated, Saratoga will no longer be required to file
periodic reports with the SEC. There will be no public market for the common
stock of Saratoga following the merger.
16
<PAGE>
Saratoga believes that the merger will not give rise to gain, loss or
other income to Saratoga. For information regarding certain tax consequences to
stockholders other than the Continuing Stockholders, see "The Merger - Material
Federal Income Tax Consequences."
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS
On January 5, 2000, the special committee unanimously determined that
the merger, the merger agreement and the transactions contemplated by the merger
agreement are advisable, fair to and in the best interests of the stockholders,
other than the Continuing Stockholders, and recommended that the board and the
stockholders of Saratoga approve and adopt the merger, the merger agreement and
the transactions contemplated by the merger agreement.
On January 5, 2000, the board, on the unanimous recommendation of the
special committee, unanimously determined that the merger, the merger agreement
and the transactions contemplated by the merger agreement, including but not
limited to the voting agreements, are advisable, fair to and in the best
interests of the stockholders, other than the Continuing Stockholders, and
recommended that the stockholders of Saratoga approve and adopt the merger, the
merger agreement and the transactions contemplated by the merger agreement.
Prior to participating in the determinations and recommendations of the board,
the members of the board who were Continuing Stockholders identified their level
of participation in the merger and noted that as a result of these
participations they had a direct conflict of interest.
REASONS OF SARATOGA FOR THE MERGER; FAIRNESS OF THE MERGER
Special Committee. In reaching its determinations referred to under
"Recommendations of the special committee and the Board of Directors," the
special committee considered the factors listed below, each of which, in the
view of the special committee, supported its determinations. The following
discussion of the factors considered by the special committee is not intended to
be exhaustive but summarizes the material factors considered:
o In its consideration of the merger, the special committee formally met
with Schroders on five occasions and had numerous other discussions
with Schroders and among themselves. At each meeting, one or more of
the material factors were discussed among the members of the special
committee and whichever of its advisors were then present. In addition,
the members of the special committee met with Schroders and
representatives of the Purchaser to discuss the merger.
o The special committee considered the historical market prices and
recent trading activity of the Class A common stock and the fact that
the merger consideration would enable the stockholders, other than the
Continuing Stockholders with respect to the Rollover Stock, to realize
a significant premium over the prices at which the Class A common stock
has traded over the past two years. The historical market prices
of the Class A common stock for the past two years were deemed relevant
because they indicate the arm's-length trading prices of the Class A
common stock for that period as determined in the open market. The
merger consideration
17
<PAGE>
represents a 37.3%, 63.9% and 76.5% premium, respectively, over the
average of the closing prices during the 30, 60 and 90 business days,
respectively, prior to the public announcement.
o The special committee considered the oral opinion, subsequently
confirmed in writing, of Schroders to the effect that, as of the date
of Schroders' opinion, the merger consideration of $6.00 in cash per
share of common stock to be received by the stockholders, other than
the Continuing Stockholders, in the merger was fair to those
stockholders from a financial point of view, and also considered the
analysis underlying Schroders' opinion. A copy of Schroders' opinion,
setting forth the assumptions made, matters considered and limitations
on the review undertaken in connection with its opinion, is attached as
Exhibit B to this document and should be read carefully in its
entirety.
o The special committee considered that there were no other proposals
which were comparable to North Castle's proposal, notwithstanding the
December 17 announcement.
o The special committee considered that although no auction occurred,
Schroders distributed, during the week of December 17, 1999, the press
release announcing the proposed merger to 19 potential acquirors.
o The special committee considered that Schroders heard from only two
interested parties, both of which declined to pursue the matter
further.
o The special committee considered that Saratoga did not execute a
definitive agreement until approximately three weeks after Saratoga
issued its press release, which allowed ample time for interested
suitors to make a proposal.
o The special committee considered that the merger agreement does not
preclude Saratoga's acceptance of a superior proposal, even though the
break-up fee and reimbursement of costs and expenses would have to be
paid.
o The special committee considered information with respect to the
financial condition, results of operations, business and prospects of
Saratoga, including the financial projections supplied to Schroders and
the inherent uncertainties and contingencies associated with those
financial projections, the size of Saratoga as compared to the
remaining companies in the retail beverage industry, and the economic
and market conditions affecting Saratoga.
o The special committee considered that Saratoga's net book value and
liquidation value were materially lower than the merger consideration.
o The special committee also considered the likelihood of the
consummation of the proposed transaction, the proposed structure of and
financing for the transaction and anticipated closing date, and the
impact on Saratoga of a delay or further uncertainty both with respect
to the market for the Class A common stock and the fiduciary
obligations of the special committee to the stockholders other than the
Continuing Stockholders.
o The special committee also considered the fact that consummation of the
merger would preclude the stockholders, other than the Continuing
Stockholders with respect to the Rollover Stock, from having the
opportunity to participate in the future growth prospects of Saratoga.
In addition, the special committee recognized that the Purchaser and
the Continuing Stockholders will have the opportunity to benefit from
any increases in the value of Saratoga following the
18
<PAGE>
merger. Accordingly, in reaching its conclusion to approve the merger
agreement, the special committee considered management's projections of
future sales and earnings of Saratoga and determined that the future
prospects of Saratoga are adequately reflected in the merger
consideration.
o The special committee also considered the fact that the merger would
afford the stockholders, other than the Continuing Stockholders with
respect to the Rollover Stock, an opportunity to dispose of their Class
A common stock at fair value and achieve liquidity without the possible
diminution of value resulting from the lack of an active trading
market.
o In addition to the above, the special committee discussed and
considered whether there were alternatives to the merger and determined
that there were no alternatives other than for Saratoga to remain a
publicly traded entity. The special committee preferred the merger to
Saratoga remaining a publicly traded entity since the merger afforded
the stockholders, other than the Continuing Stockholders with respect
to the Rollover Stock, liquidity for their Class A common stock at fair
value without the possible diminution of value resulting from the lack
of an active trading market.
In view of the various factors considered by the special committee in
connection with its evaluation of the merger and the merger consideration, the
special committee did not find it necessary to quantify or otherwise attempt to
assign relative importance to the specific factors considered in making its
determination, nor did it evaluate whether these factors were of equal
importance. However, based upon these factors, the evaluation of all the
relevant information provided to them by the special committee's financial
advisor and taking into account the existing trading ranges for the Class A
common stock, the special committee determined that the merger, including the
merger consideration, was fair from a financial point of view, to the
stockholders, other than the Continuing Stockholders. In considering the factors
described above, individual members of the special committee may have given
different weights to different factors. None of the factors considered by the
special committee led the special committee to believe that the merger would be
unfair to stockholders other than the Continuing Stockholders.
Board of Directors. In reaching its determinations referred to under
"-- Recommendations of the Special Committee and the Board of Directors," the
board considered the following factors:
o the determinations and recommendations of the special committee;
o the factors referred to above as having been taken into account by the
special committee; and
o the fact that the merger consideration and the terms and conditions of
the merger agreement were the result of negotiations between the
special committee and its representatives, on the one hand, and
representatives of the Purchaser, on the other hand.
In view of the wide variety of factors considered by the members of the
board in connection with the evaluation of the merger and the complexity of
these matters, the board did not consider it practicable to, nor did it attempt
to, quantify, rank or otherwise assign relative weights to the specific factors
it considered in reaching its decision. The board also relied on the
19
<PAGE>
experience and expertise of the financial advisors of the special committee for
quantitative analysis of the financial terms of the merger. The board conducted
a discussion of, among other things, the factors described above, including
asking questions of Saratoga's management and legal and financial advisors, and
reached the conclusion that the merger was advisable and in the best interests
of Saratoga, the stockholders other than the Continuing Stockholders, and
Saratoga's other constituencies. In considering the factors described above,
individual members of the board may have given different weight to different
factors. None of the factors considered by the board led the board to believe
that the merger would be unfair to stockholders other than the Continuing
Stockholders.
The board determined that the merger was procedurally fair because,
among other things:
o the special committee consisted entirely of non-management,
non-affiliated independent directors appointed to represent the
interests of the noncontinuing stockholders;
o the special committee retained and was advised by legal counsel
separate from legal counsel representing North Castle and/or the
Continuing Stockholders with respect to the merger;
o the special committee retained Schroders as its independent financial
advisor to assist it in evaluating a potential transaction with the
Purchaser and received advice from Schroders;
o the special committee engaged in deliberations in evaluating the merger
and alternatives to the merger; and
o the $6.00 per share price and the other terms and conditions of the
merger agreement resulted from active bargaining between the special
committee and its representatives, on the one hand, and representatives
of the Purchaser, on the other hand.
The Continuing Stockholders have advised Saratoga that they have
adopted the determinations of the board in providing them with a reasonable
belief that the merger agreement and related agreements and the transactions
contemplated thereby, are fair to the unaffiliated stockholders of Saratoga.
Purchaser. The Purchaser has advised Saratoga that they, together with
the other entities and the person described in "The Purchaser and MergerCo"
(together, the "North Castle Persons") believe that the factors described below,
when considered together, provide a reasonable basis to believe that the merger
agreement and related agreements and the transactions contemplated thereby, are
fair to the unaffiliated stockholders of Saratoga.
In reaching its conclusion, the North Castle Persons considered the
following factors: (i) Schroders, an unaffiliated investment bank, delivered its
fairness opinions to the special committee, (ii) the special committee,
comprised entirely of directors who are not employees of Saratoga and will not
retain any equity in Saratoga following the merger, retained Schroders to act
solely on behalf of unaffiliated security holders for the purposes of
negotiating the terms of the merger agreement, (iii) the merger agreement was
the result of arms-length negotiations with the special committee and its
financial and legal advisors, (iv) the determination of the special committee as
to the fairness of the merger agreement and the recommendation of the special
committee with respect to the merger agreement, (v) current and historical
market prices of the Class A common stock, (vi) Saratoga's net book value, and
(vii) the absence of any offers from unaffiliated third parties during the
preceding eighteen months for any merger or consolidation with Saratoga or the
sale or transfer of all or a substantial portion of Saratoga or its assets or
the sale of securities of Saratoga. The Purchaser has advised Saratoga that the
North Castle Persons did not find it practicable to, and did not, quantify or
otherwise attach relative weights to such factors.
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
Schroders has acted as financial advisor to the special committee of
Saratoga. The special committee requested that Schroders evaluate the fairness
of the cash consideration to be received in the merger by the holders of common
stock of Saratoga, other than the Continuing Stockholders, from a financial
point of view.
On January 5, 2000, Schroders rendered its oral opinion, which was
later confirmed by its written opinion dated January 5, 2000, to the special
committee of Saratoga that, as of the date of the opinion, the cash
consideration to be received in the merger by the holders of common stock of
Saratoga, other than the Continuing Stockholders, was fair from a financial
point of view.
Schroders is an internationally recognized investment banking firm with
experience in the valuation of businesses and their securities in connection
with mergers; acquisitions; sales and distributions of listed and unlisted
securities; private placements; and valuations for corporate and other purposes.
20
<PAGE>
The extensive experience of Schroders' consumer products investment
banking group in providing corporate finance and advisory services to companies
in the consumer products industry was a significant factor in the special
committee's decision to select Schroders to be its financial advisor for the
merger.
A copy of Schroders' written opinion, which sets forth the assumptions
made, matters considered and limitations on the scope of the review undertaken
by Schroders, is attached as Annex B to this document, and is incorporated by
reference into this document. The Schroders' opinion was provided at the request
of the special committee and is directed only to the fairness, from a financial
point of view, of the consideration to be received in the merger by common
stockholders of Saratoga, other than the Continuing Stockholders. THE SUMMARY OF
SCHRODERS' OPINION SET FORTH IN THIS PROXY STATEMENT DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
SCHRODERS' OPINION ATTACHED AS ANNEX B HERETO. Saratoga stockholders should read
the Schroders' opinion carefully and in its entirety. In reading the discussion
of the fairness opinion set forth below, Saratoga stockholders should be aware
that Schroders' opinion:
o was provided to the special committee for its use and benefit;
o did not address Saratoga's underlying business decision to effect the
merger;
o did not constitute a recommendation to the special committee in
connection with the merger;
o indicates that Schroders did not actively participate in the
negotiation of the merger consideration;
o does not constitute a recommendation to any Saratoga stockholder as to
how to vote in connection with the merger proposal; and
o is not intended to be relied upon or confer any rights or remedies upon
any creditor or stockholder of Saratoga, or any other third party.
Although Schroders evaluated the fairness, from a financial point of
view, of the consideration to be received in the merger by the stockholders of
Saratoga, other than the Continuing Stockholders, the consideration itself was
determined by representatives of the Purchaser and the special committee through
arm's length negotiations. Schroders has consented to the references to
Schroders and the Schroders' opinion in this document and to the attachment of
the Schroders' opinion to this document as an appendix. In giving its consent,
Schroders does not admit that it comes within the category of persons whose
consent is required under, and does not admit that it is an "expert" for
purposes of, the Securities Act and related rules and regulations.
A copy of the Schroders financial analysis discussed below has been
filed as an exhibit to the Schedule 13E-3 filed with the SEC with respect to the
merger, may be inspected and copied, and obtained by mail, from the SEC as set
forth in "Available Information" and will be made available for inspection and
copying at the principal executive offices of Saratoga at 11 Geyser Road,
Saratoga Springs, New York 12866 during regular business hours by any interested
stockholder of Saratoga or his or her representative who has been so designated
in writing upon written request and the expense of the requesting stockholders.
21
<PAGE>
In arriving at the Schroders' opinion, Schroders reviewed the merger
agreement and related documents, with particular emphasis placed on the sources
of required financing in order to complete the transaction, certain commitment
letters related to the financing for the transaction, and publicly available
business and financial information relating to Saratoga. Schroders also reviewed
other information relating to Saratoga, including financial forecasts provided
to, or discussed with, Schroders by Saratoga, and held discussions with the
management of Saratoga to discuss the business and prospects of Saratoga.
Schroders also considered financial and stock market data of Saratoga and
compared the data with similar data for other publicly held companies in
businesses similar to Saratoga and considered, to the extent publicly available,
the financial terms of other business combinations and other transactions that
have recently been effected including Saratoga's acquisition of Fresh Juice.
Schroders also considered other information, financial studies, analysis and
investigations and financial, economic and market criteria that Schroders deemed
relevant.
In Schroder's review and analysis and in formulating the Schroders'
opinion, Schroders:
o relied upon and assumed the accuracy and completeness of all financial
and other information supplied or otherwise made available to it by
Saratoga, including management estimates of financial performance for
certain periods of time where audits and back-up financial information
was not available;
o relied upon Saratoga's assurance that it was not aware of any
information or facts that would make the information provided to
Schroders incomplete or misleading;
o did not attempt to independently verify any of this information;
o did not undertake an independent appraisal of the assets or
liabilities, contingent or otherwise, of Saratoga, nor was Schroders
furnished with any appraisals;
o with respect to the projected financial information referred to above,
was advised by Saratoga, and Schroders assumed, without independent
investigation, that the information was reasonably prepared and
reflected the best estimates and judgements of the expected future
financial performance of Saratoga;
o expressed no opinion with respect to the projected financial
statements; and
o did not, and was not requested by the special committee to, actively
solicit third party indications of possible acquisition of Saratoga.
Schroders' opinion was necessarily based on financial, economic, market
and other conditions as they existed and could be evaluated by Schroders on the
date of those conditions. Schroders disclaimed any undertaking or obligation to
advise any person of any change in any fact or matter affecting Schroders'
opinion which may come or be brought to its attention after the date of the
Schroders' opinion unless specifically requested by the special committee to do
so.
22
<PAGE>
Schroders' opinion does not constitute a recommendation as to any
action the special committee, or any stockholder of Saratoga, should take in
connection with the merger agreement or any aspect of the merger agreement or
alternatives to the merger agreement.
In rendering Schroders' opinion, Schroders was not engaged as an agent
or fiduciary of Saratoga's stockholders or any other third party. The Schroders'
opinion related solely to the fairness, from a financial point of view, of
consideration to be paid to the common stockholders, other than the Continuing
Stockholders, of Saratoga in the transaction. In its opinion, Schroders
expressed no opinion, as to the structure, terms or effects of any other aspect
of the transaction contemplated by, or provisions of, the merger agreement or
any of the agreements or instruments delivered pursuant to the merger agreement.
In performing its analysis, Schroders made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Schroders and Saratoga. No company, transaction or business used in the analysis
as a comparison is identical to Saratoga or the proposed transaction, nor is an
evaluation of the results of the analysis entirely mathematical. Any estimates
contained in the analysis performed by Schroders is not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than suggested by this analysis. Additionally, estimates of the value
of businesses or securities do not purport to be appraisals or reflect the
prices at which such businesses or securities may actually be sold. Accordingly,
these analyses and estimates are inherently subject to substantial uncertainty.
The following is a summary of the material valuation, financial and
comparative analyses considered by Schroders in connection with the rendering of
the Schroders' opinion and was provided by Schroders for inclusion in this
document.
Implied Share Price
VALUATION METHODOLOGY IMPLIED SARATOGA SHARE PRICE
- ------------------------------------------ -------------------------------
DCF Valuation $3.50 - $5.52
- ------------------------------------------ -------------------------------
Select M&A Transactions $2.55 - $7.33
- ------------------------------------------ -------------------------------
Other Relevant M&A Transactions $5.54 - $8.95
- ------------------------------------------ -------------------------------
Premiums Analysis on M&A Transactions $3.66 - $6.43
- ------------------------------------------ -------------------------------
Publicly Traded Beverage Companies $0.45 - $5.96
- ------------------------------------------ -------------------------------
In establishing the range of equity values per share resulting from
application of each of the analyses, Schroders made qualitative judgements as to
the meaningfulness of the valuation measurements. The judgments were based upon
the number and similarity of comparable companies and transactions, as well as
the predictability and volatility of future earnings when assessing the relative
significance of the discounted cash flow analysis described below. The relative
appropriateness of certain other valuation measurements was also taken into
account in making such judgments.
23
<PAGE>
Limitations of Last Twelve Months ("LTM") Financial Results
Saratoga acquired Fresh Juice on January 29, 1999, one month after
Saratoga's fiscal year ended December 31, 1998, and two months after Fresh
Juice's fiscal year ended November 30, 1998. Fresh Juice did not file a 10-K for
its fiscal year end November 30, 1998, and last filed a 10-Q with the SEC for
the nine month period ending August 31, 1998. Withum, Smith & Brown completed an
audit of Fresh Juice for the twelve-month period ending November 30, 1998, on
November 22, 1999. The management of Fresh Juice did not prepare financial
statements of Fresh Juice for the two month period following November 30, 1998,
which included December 1998 and January 1999. Due to this limitation, the
management of Saratoga used the following information in its analysis of the LTM
figures:
o Saratoga's 10-K for the period ending December 31, 1998;
o Saratoga's 10-Q for the nine-month period ending September 30, 1999,
including the financial statements for the nine-month period ending
September 30, 1998;
o Fresh Juice's audited financials for the 12-month period ending
November 30, 1998;
o Fresh Juice's 10-Q for the nine-month period ending August 31, 1998;
and
o The management of Saratoga's estimates of financial performance for
Fresh Juice for the one-month period ending January 30, 1999.
Schroders recognized the limitations of these figures with respect to the
differing year ends, and the use of unaudited financial figures in its analysis.
Discounted Cash Flow Analysis
Schroders estimated the present value of the five-year stream of the
projected free cash flows of Saratoga. Free cash flows are defined as after-tax
operating profit, plus depreciation and amortization, less capital expenditures,
less changes in working capital. All projections were provided by management and
reviewed by Schroders. A range of exit multiples of 6.0x, 7.0x and 8.0x were
applied to projected 2004 EBITDA, and then discounted to January 1, 2000, using
the range of cost of capital of 11.0%, 12.0% and 13.0%, to calculate the present
value of a range of terminal values.
A range of enterprise values for Saratoga was determined by adding (i) the
present value of the projected free cash flows of Saratoga, (ii) the present
value of Saratoga's net operating losses, and (iii) the present value of the
estimated terminal value of Saratoga. The discounted cash flow analysis resulted
in a range of enterprise values of $41.7 million and $56.0 million and, based on
the fully diluted number of shares of Saratoga outstanding and accounting for
assumed debt and cash reserves, a range of equity values of $3.50 and $5.52 per
share.
24
<PAGE>
<TABLE>
<CAPTION>
ENTERPRISE VALUE (IN THOUSANDS)
2004 EXIT
EBITDA MULTIPLE DISCOUNT RATES
- ---------------------------------------------------------------
11.0% 12.0% 13.0%
<S> <C> <C> <C>
6.0x $45,096 $43,338 $41,668
7.0x 50,548 48,552 46,655
8.0x 56,001 53,765 51,642
- --------------------- ------------- ------------ ------------
EQUITY VALUE PER SHARE
2004 EXIT
EBITDA MULTIPLE DISCOUNT RATES
- ---------------------------------------------------------------
11.0% 12.0% 13.0%
6.0x $3.99 $3.74 $3.50
7.0x 4.75 4.47 4.21
8.0x 5.52 5.21 4.91
- --------------------- ------------- ------------ ------------
</TABLE>
Relevant Transaction Analysis
Schroders reviewed and analyzed the publicly available financial terms of
eight selected merger and acquisition transactions in the beverage industry,
which, in Schroders' judgment, were reasonably relevant to the merger, and
compared the financial terms of these transactions to those of the merger. The
selected transactions involve companies within the same industry as Saratoga,
the specialty beverage industry. The eight transactions included:
o Suntory Water Group's acquisition of Great Pines Water Company
(effective 4/99)
o Group Danone's acquisition of AquaPenn Spring Water (effective 10/98);
o PepsiCo's acquisition of Tropicana (effective 6/98);
o Northland Cranberries' acquisition of Minot Food Packers (effective
5/97);
o Triarc's acquisition of Cable Car Beverage (effective 6/97);
o Triarc's acquisition of Snapple Beverage (effective 3/97);
o Triarc's acquisition of Mistic Beverage (effective 3/95); and
o Cadbury Schweppes' acquisition of Crush International (effective 8/89).
Schroders reviewed the prices paid in these transactions and analyzed
various operating and financial information and imputed valuation multiples and
ratios. Schroders calculated multiples of enterprise value, defined as the
purchase price of equity, plus debt assumed, less cash and cash equivalents,
less cash proceeds from the conversion of options and warrants, to the target's
LTM revenues, EBITDA and EBIT; as well as price (defined as the purchase price
of equity) to target's LTM earnings. All multiples were based on financial
information available at the time of the relevant transaction. Schroders'
analysis of the relevant acquisitions indicate, based on 1999 expected EBITDA of
$5.058 million and 1999 expected net income of $1.744 million, an
25
<PAGE>
implied range of enterprise values of $56.1 million and $80.3 million, and
equity values of $5.54 and $8.95 per share.
<TABLE>
<CAPTION>
($ IN MILLIONS, MULTIPLE Implied Implied Implied
EXCEPT PER RANGE FOR Saratoga Saratoga Saratoga
SHARE RELEVANT Median Enterprise Equity Per Share
AMOUNTS) TRANSACTIONS Multiple Value Value Value
- --------------------- -------------------- ---------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
LTM REVENUES 0.5x - 3.1x 1.5x $80.3 $63.4 $8.95
- --------------------- -------------------- ---------------- ------------------ ------------------ -------------------
LTM EBITDA 6.0x - 17.3x 11.1x 56.1 39.3 5.54
- --------------------- -------------------- ---------------- ------------------ ------------------ -------------------
LTM EBIT 14.2x - 33.5x 16.1x 56.9 40.0 5.65
- --------------------- -------------------- ---------------- ------------------ ------------------ -------------------
LTM NET INCOME 24.2x - 42.8x 28.0x 61.8 45.0 6.35
- --------------------- -------------------- ---------------- ------------------ ------------------ -------------------
VALUATION BASED ON MEDIAN MULTIPLES $63.8 $46.9 $6.62
- ------------------------------------------------------------- ------------------- ----------------- -------------------
</TABLE>
Note: Implied values based on 1999 expected EBITDA of $5.058 million and 1999
expected net income of $1.744 million
Select M&A Transactions
Schroders also considered the implied valuation for Saratoga based on three of
the above mentioned transactions considered independently, which, in Schroders'
judgment, were relevant to the merger, and represented comparable valuation
benchmarks for the Transaction. These transactions included:
o Saratoga Beverage Group's acquisition of The Fresh Juice Company;
o Northland Cranberries' acquisition of Minot Food Packers;
o Triarc's acquisition of Cable Car Beverage
After analyzing the publicly available information concerning these
transactions, Schroders generated implied valuation multiples.
Saratoga Beverage Group's Acquisition of The Fresh Juice Company
Schroders delivered an opinion on June 29, 1998 as to the fairness of
Saratoga's acquisition of Fresh Juice. At that time, the transaction was valued
at $29.4 million, or 6.9x trailing EBITDA, based on LTM EBITDA of $4.2 million.
LTM EBITDA through February 28, 1998, was calculated using financial statements
contained in Fresh Juice's 10-K for the period ending November 30, 1997, and
10-Q for the six month periods ending February 28, 1998 and 1997.
Saratoga later received an adjustment in effective purchase price to $24.4
million based upon an understanding that FY 1998 EBITDA was at least $3.2
million, which implied an EBITDA multiple for the transaction of 7.6x.
26
<PAGE>
Audited financial figures for Fresh Juice's fiscal year ended November 30,
1998 show an EBITDA figure of $1.9 million, implying a multiple paid for the
business of 12.5x, considering a transaction value of $23.7 million based on
Saratoga's share price at closing. The audit was completed on November 22, 1999.
The transaction was completed on January 29, 1999.
At the time the merger agreement was signed, the implied enterprise value
offered for Fresh Juice was $24.4 million, or 7.6x what they believed to be LTM
EBITDA of $3.2 million for the twelve month period ending November 30, 1998.
The following is a summary of the implied multiples offered and paid:
<TABLE>
<CAPTION>
ENTERPRISE VALUE LTM EBITDA Implied
DATE ($M) ($M) EV/EBITDA
- --------------------------------- ------------------------------ -------------------------- ---------------------------
<S> <C> <C> <C>
LTM 2/98 $29.4 $4.2 6.9x
LTM 11/98: Estimated 24.4 3.2 7.6x
LTM 11/98: Actual 23.7 1.9 12.5x
- --------------------------------- ------------------------------ -------------------------- ---------------------------
- --------------------------------- ------------------------------ -------------------------- ---------------------------
</TABLE>
Based on 1999 expected EBITDA of $5.058 million, the implied enterprise, equity
and per share values, assuming each of the EBITDA multiples considered, are as
follows:
<TABLE>
<CAPTION>
Implied Implied Implied
LTM EBITDA Saratoga EV Saratoga Equity Saratoga Per
DATE Multiple ($M) Value ($M) Share Value
- ---------------------------- ---------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
LTM 2/98 6.9x $34.9 $18.1 $2.55
- ----------------------------
LTM 11/98:Est 7.6x 38.4 21.6 3.05
- ----------------------------
LTM 11/98:Actual 12.5x 63.2 46.4 6.54
- ---------------------------- ---------------------- --------------------- ----------------------- ---------------------
- ---------------------------- ---------------------- --------------------- ----------------------- ---------------------
</TABLE>
Note: EV is defined as Enterprise Value
Northland Cranberries Acquisition of Minot Food Packers
Schroders considered the acquisition of Minot Food Packers by Northland
Cranberries as relevant given that both Minot and Saratoga derive a large
percentage of total revenues from sales of unbranded products to institutional
investors.
Triarc's Acquisition of Cable Car Beverage
Schroders considered the acquisition of Cable Car Beverage by Triarc as a
relevant transaction in the specialty beverage industry, the same industry in
which Saratoga operates. Cable Car is the owner of such brands as Stewart's line
of soft drinks, JAVA COLA, Aspen Mountain Spring Water, Aspen Flavored Water and
San Francisco Seltzer.
27
<PAGE>
Schroders' analysis of these transactions indicates, based on 1999 expected
EBITDA of $5.058 million and 1999 expected net income of $1.744 million, a range
of enterprise values of $34.9 million and $68.8 million, and equity values of
$2.55 and $7.33 per share.
The following is a summary of the valuations implied by each of these
transactions considered independently:
<TABLE>
<CAPTION>
IMPLIED VALUES
- ----------------------------------------------------- -------------- -------------- -------------------------------------
Trailing Trailing
EBITDA Earnings EV Equity Per
ACQUIRER/TARGET Multiple Multiple ($M) ($M) Share
- ----------------------------------------------------- -------------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
SARATOGA BEVERAGE GROUP/ THE FRESH JUICE CO.(1) 7.6x n/a $38.4 $21.6 $3.05
- ----------------------------------------------------- -------------- -------------- ----------- ------------ ------------
NORTHLAND CRANBERRIES/ MINOT FOOD PACKERS 11.1x n/a 56.1 39.3 5.54
- ----------------------------------------------------- -------------- -------------- ----------- ------------ ------------
TRIARC/ CABLE CAR BEVERAGE (2) 13.6x 24.2x 63.9 47.1 6.64
- ----------------------------------------------------- -------------- -------------- ----------- ------------ ------------
</TABLE>
Note: Implied values based on 1999 expected EBITDA of $5.058 million, and 1999
expected net income of $1.744 million
(1) Implied values assuming EBITDA multiple management believed it was
paying 7.6x for the acquisition of Fresh Juice
(2) EV, Equity and per share values represent an average of the implied
values based on the trailing EBITDA multiple and trailing earnings
multiple
Premiums Analysis
Schroders conducted a comparison of the equity premium offered in the
merger, to average equity premiums paid in a large sample of publicly reported
transactions completed over a five year period, valued between $10 million and
$50 million in equity value. Schroders attempted to include all publicly
reported transactions within the relevant valuation range. The average premiums
paid were based on the share prices of the target one day, one week, and four
weeks prior to the announcement date. The analysis resulted in a range of equity
values of $3.66 and $6.43 per share. The following is a summary of the implied
per share valuation for Saratoga based on average equity premiums paid, and
Saratoga's share prices relative to the announcement by Saratoga of a potential
going private transaction on December 17, 1999:
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT
---------------------------------------------------------
Number of
TRANSACTIONS BY VALUE Deals 1 DAY 1 Week 4 Weeks
- ----------------------------------- ------------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
BETWEEN $10 - $50 MILLION 237 29.3% 35.6% 39.8%
SARATOGA SHARE PRICE (ON 12/17/99) $4.97 $3.44 $2.62
IMPLIED SARATOGA VALUE $6.43 $4.66 $3.66
- ----------------------------------- ------------------------ ------------------ ------------------- ------------------
</TABLE>
28
<PAGE>
Select Comparable Companies Analysis
Schroders compared certain operating, financial, trading and valuation
information for Saratoga to certain publicly available operating, financial,
trading and valuation information for seven selected beverage companies
operating in the specialty beverage industry, which, in Schroders' judgement,
were comparable to Saratoga for purposes of this analysis. In determining the
appropriate comparable companies, Schroders considered a variety of factors,
including market capitalization, business focus and end-markets, revenues,
EBITDA and EBIT.
These companies included:
o COTT Corporation o Hansen Natural
o Clearly Canadian Beverage o Odwalla, Inc.
o Triarc Companies o Vermont Pure
o National Beverage
Schroders calculated multiples of enterprise value, 1999 estimated
EBITDA and 2000 estimated EBITDA for the comparable companies. Schroders also
calculated multiples of enterprise value to LTM revenues, 1999 estimated
revenues and 2000 estimated revenues for the comparable companies; and multiples
of price to LTM earnings and 1999 estimated earnings, (estimated 2000 earnings
data were not available for most of the publicly traded comparable companies in
this group,) for the comparable companies. Schroders applied the range of
multiples and the mean multiple from this analysis to Saratoga's financial
results to determine implied values for Saratoga. Schroders' analysis was based
on closing stock prices as of January 4, 2000. The analysis resulted in a range
of enterprise values of $20.0 million and $59.1 million, and equity values of
$0.45 and $5.96 per share. The results of this analysis are set forth below:
<TABLE>
<CAPTION>
($ IN MILLIONS, EXCEPT PER MULTIPLE TO:
SHARE DATA)
- --------------------------------------- -------------------------------------------------------------
LTM 1999E 2000E
REVENUES Revenues Revenues
- --------------------------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C>
RANGE 0.4x - 1.4x 0.4x - 0.7x 0.3x - 0.6x
- --------------------------------------- -------------------- ------------------- -------------------
MEAN 0.7x 0.6x 0.5x
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA EV $38.0 $30.3 $30.1
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA EQUITY VALUE $21.2 $13.5 $42.3
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA PER SHARE VALUE $2.99 $1.90 $5.96
- --------------------------------------- -------------------- ------------------- -------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
($ IN MILLIONS, EXCEPT PER MULTIPLE TO:
SHARE DATA)
- --------------------------------------- -------------------------------------------------------------
LTM 1999E 2000E
EBITDA EBITDA EBITDA
- --------------------------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C>
RANGE 4.3x - 8.8x 5.0x - 6.9x 5.8x - 7.3x
- --------------------------------------- -------------------- ------------------- -------------------
MEAN 6.4x 6.0x 6.6x
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA EV $20.0 $30.1 $45.8
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA EQUITY VALUE $3.2 $13.2 $28.9
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA PER SHARE VALUE $0.45 $1.87 $4.08
- --------------------------------------- -------------------- ------------------- -------------------
</TABLE>
<TABLE>
<CAPTION>
($ IN MILLIONS, EXCEPT PER MULTIPLE TO:
SHARE DATA)
- --------------------------------------- -------------------------------------------------------------
LTM NET 1999E Net 2000E Net
INCOME Income Income
- --------------------------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C>
RANGE 6.6x - 45.2x 9.4x - 38.0x N/A
- --------------------------------------- -------------------- ------------------- -------------------
MEAN 18.5x 24.2x N/A
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA EV $27.6 $59.1 N/A
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA EQUITY VALUE $10.7 $42.3 N/A
- --------------------------------------- -------------------- ------------------- -------------------
IMPLIED SARATOGA PER SHARE VALUE $1.51 $5.96 N/A
- --------------------------------------- -------------------- ------------------- -------------------
</TABLE>
Schroders noted that none of the comparable companies considered is
identical to Saratoga and that, accordingly, any analysis of comparable
companies necessarily involved complex consideration and judgments concerning
differences in financial and operating characteristics and other factors that
would necessarily affect the relative trading value of Saratoga versus the
companies to which Saratoga was being compared.
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant quantitative and
qualitative methods of financial analysis and the application of those methods
to the particular circumstances and, therefore, is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Schroders
considered the results of all its analyses as a whole and did not attribute any
particular weight to any analysis or factor considered by it. Subject to the
matters set forth in the Schroders' opinion, the judgments made by Schroders as
to its analyses and the factors considered by it caused Schroders to be of the
opinion, as of the date of the Schroders' opinion, that the consideration to be
paid by North Castle was fair, from a financial point of view, to Saratoga's
stockholders, other than the Continuing Stockholders. Schroders' analyses must
be considered as a whole and considering any portion of such analyses and of the
factors considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the Schroders' opinion.
30
<PAGE>
Any estimates contained in Schroders' analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those contained in such analyses.
Estimated values do not purport to be appraisals or to reflect the prices at
which businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty.
Schroders, in the past, has performed financial advisory services for
Saratoga. Schroders acted as financial advisor to Saratoga in connection with
its acquisition of Fresh Juice, for which Schroders received aggregate
compensation of approximately $100,000. Schroders may provide investment banking
or financial advisory services for Saratoga in the future.
Engagement Letter
Pursuant to a letter agreement dated November 19, 1999, Saratoga has
agreed to pay to Schroders a fee of $500,000, $75,000 of which is contingent
upon and payable in cash upon the issuance and delivery of Schroders' opinion to
the special committee of Saratoga and $425,000 of which is contingent upon and
payable in cash upon the consummation of the merger or an alternative
transaction. Saratoga will pay an additional fee equal to 10% of the aggregate
consideration involved in the merger or an alternative transaction in excess of
$58.5 million upon the closing of the merger or an alternative transaction.
Saratoga has also agreed to reimburse Schroders for its reasonable out-of-pocket
expenses, including reasonable fees and expenses of legal counsel. In addition,
Saratoga has agreed to indemnify Schroders against certain expenses and
liabilities in connection with its engagement. Schroders' fee was not
conditioned upon the conclusion reached by Schroders as to the fairness of the
consideration.
In the ordinary course of Schroders' business, Schroders may trade in
the equity securities of Saratoga for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
PLANS FOR SARATOGA AFTER THE MERGER; CONDUCT OF THE BUSINESS OF SARATOGA IF THE
MERGER IS NOT CONSUMMATED
As contemplated by the stockholders agreement described in "The Merger
- - Stockholders Agreement" and the employment agreement described in "The Merger
- - Robin Prever Employment Agreement", North Castle and the Continuing
Stockholders intend for Saratoga to serve as the platform company to acquire
other companies in the refrigerated juice industry following the consummation of
the merger. In this connection, discussions with several other companies in the
refrigerated juice industry are currently underway. As contemplated by the
merger agreement and the stockholders agreement, the directors of Saratoga
immediately following the merger will be the directors of MergerCo at the time
of the merger and thereafter four directors will be nominated by the Purchaser
and three will be nominated by Robin Prever, as long as she is the Chief
Executive Officer of Saratoga, or if Ms. Prever is no longer Chief Executive
Officer, then by the Continuing Stockholders as long as they own in the
aggregate at least 5% of the outstanding common stock of Saratoga.
31
<PAGE>
Except as described above and elsewhere in this document, the changes
to the board of directors contemplated by the merger agreement and the
stockholders agreement, as well as the transactions set forth in the merger
agreement, including the financing of the merger, the Purchaser has no current
plans or proposals relating to any extraordinary corporate transactions
involving Saratoga or any of its subsidiaries, any sale or transfer or a
material amount of the assets of Saratoga or any of its subsidiaries, any change
in the present board of directors or management of Saratoga or any other
material change in Saratoga's present dividend rate or policy, indebtedness or
capitalization, corporate structure or business. The Purchaser currently intends
to cause Saratoga to terminate the registration of the Class A common stock
under the Exchange Act as soon after consummation of the merger as the
requirements for termination of registration are met. The Purchaser has no
plans, other than pursuant to the merger agreement, to acquire the shares of
Class A common stock held by the stockholders of Saratoga.
Other than scheduled repayments of the senior credit facilities and the
senior subordinated notes, there are currently no specific plans or arrangements
for the repayment of the funds borrowed under the senior credit facilities and
the senior subordinated notes, but the Purchaser and Ms. Prever anticipate that
the surviving corporation will be able to repay such borrowings out of
internally generated funds.
If the merger is not consummated, then Saratoga currently plans to
continue to work to enhance stockholder value by continuing to integrate Fresh
Juice, including continuing cost reduction programs and pursuing synergies
between the premium bottled water market and fresh juices and beverages.
32
<PAGE>
PRICE OF CLASS A COMMON STOCK
The Class A common stock is traded over-the-counter on the Nasdaq
SmallCap Market under the symbol "TOGA". The table below sets forth the range of
the high and low bid and asked sales prices for the Class A common stock as
reported by the Nasdaq SmallCap Market for the periods indicated.
HIGH LOW
------- -------
1998
- ----
First quarter $3.8750 $2.0625
Second quarter 3.5625 2.7500
Third quarter 3.2500 2.1250
Fourth quarter 2.7500 1.6250
1999
- ----
First quarter $3.0000 $2.0000
Second quarter 2.8750 2.0625
Third quarter 3.6875 2.1875
Fourth quarter 6.2500 2.5000
2000
- ----
First quarter (through January 19) $5.8125 $4.6250
33
<PAGE>
On December 16, 1999, the last trading day before the public
announcement by Saratoga of a potential going-private transaction in which the
shares of the public would be acquired for $6.00 per share, the closing price of
the Class A common stock was $4.9688 per share.
On January 5, 2000, the last trading day before the public announcement
of the execution of the merger agreement, the closing price of the Class A
common stock was $4.8125 per share.
On February , 2000, the closing price of the Class A common stock was
$[ ] per share.
On February , 2000, there were approximately [ ] record holders of
Class A common stock and two record holders of Class B common stock.
Stockholders should obtain current market price quotations for the
Class A common stock in connection with voting their shares.
Since its inception in April 1992, Saratoga has not paid any cash
dividends on its capital stock. Saratoga anticipates that its future earnings,
if any, will be retained for use in the business or for other corporate
purposes, and it is not anticipated that any cash dividends on the common stock
will be paid in the foreseeable future. In addition, payments of dividends on
the Class A common stock are restricted by Saratoga's Bank of America credit
facility.
34
<PAGE>
SARATOGA
GENERAL
Saratoga manufactures, markets and distributes fresh squeezed and
frozen fresh squeezed citrus juices, fresh squeezed organic juices, fresh fruit
smoothies, which are blends of juices and purees, and other non-carbonated
beverages marketed under the labels "Fresh Pik't," "the Fresh Juice Company,"
"Hansen's Juices," "The Ultimate Juice" and "Just Pik't."
The majority of the juice produced by Saratoga is fresh squeezed orange
juice. The only ingredient used to produce "Just Pik't," "Fresh Pik't," "Florida
Pik't," "The Ultimate Juice," and "Hansen's Juices," orange and grapefruit
juices is fresh citrus fruit. Similarly, "Hansen's Juices" and "Just Pik't"
smoothies are made with a blend of orange juice, apple juice, bananas, berries
and other fruit purees. Saratoga is one of the only national fresh juice
companies, with bi-coastal facilities in California and Florida.
Saratoga is also engaged in the bottling, marketing and distribution of
spring and mineral water products and in packaging products for others, also
known as co-packing. Saratoga's product line currently includes:
o sparkling spring water;
o sparkling essence-flavored spring water products;
o non-carbonated spring water; and
o non-carbonated spring water with flavors.
All of Saratoga's water products are marketed as premium domestic
bottled water primarily under the proprietary brand name "Saratoga." The
Saratoga brand name has been in existence for 127 years.
Saratoga had been owned over the years by Anheuser-Busch and, most
recently, Evian Waters of France, a division of BSN, S.A. Since that time,
Saratoga has undertaken the task of rebuilding a distribution network and
customer base for the Saratoga brand beverage products.
Since the end of the 1980s, the bottled water industry has experienced
rapid growth. The industry is divided into non-carbonated water and sparkling,
or carbonated, water. Saratoga believes that non-carbonated water is becoming an
alternative for municipal tap water and that it is perceived by consumers as a
healthy and refreshing beverage alternative to soft drinks, coffee and other
beverages. Saratoga also believes that sparkling water is perceived as a healthy
and refreshing beverage alternative to beer, liquor and wine. Saratoga
anticipates that sales in the bottled water industry will continue to grow as
consumer trends involving increased health and fitness consciousness, alcohol
moderation, and caffeine and sodium avoidance continue to
35
<PAGE>
develop and grow. Saratoga believes that it is well-positioned to take advantage
of the anticipated future growth of the bottled water industry.
PRODUCTS
The Fresh Juice product line includes fresh squeezed and frozen fresh
squeezed citrus juices, organic fresh squeezed juices, fresh fruit smoothies,
vitamin and herb fortified smoothies, and other non-carbonated beverages. The
juices are sold in a variety of sizes ranging from 8 ounces to one gallon.
Smoothies are sold primarily in 16 ounce sizes.
The main product lines sold under the Saratoga label include the
following various types of bottled water:
o sparkling spring water;
o sparkling essence-flavored spring water; and
o natural non-carbonated spring water.
Saratoga's bottled water is sold in both PET recyclable bottles in
sizes from one-half liter to 5 gallon, and cobalt glass bottles in 12 ounce and
28 ounce sizes.
Saratoga also markets a line of flavored spring water beverages under
the name Saratoga Splash.
Saratoga Splash is a non-carbonated fruit flavored spring water
product. It currently is available in the following six flavors:
o Lemon Frost;
o Orange Twist;
o Strawberry Mist;
o Blueberry Burst;
o Grapes Galore; and
o Raspberry Rush.
Saratoga recently commenced operations in the home and office 5 gallon
business.
On June 30, 1997, Saratoga entered into an agreement with Mistic
Brands, Inc. that granted Saratoga the non-exclusive right to use the
formulations and the exclusive right to use the graphic designs utilized by
Mistic in connection with beverages sold under the Saratoga Splash trademark
pursuant to the original agreement. Saratoga pays Mistic a royalty for cases
sold under the Saratoga Splash trademark.
36
<PAGE>
MARKETING AND SALES
Saratoga markets its products as fresh squeezed, pasteurized and frozen
juice, smoothies and "premium" domestic bottled water. Saratoga believes that
the proprietary Saratoga brand name, which has existed for over 125 years and
its upscale packaging, connotes a premium image. The majority of juice produced
is fresh squeezed orange juice from fresh citrus fruit. Fresh squeezed,
pasteurized and frozen juice are marketed under the brand names "Ultimate",
"Just Pik't", Fresh Pik't", Florida Pik't" and "Hansen's Juices".
Saratoga and Hansen's Juices are recognizable brand names and Saratoga
has sold its product to customers, through institutional sales throughout the
United States. Saratoga products are marketed and sold to restaurants, hotels,
food service accounts, convenience stores and distributors.
Saratoga has developed a limited public relations campaign with a focus
on the tradition of Saratoga Spring water. Marketing and sales activities have
generally involved product promotions and sponsorships. Point of sale
advertising, trade incentives, and in-store displays are also used to support
the sale of Saratoga products. From time to time Saratoga has provided retail
incentive programs to support merchandising of its products. These incentives
are common to the industry and have generally been provided as free or
discounted products for a short period of time. In very competitive situations
Saratoga has purchased shelf space where the exposure and potential sales
justify the cost.
DISTRIBUTION
Saratoga is primarily focused on securing distribution for its product
line. Saratoga's distribution network includes produce distributors, dairy
distributors, soft drink distributors, beer distributors, liquor distributors
and national distributors.
COMPETITION
The market for orange juice and fruit beverages is highly competitive
and is dominated by major companies including PepsiCo Inc, which owns Tropicana,
and The Coca-Cola Company, which owns Minute Maid. Presently, the major orange
juice companies are involved primarily in the production of chilled pasteurized
juice and frozen or reconstituted concentrate juice. Saratoga operates in a
niche category as a producer, distributor and marketer of fresh squeezed,
minimally processed juices and juice-based beverages. Saratoga's largest
competitors are Odwalla, Inc., California Day Fresh, a subsidiary of Chiquita,
and Fresh Samantha. Saratoga anticipates that sales in the fresh juice industry
will grow as a result of consumer trends towards natural products and increased
health consciousness. Saratoga believes it can continue to grow its natural and
organic juice business.
37
<PAGE>
The bottled water industry is also highly competitive, as there are
over 700 brands sold in the United States. The industry is dominated by two
entities, Great Water of France (Perrier) and Danone Group (Evian). On a
regional basis, Saratoga's products compete with a number of regional brands,
including Poland Springs and San Pellegrino, which are owned by The Perrier
Group, in the northeastern part of the United States and Zephyrhills, which is
also owned by The Perrier Group, in the southeastern part of the United States.
Saratoga's products also compete with other beverage products, including, but
not limited to, beer, liquor, wine, soft drinks, coffee, juices and juice
products and "new age" beverages.
Saratoga's competition includes numerous beverage bottlers and
distributors, many of which are more experienced, have greater financial and
management resources and have more established proprietary trademarks and
distribution networks than Saratoga. Saratoga believes that it is able to
compete effectively with other bottled water and beverage products because it
offers a diverse product line of quality bottled water at competitive prices.
Additionally, Saratoga believes that the relative proximity of its Saratoga
Springs, New York facility to several large metropolitan markets, such as New
York City and Boston, enables it to compete effectively with other regional
brands on the eastern coast of the United States.
PRODUCTION
Saratoga operates fruit processing and bottling plants in Winter Haven,
Florida and Azusa, California. Saratoga also owns a water production and
bottling plant for its products in Saratoga, New York.
SUPPLIERS
The significant raw materials in Saratoga's products are citrus juice,
fruit puree and spring water. Saratoga purchases fresh fruits from a number of
growers and fruit puree from various suppliers. Alternate supplies of fruit are
available from a large number of citrus growers in Florida, California, Arizona,
and Texas. Fruit puree are available from a number of companies that specialize
in producing these products.
Saratoga does not manufacture the bottles or packaging for its
products. Packaging and bottles are purchased from suppliers that are located
throughout the country. A large number of companies manufacture the packaging
products that Saratoga uses for its products.
Saratoga is not affiliated with its suppliers.
38
<PAGE>
MAJOR CUSTOMERS
Saratoga sells to a large number of customers including food service
companies, beverage distributors, produce distributors, retail chain grocery,
and convenience stores. Saratoga also has toll-packing customers for water and
juices.
TRADEMARKS
"Saratoga" is a registered trademark of Saratoga in the United States
and Canada for use in connection with spring water, mineral water, tonic water
and ginger ale products. Saratoga has numerous other trademarks, either pending
or registered, which include "Jango's," the "Saratoga Vichy" name, the name
"Saratoga Splash" and the Saratoga racetrack oval label used on its bottles and
packaging.
Fresh Juice also has numerous trademarks, including Just Pik't,
Hansen's Juices and The Ultimate Juice.
GOVERNMENT REGULATION
The Company and its subsidiaries are subject to certain regulations of
federal, state and local government authorities regarding manufacture,
distribution and sale of food products. The Florida Department of Citrus and
USDA have a defined inspection program and routinely sample fruit and inspect
product. The FDA has performed reviews of the bottled water and fresh juice
industry. From time to time various proposals are made for new laws and
regulations impacting the Company's industry as a whole. It is impossible to
predict whether any such proposals will be adopted and the impact, if any, of
such adoption on the business of the Company. The Company believes that it
currently is in compliance with all applicable federal, state and local
government regulations.
SEASONALITY
The unit sales of citrus juices are generally greater in the 1st and
2nd quarters due to seasonal factors. Sales of bottled water are generally
greater in the 3rd quarter due to seasonal factors.
39
<PAGE>
EMPLOYEES
As of December 31, 1999, Saratoga and its subsidiaries had 5 part-time
and 326 full-time employees, including 244 production, and 87 executive, sales
and administrative employees.
None of Saratoga's employees are represented by a labor organization,
and Saratoga considers its relationship with its employees to be satisfactory.
PROPERTIES
New York Headquarters
Saratoga owns a bottling facility and office space located on 48 acres
in Saratoga Springs, New York. The property consists of an approximately 40,000
sq. ft. building which has been substantially rebuilt since 1985. The carbonated
bottling line was installed in 1985 and the PET bottling line was installed in
1994 and substantially upgraded during 1998. Saratoga believes that its
insurance policies provide adequate coverage on its facilities and equipment.
The facilities are suitable and adequate to support Saratoga's current business.
Newark Offices and Distribution Facility
Fresh Juice leases approximately 27,000 square feet of space located at
280 Wilson Avenue, Newark, New Jersey which includes a warehouse with 3,000
square feet of freezer space, 11,000 square feet of cooler space and 7,800
square feet of dry storage space, as well as approximately 5,200 square feet of
office space. The lease was executed in November 1997 and provides for an
initial term which terminates on August 31, 2007. The lease contains two five
year options to renew which, if exercised, could extend the lease term through
August 31, 2012 and August 31, 2017, respectively.
Florida Production Facility
Fresh Juice owns a facility located at 1000 American Superior
Boulevard, Winter Haven, Florida which consists of a 70,000 square foot facility
on four acres, 20,000 square feet of which consists of either chilled or freezer
space. The Florida plant contains the first spiral quick freeze system in the
citrus industry. Fresh Juice designed the Florida plant to be capable of
producing fresh squeezed juice, fresh frozen juice and pasteurized juice, in
addition to other juice-based beverages. Each segment of the production process
is separate and distinct, with separate extraction rooms, filling rooms,
blending rooms and a separate spiral freeze system for the frozen fresh squeezed
juice. The Florida plant is equipped with a laboratory designed to provide an
40
<PAGE>
additional measure of quality control to assist in providing optimal flavor and
shelf life for its customers.
California Offices, Warehouse and Production Facility
Saratoga's subsidiary, The Fresh Juice Company of California, Inc.,
leases commercial space in Azusa, California, in which its offices, warehouse
and production facility are located. The total amount of leased space is 35,000
square feet, consisting of approximately 3,000 square feet of office space and
approximately 32,000 square feet of production and refrigerated warehouse space.
The lease is for a ten year six month term which began on December 1, 1992.
The lease contains one five year option.
LEGAL PROCEEDINGS
On December 22, 1999, lawsuits were filed by each of Moses Semel,
Marian Lustig and Melvin Tepler on their own behalf and as purported class
actions on behalf of all security holders of Saratoga, against Saratoga and its
directors. The lawsuits allege, among other things, that the $6.00 per share
price to be paid in the merger is "unfair and inadequate consideration."
Saratoga believes that the lawsuits are without merit and intends to defend the
lawsuits vigorously.
THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
Saratoga's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
State of Readiness
Saratoga relies on systems developed by other parties in regard to its
business, accounting and operational software. Saratoga believes that its
significant business, accounting and operations software is year 2000 compliant.
Additionally, Saratoga has assessed the impact of this issue on its production
equipment. The new bottling line installed in 1998 is certified year 2000
compliant by the equipment manufacturer. Older manufacturing equipment is relay
controlled and is not believed to be affected by the Year 2000 issue. Saratoga
has evaluated its management information systems, including information
technology and non-IT computerized systems and believes it is year 2000
compliant. No Year 2000 issues have emerged to date during 2000.
Risk
Saratoga relies on third party suppliers for raw materials,
transportation, utilities, and other critical services. Company operations could
be affected by the interruption of significant suppliers. Saratoga has evaluated
the status of suppliers' compliance with year 2000 issues. These evaluations
were intended to minimize risk, but cannot eliminate the potential for
disruption due to third party failures to be year 2000 compliant. Saratoga has
experienced no year 2000 problems to date during 2000.
Saratoga also is dependent on customers for sales and for cashflow.
Interruptions in our customers' operations due to year 2000 could result in
decreased revenue, increased inventory and cash flow reductions. Saratoga has
evaluated its customers' year 2000 risks, as well as developing alternative
sales strategies. Saratoga has experienced no year 2000 problems to date during
2000.
Despite Saratoga's efforts in regard to the Year 2000 issue, Saratoga's
business, financial condition or results of operations could be materially
adversely affected by the failure of its systems and applications or those
operated by other parties to properly manage dates beyond 1999.
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED
The primary purpose of the special meeting is to vote upon a proposal
to approve and adopt the merger agreement. If the merger agreement is approved
by the stockholders of Saratoga and the other conditions to the merger are
either satisfied or waived, MergerCo will merge with and into Saratoga and each
share of common stock of Saratoga issued and outstanding immediately prior to
the effective time of the merger, other than (i) shares held by Saratoga as
treasury stock, (ii) the Rollover Stock held by the Continuing Stockholders, and
(iii) shares as to which dissenters' rights have been validly exercised, will be
converted into the right to receive $6.00 in cash, without interest, and each
share of Rollover Stock will each be converted into the right to receive one
share of common stock of Saratoga as the corporation surviving the merger. See
"Certain Provisions of the Merger Agreement - The Merger; Merger Consideration."
At the special meeting, the stockholders will also be asked to transact any
other business as properly may come before the meeting. The board is not
presently aware of any other business.
A copy of the merger agreement is attached to this document as Annex A.
See also "The Merger" and "Certain Provisions of the Merger Agreement." THE
SPECIAL COMMITTEE AND THE BOARD HAVE, BY UNANIMOUS VOTE, APPROVED THE MERGER
AGREEMENT AND RECOMMEND A VOTE FOR ADOPTION AND APPROVAL OF THE MERGER
AGREEMENT.
41
<PAGE>
REQUIRED VOTES
The affirmative vote of at least a majority of the outstanding voting
power represented by the shares of Class A common stock and Class B common stock
is required to approve and adopt the merger agreement and the transactions
contemplated by the merger agreement. The transaction is not structured so that
the approval of at least a majority of the stockholders other than the
Continuing Stockholders is required.
Certain stockholders of Saratoga, including Robin Prever, Anthony
Malatino, Steven Bogen, Warren Lichtenstein, Steel Partners II, L.P., an
affiliate of Warren Lichtenstein, Pershing Securities Limited, and Jurg Walker,
who beneficially own a sufficient number of shares of Class A common stock and
Class B common stock to cause the merger agreement to be adopted without the
vote of any other stockholders, have each entered into a voting agreement, dated
as of January 5, 2000, with the Purchaser which, among other things, appoints
the Purchaser as his, her or its irrevocable proxy to vote all of his, her or
its shares in favor of the approval and adoption of the merger agreement. The
voting agreements are subject to certain terms and conditions and terminate upon
termination of the merger agreement, including termination of the merger
agreement in connection with the acceptance by Saratoga of a company superior
proposal (as defined in the merger agreement).
As of the record date, the stockholders who are parties to the voting
agreements, were beneficial owners of an aggregate of [ ] shares, or [ ] %, of
the Class A common stock and [ ] shares, or [ ] %, of the Class B common stock
for a total of [ ]% of the voting power of Saratoga, excluding the shares owned
by Saratoga. See "Security Ownership of Certain Beneficial Owners and
Management."
Accordingly, the approval and adoption of the merger agreement by
Saratoga's stockholders is expected to occur irrespective of whether or the
manner in which Saratoga's other stockholders vote their Shares.
VOTING AND REVOCATION OF PROXIES
Shares that are entitled to vote and are represented by a proxy
properly signed and received at or prior to the special meeting, unless
subsequently properly revoked, will be voted in accordance with the instructions
indicated on the proxy. IF A PROXY IS SIGNED AND RETURNED WITHOUT INDICATING ANY
VOTING INSTRUCTIONS, SHARES REPRESENTED BY THAT PROXY WILL BE VOTED FOR THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT. The board is not currently
aware of any business to be acted upon at the special meeting other than as
described in this document. If, however, other matters are properly brought
before the special meeting or any adjournments or postponements of the special
meeting, the persons appointed as proxies will have the discretion to vote or
act on the other matters in accordance with their best judgment, unless
authority to do so is withheld in the proxy. The persons appointed as proxies
may not
42
<PAGE>
exercise their discretionary voting authority to vote any proxy in favor of any
adjournments or postponements of the special meeting if instruction is given to
vote against the approval and adoption of the merger agreement.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the shares represented by that proxy are
voted at the special meeting by:
o attending and voting in person at the special meeting;
o giving notice of revocation of the proxy at the special meeting; or
o delivering to the Secretary of Saratoga a written notice of revocation
or a duly executed proxy relating to the same shares and matters to be
considered at the special meeting, bearing a date later than the proxy
previously executed.
Attendance at the special meeting will not in and of itself constitute
a revocation of a proxy. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed as
follows: Saratoga Beverage Group, Inc., 11 Geyser Road, Saratoga Springs, New
York 12866, Attention: Secretary, and must be received before the taking of the
votes at the special meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of shares at February ___, 2000 will be entitled to
receive notice of and to vote at the special meeting. At the close of business
on the record date, there were outstanding and entitled to vote [ ] shares of
Class A common stock and [ ] shares of Class B common stock. Under the terms of
the certificate of incorporation of Saratoga, each share of Class A common stock
is entitled to one vote and each share of Class B common stock is entitled to
five votes and the classes vote together as a single class. The presence, in
person or by proxy, at the special meeting of the holders of at least a majority
of the votes represented by the shares is necessary to constitute a quorum for
the transaction of business. Abstentions will be counted as votes present for
the purposes of determining whether a quorum is present but will not be counted
as votes cast in favor of approval and adoption of the merger agreement. Because
the vote on the merger agreement requires the approval of the majority of the
votes entitled to be cast by the stockholders of the outstanding shares of Class
A common stock and Class B common stock, abstentions will have the same effect
as a negative vote on these proposals. Proxies relating to "street name" shares
that are voted by brokers will be counted as votes present for purposes of
determining the presence of a quorum on all matters, but will not be treated as
shares having voted at the special meeting as to any proposal as to which
authority to vote is withheld by the broker.
APPRAISAL RIGHTS
Each stockholder of Class A common stock has a right to dissent from
the merger, and, if
43
<PAGE>
the merger is consummated, to receive "fair value" for his or her shares in cash
by complying with the provisions of Delaware law, including Section 262 of the
Delaware General Corporate Law. The dissenting stockholder must deliver to
Saratoga, prior to the vote being taken on the merger agreement at the special
meeting, written notice of his or her intent to demand payment for his or her
shares if the merger is effected and must not vote in favor of approval and
adoption of the merger agreement. The full text of Section 262 of the DGCL is
attached as Annex C in this document. See "Dissenting Stockholders' Rights"
for a further discussion of such rights and the legal consequences of voting
shares of Class A common stock and Class B common stock in favor of the approval
and adoption of the merger agreement.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by Saratoga. In
addition to the use of the mails, proxies may be solicited by telephone by
officers and directors and a small number of regular employees of Saratoga who
will not be specially compensated for such services. Saratoga may also request
banks and brokers to solicit proxies from their customers, where appropriate,
and will reimburse such persons for reasonable expenses incurred in that regard.
THE MERGER
OVERVIEW
For a description of the principal terms of the merger and the merger
agreement, including the consideration to be received by the stockholders other
than the Continuing Stockholders with respect to the Rollover Stock, see
"Certain Provisions of the Merger Agreement."
VOTING AGREEMENTS
Concurrently with the execution of the merger agreement, and incident
to the merger agreement, each of Robin Prever, Anthony Malatino, Steven Bogen,
Steel Partners II, L.P., Warren Lichtenstein, Pershing Securities Limited and
Jurg Walker, currently the beneficial owners in the aggregate of 1,877,262
shares of Saratoga Class A common stock and 522,955 shares of Saratoga Class B
common stock, representing approximately 55.63% of the total voting power of
Saratoga entitled to vote at the special meeting, entered into voting agreements
with the Purchaser pursuant to which he, she or it appointed the Purchaser as
his, her or its irrevocable proxy to vote all of the shares of Class A common
stock and Class B common stock owned by him, her or it on the record date in
favor of the approval and adoption of the merger agreement. The vote, in the
aggregate, represented by the various voting agreements, is sufficient to cause
the merger agreement to be approved and adopted without the vote of any other
Saratoga stockholders. The voting agreements are subject to certain terms and
conditions and terminate upon termination of the merger agreement, including
termination of the merger agreement in connection with the
44
<PAGE>
acceptance by Saratoga of a company superior proposal, as defined in the merger
agreement. Accordingly, unless the merger agreement is terminated in accordance
with its terms, the approval and adoption of the merger agreement by Saratoga's
stockholders is expected to occur irrespective of whether or the manner in which
Saratoga's other stockholders vote their shares of Class A common stock.
A copy of the form of the voting agreements is attached to this
document as Annex D.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences of the merger to the stockholders, other than the Continuing
Stockholders, with respect to their shares of Class A common stock. The
discussion is for general information only and does not purport to consider all
aspects of federal income taxation that might be relevant to the stockholders,
other than the Continuing Stockholders, with respect to their shares of Class A
common stock. The discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing regulations promulgated
under the Code and administrative and judicial interpretations of the Code, all
of which are subject to change, possibly with retroactive effect. The discussion
applies only to stockholders who hold shares of Class A common stock as capital
assets within the meaning of Section 1221 of the Code, and may not apply to
Class A common stock received pursuant to compensation arrangements, Class A
common stock held as part of a "straddle," "hedge," "conversion transaction,"
"synthetic security," or other integrated investment, or to certain types of
stockholders, including financial institutions, insurance companies, tax-exempt
organizations and broker-dealers, or persons bearing a relationship described in
Section 318 of the Code to a Continuing Stockholder or the Purchaser, who may be
subject to different or special rules. This discussion does not address the
federal income tax consequences to a stockholder who, for federal income tax
purposes, is a non-resident alien individual, a foreign corporation, a foreign
partnership or a foreign estate or trust, as defined in the Code, nor does it
consider the effect of any foreign, state, local or other tax laws.
The receipt of cash for Class A common stock pursuant to the merger
will be a taxable transaction for federal income tax purposes, and may also be a
taxable transaction under applicable foreign, state, local or other tax laws. In
general, for federal income tax purposes, a stockholder will recognize capital
gain or loss equal to the difference between the stockholder's adjusted tax
basis in his Class A common stock and the amount of cash received therefor. Gain
or loss must be determined separately for each block of Class A common stock
(i.e., shares acquired at the same cost in a single transaction) held by the
stockholder.
45
<PAGE>
Net capital gain (i.e., generally capital gain from the disposition of
Class A common stock that has been held for more than 12 months in excess of
capital loss) recognized by an individual stockholder will generally be subject
to a maximum tax rate of 20% or, in the case of Class A common stock that has
been held for 12 months or less, will be subject to tax at ordinary income tax
rates. Net capital gains derived by corporations currently are taxed at the same
rates as ordinary income. There are also limitations on a stockholder's
deductibility of capital losses.
Payments in connection with the merger may be subject to "backup
withholding" at a rate of 31%, unless a stockholder is a corporation or comes
within certain exempt categories and, when required, demonstrates this fact, or
provides a correct taxpayer identification number, which, for an individual
stockholder, would be the stockholder's social security number, to the exchange
agent, and otherwise complies with applicable requirements of the backup
withholding rules. A stockholder who does not provide a correct TIN may be
subject to penalties imposed by the Internal Revenue Service ("IRS"). Any amount
paid as backup withholding does not constitute an additional tax and will be
creditable against the stockholder's federal income tax liability, provided that
the required information is furnished to the IRS. Each stockholder should
consult with his own tax advisor as to his qualification or exemption from
backup withholding and the procedure for obtaining such exemption. Stockholders
may prevent backup withholding by completing a Substitute Form W-9 and
submitting it to the exchange agent.
In the case of any foreign stockholder (i.e., any person who is, for
federal income tax purposes, a foreign corporation, a non-resident alien
individual, a foreign partnership or a foreign estate or trust), the exchange
agent may withhold 30% of the amount of cash paid to such stockholder in the
merger in order to satisfy certain withholding requirements, unless such foreign
stockholder proves in a manner satisfactory to Saratoga and the exchange agent
that
o the foreign stockholder is not a Continuing Stockholder and is not
considered to own any common stock of any Continuing Stockholder or the
Purchaser under the rules described in Section 318 of the Code;
o the cash received in the merger will qualify for treatment under
Section 302 of the Code as proceeds of a sale or exchange of common
stock, rather than as a dividend for federal income tax purposes, in
which case no withholding will be required;
o the foreign stockholder is eligible for a reduced tax treaty rate with
respect to dividend income, in which case the exchange agent will
withhold at the reduced treaty rate; or
o no withholding is otherwise required.
Foreign stockholders should consult their own tax advisers regarding
the application of these withholding rules.
SARATOGA STOCKHOLDERS SHOULD NOTE THAT SARATOGA HAS NOT OBTAINED, AND
WILL NOT OBTAIN, A RULING FROM THE IRS OR AN OPINION OF COUNSEL REGARDING THE
MATTERS DESCRIBED IN THIS DOCUMENT. EACH SARATOGA STOCKHOLDER IS URGED TO
CONSULT HIS, HER OR ITS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE
STOCKHOLDER OF THE PROPOSED TRANSACTIONS, INCLUDING FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES.
ACCOUNTING TREATMENT OF THE MERGER
Saratoga believes that the merger and the other transactions
contemplated by the merger agreement will be accounted for as a recapitalization
for accounting purposes. Under the recapitalization method of accounting, the
historical costs basis of Saratoga's assets and liabilities will be carried
forward to the surviving corporation with the aggregate cost of repurchasing the
Saratoga common stock accounted for as a reduction to stockholders' equity.
Accordingly, the historical basis of assets and liabilities will not be affected
by the merger and the other transactions.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stockholders should be aware that, primarily as a result of their
relationships with Saratoga and its affiliates, certain directors and executive
officers of Saratoga had at the time the merger agreement was negotiated and
executed, and currently have, interests, described in this document, that are
different from, or in addition to, the interests of holders of shares generally.
46
<PAGE>
These interests have presented them with direct conflicts of interest in
connection with the merger. The special committee and the board were and are
aware of the interests and conflicts described below and elsewhere in this
document and considered them in addition to the other matters described under
"Special Factors--Recommendation of the Special Committee and the Board of
Directors" and "--Reasons for the Merger; Fairness of Merger." For information
on the role of the special committee, see also "Special Factors-- Background of
the merger."
Leonard Toboroff will be paid $15,000 for serving as the chairman of
the special committee and William Colaianni will be paid $10,000 for serving as
a member of the special committee. These payments include the special
committee's out-of-pocket expenses.
Pursuant to the merger agreement, Saratoga has agreed for six years
after the effective time to indemnify all present directors and officers of
Saratoga and, subject to certain limitations, use its best efforts to maintain
for six years a directors' and officers' insurance and indemnification policy
and a fiduciary liability policy on terms with respect to coverage and amount
not less favorable in any material respect, than any such policies in effect on
January 5, 2000. See "Certain Provisions of the Merger Agreement --
Indemnification and Insurance."
As of the record date, the executive officers and directors of Saratoga
beneficially owned an aggregate of [ ] shares of Class A common stock and [ ]
share of Class B common stock, excluding shares held by Saratoga and Rollover
Stock. Based on the merger consideration of $6.00 per share, the aggregate
consideration which would be received in the merger by the executive officers
and directors of Saratoga in respect of these shares would be $[ ]. In addition,
as of the record date, the executive officers and directors of Saratoga
beneficially owned options to purchase an aggregate of [ ] shares with a
weighted average exercise price of $[ ] per share. Based on the merger
consideration of $6.00 per share and the provision in the merger agreement that
all options to purchase shares of Class A common stock will be repurchased or
canceled, the aggregate consideration which would be received in the merger by
the executive officers and directors of Saratoga in respect of these options
would be $[ ]. See "Security Ownership of Certain Beneficial Owners and
Management."
In the merger, certain executive officers and directors of Saratoga
including Robin Prever, President, Chief Executive Officer and a director of
Saratoga, Steven Bogen, a director, and Warren Lichtenstein, a director, Steel
Partners II, L.P., an affiliate of Warren Lichtenstein, and certain other
stockholders, including Anthony Malatino, Pershing Securities Limited and Jurg
Walker, will convert a minimum of 550,000 and a maximum of 700,000 shares of
Class A common stock into the equivalent number of shares of common stock in the
surviving corporation. These shares of common stock of the surviving corporation
will represent approximately 10%, and, after the stock purchase by the
Purchaser, the Purchaser will hold approximately 90%, of the issued and
outstanding common stock of the surviving corporation. Set forth on the
following page is a list of the Continuing Stockholders and the number of shares
which will be rolled over and cashed out in the merger.
47
<PAGE>
<TABLE>
<CAPTION>
CONTINUING STOCKHOLDER TOTAL CASHED ROLLOVER
---------------------- ----- ------ --------
SHARES OUT STOCK STOCK
------ --------- -----
<S> <C> <C> <C>
Robin Prever 318,285 251,499 66,786
Anthony Malatino 718,127 557,056 161,071
Warren Lichtenstein 46,254 --- 46,254
Steel Partners II, L.P. 506,258 450,369 55,889
Steven Bogen 386,793 304,293 82,500
Pershing Securities Limited 200,000 141,071 58,929
Jurg Walker 224,500 145,929 78,571
======================================= ================== =================== ==================
TOTAL 2,400,217 1,850,217 550,000
</TABLE>
If the equity investment of the Purchaser exceeds $28.66 million due to the
unavailability of the full amount of the contemplated debt financing, then the
aggregate number of shares of Rollover Stock will be increased so that the
aggregate value, based on a value per share of $6.00, of all of the shares of
Rollover Stock equals 11.11% of such equity investment, and the aggregate number
of cashed out shares will be decreased in an amount equal to the increase in the
aggregate number of shares of Rollover Stock. This increase and decrease in the
number of shares of Rollover Stock and cashed out stock, respectively, shall be
allocated among Robin Prever, Anthony Malatino, Warren Lichtenstein, Steel
Partners, II, L.P., Steven Bogen, Pershing Securities Limited and Jurg Walker in
accordance with the following respective percentages: 12.1429%, 29.2856%, 0%,
18.5715%, 15.0000%, 10.7144%, and 14.2856%.
OPTION INFORMATION
The table on the following page sets forth certain information
regarding the number of shares of Class A common stock covered by outstanding
vested and unvested options to purchase shares of Class A common stock held by
the executive officers and directors of Saratoga to be canceled in connection
with the merger and the consideration to be paid to each of the executive
officers and directors as a result of the cancellation. Pursuant to the merger
agreement, each existing option, whether vested or unvested, to purchase shares
of Class A common stock shall be terminated in exchange for a cash payment equal
to $6.00 per share of Class A common stock purchasable under the option less the
exercise price with respect to the option.
48
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
OPTION INFORMATION
<TABLE>
<CAPTION>
TOTAL CASH VALUE
OPTIONS VESTED OPTIONS NOT VESTED TO BE RECEIVED
<S> <C> <C> <C>
Robin Prever 100,000 200,000 $ 1,068,600
ADAM MADKOUR 80,666 19,334 346,250
GAYLE HENDERSON 6,668 8,332 55,000
WARREN LICHTENSTEIN -- 2,500 3,280
JOHN MORABITO 25,000 50,000 262,500
LEONARD TOBOROFF 207,500 2,500 684,360
JEFFREY HEAVIRLAND 50,000 50,000 350,000
STEVEN BOGEN 2,500 2,500 6,560
R. J. BARRY COX 2,500 4,500 12,560
KIM JAMES -- 20,000 70,000
WILLIAM COLAIANNI 87,500 2,500 317,490
-------------- -------------- --------------
TOTAL 562,334 362,166 $ 3,176,600
============= ============= =============
</TABLE>
ROBIN PREVER EMPLOYMENT AGREEMENT
Concurrently with the execution of the merger agreement, and incident
to the merger agreement, Robin Prever entered into an employment agreement with
Saratoga, to be effective upon the closing of the merger.
Under the employment agreement, Ms. Prever will be employed as the
President and Chief Executive Officer of Saratoga under the following terms:
o A period of 3 years with an automatic one year extension unless
otherwise notified, subject to earlier termination for death,
disability, resignation or removal.
49
<PAGE>
o An initial base salary of $220,000 and benefits available to officers
of Saratoga generally.
o A performance bonus set annually by the compensation committee, which
shall be not less than $110,000 in the first year. With respect to the
first year's performance bonus, such bonus shall be payable (prorated
under certain circumstances) if Ms. Prever's employment is terminated
by Saratoga without cause or by her for certain types of good reason.
o The grant of stock options to purchase shares of common stock
representing 2% of Saratoga's fully diluted equity as of the closing
date of the merger of Saratoga, at an exercise price equal to the fair
market value at the date of grant of the common stock of Saratoga as
the company surviving the merger and vesting at a rate of 25% on the
date of grant and on each of the first, second and third anniversaries
of the date of grant.
o On the first anniversary of the closing of the merger, Ms. Prever will
be granted stock options to purchase shares of common stock
representing 1% of Saratoga's fully diluted equity as of the closing
date of the merger, at an exercise price equal to the fair market value
at the date of grant of the common stock of Saratoga as the company
surviving the merger, which will be subject to the same vesting and
other provisions as the previous grant of options.
o If Ms. Prever resigns her employment for good reason, as defined in the
employment agreement, or if Saratoga terminates her employment without
cause, as defined in the employment agreement, Ms. Prever will receive
her full salary through the date of termination plus all other unpaid
amounts under any compensation or benefit plan or program of Saratoga,
for a period ending on the earlier of 24 months or the expiration of
the term of the employment agreement but in no circumstances less than
12 months. All additional salary payments under good reason are payable
in equal monthly installments over the succeeding 12 months. In case of
termination without cause or termination for good reason, Ms. Prever
will receive continuing health insurance for the earlier of 24 months
or expiration of the term of the Agreement, but no less than 12 months;
and her stock options will be deemed granted and vested.
o If Ms. Prever terminates her employment because of the failure to
appoint her as the Chief Executive Officer for any and all acquisitions
made by NCP, Saratoga's immediate and ultimate parent companies or
their respective affiliates of businesses in the refrigerated beverage
and/or water business, Saratoga will pay Ms. Prever an amount equal to
Ms. Prever's salary for 36 months payable in equal monthly installments
over the succeeding 12 months and all options shall be granted and
vested.
o Pursuant to the employment agreement, Ms. Prever is entitled to
terminate her employment if she perceives, in her sole judgment, that
there has been a diminution in her duties, authority, responsibility,
day to day control, reporting responsibility, employee relations,
status, relationship with the board of Saratoga or NCP or interference
with the exercise of her business judgment or a substantial increase
without her agreement in her duties, responsibilities, or reporting
requirements.
50
<PAGE>
o During the term of employment and for a period of three years following
the termination of employment, Ms. Prever shall not compete with
Saratoga on the same terms as described below in "-- Robin Prever
Non-Competition Agreement."
ROBIN PREVER NON-COMPETITION AGREEMENT
Concurrently with the execution of the merger agreement, and incident
to the merger agreement, Robin Prever entered into a non-competition agreement
with Saratoga, to be effective upon the closing of the merger. Under the
non-competition agreement, Ms. Prever shall not engage in any business which
competes with Saratoga's business, namely, the bottled water or the refrigerated
beverage industry in the same geographic area, or engage in any conduct
disparaging or criticizing Saratoga in any way, for five years from the closing
date of the merger. In consideration for the restrictive covenants, Saratoga has
agreed to pay Ms. Prever $750,000 on the closing date of the merger.
Pursuant to the non-competition agreement, Ms. Prever can own up to 5%
of the outstanding voting securities of any publicly held corporation and she
can work in an investment banking or consulting business for a company with
clients in the refrigerated beverage and bottled water business, provided that
she does not provide services to those clients.
STOCKHOLDERS AGREEMENT
Concurrently with the execution of the merger agreement, and incident
to the merger agreement, the Purchaser, Robin Prever, Anthony Malatino, Steven
Bogen, Steel Partners II, L.P., Pershing Securities Limited, Warren Lichtenstein
and Jurg Walker entered into a stockholders agreement to be effective upon the
closing of the merger.
Pursuant to the stockholders agreement, the board of Saratoga will
consist of seven members, of which four members will be nominated by the
Purchaser, and three members will be nominated by Robin Prever so long as she is
the Chief Executive Officer. If Ms. Prever is no longer the Chief Executive
Officer, then the Continuing Stockholders may nominate one director, so long as
they collectively own 5% or more of the outstanding common stock. The
chairperson of the board shall be designated by the Purchaser from among the
directors of Saratoga.
In addition, pursuant to the stockholders agreement, the parties also
agreed to certain restrictions on transfer and other rights with respect to
their shares in the surviving corporation in the merger.
51
<PAGE>
In the stockholders agreement, Saratoga and the Purchaser agree to
pursue all future acquisitions, mergers and recapitalizations involving
businesses in the refrigerated juice industry, other than minority investments
by the Purchaser or any of its affiliates, through Saratoga.
CONSULTING AGREEMENT
Concurrently with the execution of the merger agreement, and incident
to the merger agreement, Saratoga and North Castle entered into a consulting
agreement, to be effective upon the closing of the merger, under which Saratoga,
as the surviving corporation, engages North Castle as a consultant to provide
financial and managerial advisory services to Saratoga.
Concurrent with the closing of the merger, Saratoga agrees to pay
$1,150,000 to North Castle for the financial and managerial services that North
Castle has performed for MergerCo and Saratoga in connection with the merger and
the merger agreement.
Saratoga also agrees to pay to North Castle an annual fee equal to
$550,000 payable quarterly for the continuing services to be provided to
Saratoga. The annual fee will be increased up to a maximum of 2% of the
aggregate equity investment in Saratoga by North Castle and its affiliates but
may not exceed $1.25 million per year. In addition, in connection with any
acquisition of any business or company by Saratoga or any of its subsidiaries or
disposition of Saratoga, Saratoga shall pay to North Castle a transaction fee
equal to 2% of the enterprise value of the acquired company or business or of
Saratoga in the case of a disposition of Saratoga.
52
<PAGE>
The consulting agreement shall remain in effect until the earlier to
occur of the tenth anniversary of the consummation of the merger and the date on
which a change of control occurs, as defined in the consulting agreement. Also,
North Castle may terminate the consulting agreement at any time on 30 days'
prior notice to Saratoga. The consulting agreement contains customary
indemnification provisions on behalf of North Castle and its affiliates.
REGISTRATION RIGHTS AGREEMENT
Concurrently with the execution of the merger agreement, and incident
to the merger agreement, Saratoga, the Purchaser and the Continuing Stockholders
entered into a registration rights agreement to be effective as of the closing
of the merger, under which Saratoga, as the surviving corporation, is required
to use its reasonable best efforts to effect the registration of any registrable
securities, as defined in the registration rights agreement, subject to
limitations (including cutback provisions) set forth in the registration rights
agreement. The registration rights agreement contains customary indemnification
provisions.
53
<PAGE>
MERGER FINANCING
General
The total amount of cash required to consummate the transactions
contemplated by the merger agreement, including payment of related fees and
expenses, is estimated to be approximately $60.66 million. A substantial portion
of these funds will be provided from the proceeds of financing arrangements.
Senior Credit Facilities
On December 31, 1999, Bank of America, N.A. and Banc of America
Securities LLC issued a commitment letter and term sheet to MergerCo, pursuant
to which Bank of America, N.A. committed to provide, subject to certain terms
and conditions, up to $30,000,000 of senior secured credit facilities. The
senior credit facilities consist of a revolving credit facility and a term loan
facility. The senior credit facilities are intended to provide for:
54
<PAGE>
o the capital required for the consummation of the merger;
o the transaction fees and expenses related to the merger;
o the funds to refinance certain indebtedness of Saratoga; and
o after the closing of the merger, the working capital and other general
corporate purposes of Saratoga and its subsidiaries.
As part of the senior credit facilities, Bank of America has agreed to
provide the surviving corporation in the merger with the revolving credit
facility in an aggregate amount not to exceed the principal amount of
$8,000,000. The revolving credit facility is expected to bear interest, at the
surviving corporation's option, at an annual rate equal to three and one-quarter
percentage points (3.25%) above LIBOR or two percentage points (2.00%) above the
Base Rate, which is defined as the higher of the Bank of America prime rate and
the Federal Funds rate plus .50%. The revolving credit facility will expire in
five years. The senior credit facilities will be guaranteed by all existing or
subsequently acquired or organized domestic subsidiaries of the surviving
corporation and will be secured by a first priority perfected security interest
in the capital stock of each of the existing or subsequently acquired or
organized subsidiaries of the surviving corporation and substantially all
present and future assets and properties of the surviving corporation and its
domestic subsidiaries.
Under the revolving credit facility, letters of credit may be issued,
on a revolving basis, at any time after the closing of the merger and prior to
maturity. Bank of America will extend the surviving corporation credit at any
time up to the lesser of $8 million or the amount of a borrowing base formula
equal to the sum of 85% of eligible receivables and 60% of eligible inventory of
the surviving corporation. Swingline loans will be made available by certain
lenders in minimum amounts of $100,000.
As part of the senior credit facilities, Bank of America has agreed to
provide the surviving corporation in the merger with a term loan facility in an
aggregate principal amount of $22,000,000. The term loan will bear interest at
the same rate as the revolving credit facility. The term loan will be subject to
quarterly amortization, with a final maturity in five years.
The senior credit facilities provide for mandatory prepayments and
commitment reductions out of excess cash flow and the net cash proceeds from
certain debt or equity issuances and from certain sales of assets or other
dispositions of property. Voluntary prepayments are permitted in whole or in
part at the option of the surviving corporation without penalty, subject to
LIBOR breakage costs. It also provides that the surviving corporation must
remain in compliance with financial covenants specifying maximum leverage ratios
and minimum fixed charge coverage ratios, as well as minimum net worth and
minimum consolidated EBITDA.
55
<PAGE>
The senior credit facilities will also include:
o customary affirmative and negative covenants, including covenants that
limit indebtedness, liens, investments, transactions with and payments
to affiliates, nature of business conducted, acquisitions, issuance of
equity and amendments to material agreements, and
o customary events of default.
The obligation to make the loans under the senior credit facilities is
conditioned upon there not having occurred any material adverse change in the
business, assets, operation or condition (financial or otherwise) of Saratoga
and its subsidiaries since December 31, 1998 and the absence of any event that,
individually or in the aggregate, could reasonably be expected to result in such
a material adverse change, as well as other customary conditions for commitments
of this type.
Senior Subordinated Notes
On January 3, 2000, Key Mezzanine Capital Fund L.L.P. committed,
subject to certain terms and conditions, to purchase from Saratoga $10,000,000
in senior subordinated notes with warrants. The commitment letter is subject to
customary conditions, including the negotiation, execution and delivery of
definitive documentation with respect to the commitment. The commitment letter
will expire on May 31, 2000. The obligation to purchase the senior subordinated
notes is conditioned upon there not having occurred any material adverse change
in the business, assets, financial condition or income of Saratoga and any of
its subsidiaries since December 31, 1998 and other customary conditions for
commitments of this type.
Whether or not Key Mezzanine purchases the senior subordinated notes,
the Purchaser agrees:
o if the merger takes place, to pay all reasonable out-of-pocket costs
and expenses incurred by Key Mezzanine, including its reasonable fees
and disbursements of its counsel;
o to indemnify Key Mezzanine and its affiliates from all losses, claims,
damages, liabilities and expenses in connection with the commitment
letter, except for damages resulting from the gross negligence or
willful misconduct of the indemnitee; and
o should the Purchaser and Saratoga consummate the merger before December
31, 2000 without utilizing Key Mezzanine to provide the senior
subordinated note financing, to pay Key Mezzanine $150,000 as
liquidated damages.
Payment of all amounts due under the senior subordinated notes will be
subordinated and junior in right of payment to certain specified senior debt.
56
<PAGE>
The terms and conditions of the senior subordinated notes include:
o a rate of 12% per annum, payable quarterly in arrears;
o a one-time facility fee of $150,000;
o a final maturity of seven years from the closing date, without
amortization prior to maturity;
o prepayment in whole or in part, in multiples of $1,000,000 at any time
upon payment of a prepayment fee of 3-5% of the amount prepaid in
certain circumstances;
o mandatory prepayment in full upon certain change of control events or
sale of 35% or more of Saratoga's assets, together with a prepayment
fee of 3-5% of the amount prepaid in certain circumstances;
o Saratoga's being subject to certain affirmative covenants, including
financial reporting and debt service coverage ratio;
o Saratoga's being subject to certain negative covenants, including
restrictions on capital expenditures, incurrence of debt, dividends or
other distributions, sale of assets or subsidiary stock, merger or
consolidation, and transactions with affiliates;
o customary events of default, including failure to pay amounts due on
senior subordinated notes, non-payment of any final judgment in excess
of $250,000, bankruptcy and acceleration of the senior debt.
The holders of the subordinated notes will receive detachable equity
warrants with a nominal exercise price for up to 5% of the equity interest on a
fully diluted basis in Saratoga.
The terms and conditions of the warrants include:
o ability to exercise at any time prior to the later of seven years from
the closing date or payment in full of the subordinated debt;
o exercise price of $.01 per share;
o customary anti-dilution provisions;
o rights, under certain circumstances, to require Saratoga to register
the underlying equity securities under the Securities Act to permit
their resale in a public offering;
o covenants by Saratoga, including prohibition against changing current
line of business and restrictions on affiliate transactions that are
not arm's length.
57
<PAGE>
Other than scheduled repayments of the senior credit facilities and the
senior subordinated notes, there are currently no specific plans or arrangements
for the repayment of the funds borrowed under the senior credit facilities and
the senior subordinated notes, but the Purchaser and Ms. Prever anticipate that
the surviving corporation will be able to repay such borrowings out of
internally generated funds.
Equity Financing
On January 5, 2000, North Castle Partners II, L.P. committed, subject
to the terms and conditions of the merger agreement, to Saratoga and the
Purchaser to provide $28.66 million of equity financing to the Purchaser
required to acquire shares of the surviving corporation necessary to consummate
the merger. In addition, North Castle Partners II, L.P. has agreed to provide up
to an additional $10 million in equity financing if the full amount of debt
financing contemplated by either the senior credit facilities or the senior
subordinated notes is not available at the effective time of the merger. The
equity investment by the Purchaser is subject to the same conditions as the
merger, including Saratoga obtaining adequate debt financing.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following summarizes the material provisions of the merger
agreement. A copy of the merger agreement is attached as Annex A to this
document and is incorporated in this document by reference. This summary is
qualified in its entirety by reference to the merger agreement.
THE MERGER
The merger agreement provides that after satisfaction or, to the extent
permitted, waiver of all conditions to the merger, Saratoga and the Purchaser
will file a certificate of merger with the Secretary of State of the State of
Delaware and make all other filings or recordings required by Delaware law in
connection with the merger. The merger will become effective at such time as the
certificate of merger is duly filed with the Secretary of State of the State of
Delaware or at such later time as is specified in the certificate of merger by
agreement of the Purchaser and Saratoga. Pursuant to this certificate, MergerCo
shall be merged at the effective time with and into Saratoga, the separate
existence of MergerCo shall cease, and Saratoga shall be the surviving
corporation. From and after the effective time, the surviving corporation will
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of Saratoga, all as provided under
Delaware law.
MERGER CONSIDERATION
At the effective time:
o each share outstanding immediately prior to the effective time (other
than a minimum of 550,000 and a maximum of 700,000 shares owned by the
Continuing Stockholders, shares held in treasury and shares as to which
appraisal rights have been validly exercised), will be converted into
the right to receive $6.00 in cash, without interest;
o a minimum of 550,000 and a maximum of 700,000 shares held by the
Continuing Stockholders immediately prior to the effective time will be
converted into the right to receive a minimum of 550,000 and a maximum
of 700,000 shares of common stock of
58
<PAGE>
the surviving corporation; provided that in lieu of any fractions of a
share of common stock of the surviving corporation, each holder shall
be entitled to receive an amount of cash, without interest, determined
by multiplying $6.00 by the fractional interest to which the holder
would otherwise be entitled;
o each share held by Saratoga as treasury stock immediately prior to the
effective time shall be canceled, and no payment shall be made with
respect to those shares;
o all options to purchase shares of Class A common stock, whether or not
exercisable or vested, shall be repurchased or canceled, and each
holder shall receive an amount in cash determined by multiplying (x)
the excess, if any, of $6.00 over the per share exercise price of each
option by (y) the number of shares of Class A common stock the holder
could have purchased, assuming full vesting of all options, had the
holder exercised these options in full immediately prior to the
effective time; and
o all warrants to purchase shares of Class A common stock, whether or not
exercisable or vested, shall be repurchased or canceled, and each
holder shall receive an amount in cash determined by multiplying (x)
the excess, if any, of $6.00 over the per share exercise price of each
warrant by (y) the number of shares of Class A common stock the holder
could have purchased, assuming full vesting of all warrants, had the
holder exercised these warrants in full immediately prior to the
effective time.
Immediately after the effective time of the merger, the Purchaser will
purchase shares of common stock of Saratoga, as the corporation surviving the
merger, for a minimum of $28.66 million and a maximum of $38.66 million. The
purchase price for each share of common stock will be $6.00. The number of
shares in the surviving corporation that will be purchased by the Purchaser will
be increased above $28.66 million if the financing provided by Bank of America
and Key Mezzanine is less than $32 million. See "The Merger--Interests of
Certain Persons in the Merger" for a discussion of how an increse in the number
of shares of common stock to be purchased by the Purchaser will affect the
number of shares of Rollover Stock.
SURRENDER AND PAYMENT
Prior to the effective time, MergerCo shall appoint an agent for the
purpose of exchanging certificates representing shares for the merger
consideration, and Saratoga shall provide MergerCo and the exchange agent with a
complete and accurate list of names and addresses for the stockholders of record
of Saratoga. On or prior to the effective time, Saratoga will deposit in trust
with the exchange agent the merger consideration to be paid in respect of the
shares and the certificates representing the shares of common stock of the
surviving corporation to be issued. For purposes of determining the merger
consideration to be made available, Saratoga shall assume that no holder of
shares will perfect his right to appraisal of his shares. Promptly, and in any
event within three business days, after the effective time, the surviving
corporation will cause the exchange agent to send to each holder of shares at
the effective time a letter of transmittal for use in the exchange, which will
specify that the delivery shall be effected,
59
<PAGE>
and risk of loss and title shall pass, only upon delivery of the certificates
representing shares to the exchange agent, and instructions for use in effecting
the surrender of such certificates in exchange for the merger consideration.
Each holder of shares that have been converted into a right to receive
the merger consideration, upon surrender to the exchange agent of a certificate
or certificates representing the shares, together with a properly completed
letter of transmittal covering those shares, will be entitled to receive the
merger consideration payable in respect of those shares. Until so surrendered,
each certificate shall, after the effective time, represent for all purposes,
only the right to receive the merger consideration. The exchange agent or the
surviving corporation, as the case may be, shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to the merger
agreement any amounts as the exchange agent or the surviving corporation are
required to deduct and withhold under the Code or any applicable provision of
state, local or foreign tax law, with respect to the making of any payment in
respect of the merger consideration under the merger agreement.
If any portion of the merger consideration is to be paid to a person
other than the registered holder of the shares represented by the certificate or
certificates surrendered in exchange therefor, it shall be a condition to the
payment that the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such payment shall pay to the exchange agent any transfer or other
taxes required as a result of such payment to a person other than the registered
holder of the shares or establish to the satisfaction of the exchange agent that
the tax has been paid or is not payable.
In the event any certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost, stolen or destroyed, the exchange agent will issue in
exchange for the lost, stolen or destroyed certificate the merger consideration
deliverable in respect of the certificates as determined in accordance with the
merger agreement, provided that the person to whom the merger consideration is
paid shall, as a condition precedent to the payment thereof, gives the surviving
corporation a bond in a sum as it may direct or otherwise indemnify the
surviving corporation in a manner satisfactory to it against any claim that may
be made against the surviving corporation with respect to the certificate
claimed to have been lost, stolen or destroyed.
After the effective time, the stock transfer books of Saratoga shall be
closed and there shall be no further registration of transfers on the stock
transfer books of the surviving corporation of shares that were outstanding
immediately prior to the effective time. If, after the effective time,
certificates representing shares are presented to the surviving corporation,
they shall be canceled and exchanged for the consideration provided for, and in
accordance with the procedures set forth in the merger agreement.
Any portion of the merger consideration made available to the exchange
agent that remains unclaimed by the holders of shares one year after the
effective time shall be returned to
60
<PAGE>
the surviving corporation, upon demand, and any such holder who has not
exchanged his shares for the merger consideration in accordance with this the
procedures described in the merger agreement prior to that time shall thereafter
look only to the surviving corporation for payment of the merger consideration
in respect of his shares. Notwithstanding the foregoing, the surviving
corporation shall not be liable to any holder of shares for any amount paid to a
public official pursuant to applicable abandoned property laws. Any amounts
remaining unclaimed by holders of shares two years after the effective time, or
an earlier date immediately prior to the time as any amounts would otherwise
escheat to or become property of any governmental entity, 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 to
the property.
Any portion of the merger consideration made available to the exchange
agent to pay for shares for which appraisal rights have been perfected shall be
returned to the surviving corporation, upon demand.
THE SURVIVING CORPORATION
At the effective time, the certificate of incorporation and bylaws of
Saratoga immediately prior to the effective time, as amended and restated, to be
substantially in the forms attached to the merger agreement as Annexes B and C,
respectively, which shall be the certificate of incorporation and bylaws of the
surviving corporation until duly amended in accordance with applicable law. From
and after the effective time, until successors are duly elected or appointed and
qualified in accordance with applicable law or their earlier death, resignation
or removal, the directors of MergerCo, and the officers of Saratoga immediately
prior to the effective time shall be the directors and officers, respectively,
of the surviving corporation.
Pursuant to the stockholders agreement, the board of Saratoga will
consist of seven members, of which four members will be nominated by the
Purchaser, and three members will be nominated by Robin Prever so long as she is
the Chief Executive Officer. If Ms. Prever is no longer the Chief Executive
Officer, then the Continuing Stockholders may nominate one director, so long as
they collectively own 5% or more of the outstanding common stock. The
chairperson of the board shall be designated by the Purchaser from among the
directors of Saratoga. The stockholders agreement provides that the certificate
of incorporation and bylaws of Saratoga, as the surviving corporation, are to be
consistent with the terms of the stockholders agreement.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties
of Saratoga relating to, among other things:
o organization, standing and similar corporate matters of Saratoga and
its subsidiaries;
61
<PAGE>
o the authorization, execution, delivery, performance and enforceability
of the merger agreement;
o consents and approvals, no conflicts, breaches or violations as a
result of the merger agreement and related transactions;
o the capital structure of Saratoga and its subsidiaries;
o interests or investments in other entities;
o the absence of material undisclosed liabilities;
o the absence of certain changes or events since December 31, 1998,
including material adverse changes with respect to Saratoga;
o filing of tax returns and payment of taxes;
o title to properties and assets and encumbrances;
o title to real property and encumbrances;
o material contracts and enforceability;
o intellectual property and encumbrances;
o insurance;
o the absence of pending or threatened litigation;
o compliance with applicable laws, governmental approvals and other
consents;
o environmental matters;
o benefit plans and other matters relating to the Employee Retirement
Income Security Act of 1974, as amended, and employment matters;
o product liability;
o brokers' fees and expenses;
o documents filed by Saratoga with the SEC and the accuracy of
information contained in those documents and the financial statements
of Saratoga;
o the accuracy of information supplied by Saratoga in connection with
this document and the Schedule 13E-3;
o required vote by Saratoga's stockholders;
o the receipt of a fairness opinion from Saratoga's financial advisor;
o state and federal takeover statutes; and
o substantial suppliers and customers.
The merger agreement also contains customary representations and
warranties of the Purchaser relating to, among other things:
o organization, standing and similar corporate matters of the Purchaser
and MergerCo;
o the authorization, execution, delivery, performance and enforceability
of the merger agreement and related matters; consents and approvals, no
breaches or violations as a result of the merger agreement and related
transactions,
o the absence of pending or threatened litigation;
o brokers' fees and expenses;
62
<PAGE>
o no prior business;
o financing commitments in connection with the merger;
o accuracy of information supplied by the Purchaser and MergerCo in
connection with this document and the Schedule 13E-3;
o ownership of shares of Saratoga by MergerCo; and
o the absence of undisclosed liabilities.
CERTAIN PRE-CLOSING COVENANTS
Pursuant to the merger agreement, Saratoga has agreed that prior to the
effective time, Saratoga and its subsidiaries shall conduct their business in
the ordinary course consistent with past practice in all material respects and
shall use their commercially reasonable efforts to preserve intact its present
business organization and relationships with customers, suppliers and others
having business dealings with it, and to keep available the services of its
present officers, employees and consultants in all material respects. Until the
effective time, Saratoga has agreed to promptly advise the Purchaser in writing
of any event, occurrence, fact, condition, change, development or effect that,
individually or in the aggregate, could reasonably be expected to have or result
in a material adverse effect.
Until the effective time, Saratoga shall not take any action or omit to
take any action which would result in a breach of its representations and
warranties, it being agreed that Saratoga may enter into contracts to purchase
fruit in the ordinary course consistent with past practice; and may make and
commit to make capital expenditures not in excess of $1 million in the aggregate
in accordance with Saratoga's budget for the fiscal year 2000.
Until the effective time, Saratoga shall conduct all tax affairs
relating to it in the ordinary course of business, and in good faith in
substantially the same manner as such affairs would have been conducted if the
merger agreement had not been entered into.
ACCESS AND INFORMATION
Until the effective time, Saratoga and its subsidiaries shall give
Purchaser and its accountants, counsel, consultants, employees and agents, full,
complete and timely access during normal business hours to, and furnish them
with all documents, records, work papers, tax returns and information with
respect to, all of Saratoga's and its subsidiaries' properties, assets, books,
material contracts, reports, records and senior management personnel, as
Purchaser shall from time to time reasonably request. Saratoga and its
subsidiaries shall keep Purchaser and its representatives informed as to the
affairs of the business.
63
<PAGE>
AGREEMENT NOT TO SOLICIT TAKEOVER PROPOSALS
Saratoga shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly through another person:
o solicit, initiate or encourage, including by way of furnishing
information, or take any other action designed to facilitate, any
inquires or the making of any proposal which constitutes a company
takeover proposal, as defined in the merger agreement; or
o negotiate with respect to, agree to or endorse any company takeover
proposal;
provided, however, that if and to the extent that the board determines
in good faith, after consultation with outside counsel, that it is necessary to
do so in order to act in a manner consistent with its fiduciary duties to the
stockholders under applicable law, Saratoga may, in response to any company
takeover proposal which was not solicited by it and which did not otherwise
result from a breach of this provision, and subject to providing prior written
notice of its decision to take such action to Purchaser, (x) furnish information
with respect to Saratoga and its subsidiaries to any person making a company
takeover proposal pursuant to a customary confidentiality agreement, as
determined by Saratoga based on the advice of its outside counsel, and (y)
participate in discussions or negotiations regarding such company takeover
proposal.
Except as expressly permitted in the merger agreement, neither the
board, the special committee of Saratoga nor any other committee shall:
o withdraw, modify or, following a request by Purchaser to do so, fail to
reconfirm, or propose publicly to withdraw, modify or fail to
reconfirm, in a manner adverse to MergerCo or Purchaser, the approval
or recommendation by the board or any committee of the merger or the
merger agreement;
o approve or recommend, or propose publicly to approve or recommend any
company takeover proposal; or
o cause Saratoga to enter into any letter of intent, agreement in
principle acquisition agreement or other similar agreement related to
any company takeover proposal.
Notwithstanding the foregoing, the board may take such actions if it
determines in good faith, based upon the recommendation of the special committee
and after consultation with outside counsel, that in light of a company superior
proposal, as defined in the merger agreement, it is necessary to do so in order
to act in a manner consistent with its fiduciary duties to the stockholders
under applicable law; provided, that it may only take such actions at a time
that is after the third business day following Purchaser's receipt of written
notice advising Purchaser that the board is prepared to accept a company
superior proposal, specifying the material terms and conditions of the company
superior proposal, all of which information will be kept confidential by
Purchaser in accordance with the terms of the confidentiality agreement between
Saratoga and North Castle.
64
<PAGE>
Pursuant to the merger agreement, Saratoga has agreed to immediately
advise the Purchaser of any request for information or of any company takeover
proposal and the material terms and conditions of any request or company
takeover proposal. Saratoga agrees to keep Purchaser reasonably informed of the
status and details, including amendments or proposed amendments, of any such
request or company takeover proposal.
Nothing contained in the merger agreement will prohibit Saratoga from
taking and disclosing to its stockholders a position contemplated by Rules 14d-9
and 14e-2(a) promulgated under the exchange act or from making any disclosure to
Saratoga's stockholders if, in the good faith judgment of the board, after
consultation with outside counsel, failure to so disclose would be inconsistent
with its obligations under applicable law; provided, however, that, neither
Saratoga nor its board nor any committee thereof shall withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to the merger
agreement or the merger or approve or recommend, or propose publicly to approve
or recommend, a company takeover proposal, except to the extent permitted in the
merger agreement.
INDEMNIFICATION AND INSURANCE
Pursuant to the terms of the merger agreement, for a period of six
years following the effective time, the surviving corporation shall indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of Saratoga and its subsidiaries in such capacities against all
losses, claims, damages, expenses or liabilities arising out of actions or
omissions, or alleged actions or omissions, occurring at or prior to the
effective time, to the same extent and on the same terms and conditions,
including with respect to advancement of expenses, provided for in Saratoga's
certificate of incorporation and bylaws in effect at the date hereof to the
extent consistent with applicable law.
For six years after the effective time, the surviving corporation shall
maintain in effect directors' and officers' liability insurance covering the
persons who are currently covered by Saratoga's existing directors' and
officers' liability insurance with respect to claims arising from facts or
events which occurred before the effective time, on terms and conditions no less
favorable to such directors and officers than those in effect on January 5,
2000; provided that in no event shall the surviving corporation be required to
make annual premium payments for this insurance in excess of 200% of the
premiums paid by Saratoga for this insurance as of the date hereof.
65
<PAGE>
BEST EFFORTS; CERTAIN FILINGS
Saratoga and the Purchaser have agreed to use their best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the merger agreement in the most expeditious manner practicable, including but
not limited to the satisfaction of all conditions to the merger and seeking to
remove promptly any injunction or other legal barrier that may prevent or delay
such consummation.
Saratoga and the Purchaser have agreed to promptly prepare and file
with the SEC and thereafter mail to the stockholders of Saratoga as promptly as
practicable the Schedule 13E-3 and this document.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The respective obligations of the parties to consummate the merger are
subject to the satisfaction of the following conditions:
o the merger agreement shall have been adopted by the stockholders of
Saratoga in accordance with the Delaware law;
o no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the
merger;
o no federal, state or foreign court, arbitrator or governmental body,
agency, or official shall have issued any order, and there shall not
have been adopted or promulgated any statute, rule or regulation,
prohibiting the consummation of the merger;
o the proxy statement shall have been cleared by the SEC;
o the applicable waiting period under the HSR Act shall have expired or
been terminated;
o Saratoga shall have received at least $22.5 million of debt financing
pursuant to definitive financing agreements on the terms substantially
similar to the terms set forth in the commitment letters described
under "The Merger - Merger Financing", or on less favorable terms that
are acceptable to Purchaser;
o Saratoga and the Purchaser shall have entered into the Stockholders
Agreement and the Registration Rights Agreement, and such agreements
shall be in full force and effect; and
o Purchaser and each Continuing Stockholder shall have entered into a
voting agreement and each voting agreement shall be in full force and
effect.
The obligations of the Purchaser and MergerCo to consummate the merger
are subject to the satisfaction of the following further conditions:
o Saratoga shall have performed in all material respects all of its
obligations under the merger agreement required to be performed by it
at or prior to the effective time and the
66
<PAGE>
representations and warranties of Saratoga contained in the merger
agreement shall be true and correct in all respects, in the case of any
representation or warranty qualified as to materiality, or in all
material respects, in the case of any representation or warranty not so
qualified, at and as of the effective time as if made at and as of such
time;
o Saratoga shall have obtained and shall have delivered to Purchaser on
or prior to the closing date copies of all governmental approvals and
all consents required or appropriate to be obtained by Saratoga or its
subsidiaries;
o from January 5, 2000 through and including the effective time, no
event, occurrence, fact, condition, change, development or effect shall
have occurred, exist or come to exist that, individually or in the
aggregate, has constituted or resulted in, or could reasonably be
expected to constitute or result in, a material adverse effect; it
being understood that the enactment of any regulation by the Food and
Drug Administration mandating pasteurization of fresh juice products
shall not constitute a material adverse effect, as defined in the
merger agreement, unless Saratoga would be unable to comply with such
new regulation without the occurrence of a material adverse effect;
o as of the effective time, all corporate proceedings of Saratoga in
connection with the merger agreement, the ancillary agreements, as
defined in the merger agreement, and the transactions contemplated
thereby, and all documents and instruments incident thereto, shall be
reasonably satisfactory in substance and form to Purchaser and its
counsel, and Purchaser and its counsel shall have received all such
documents and instruments;
o the number of dissenting shares shall not exceed 5% of the issued and
outstanding shares of Class A common stock and Class B common stock;
o the Purchaser shall have received a certificate of Saratoga, in
accordance with Treasury Regulations ss. 1.897-2(h), to the effect that
Saratoga is not, and has not during the five year period preceding the
effective time been, a U.S. real property holding corporation within
the meaning of Section 897 of the Code;
o Saratoga and Robin Prever shall have entered into an employment
agreement and such agreement shall be in full force and effect; and
o Saratoga and North Castle shall have entered into a consulting
agreement and such agreement shall be in full force and effect.
The obligations of Saratoga to consummate the merger are subject to the
satisfaction of the following further conditions:
o each of the Purchaser and MergerCo shall have performed in all material
respects all of its obligations under the merger agreement required to
be performed by them at or prior to the effective time and the
representations and warranties of the Purchaser and MergerCo contained
in the merger agreement shall be true and correct in all respects, in
the case of any representation or warranty qualified as to materiality,
or in all material respects, in the case of any representation or
warranty not so qualified;
o the Purchaser and MergerCo shall have obtained and shall have delivered
to Saratoga on or prior to the closing date copies of all governmental
approvals and all consents required
67
<PAGE>
or appropriate to be obtained by Purchaser and MergerCo in connection
with the execution and delivery of the merger agreement and the
ancillary agreements and the consummation of the transactions
contemplated thereby; and
o as of the effective time, all organizational proceedings of Purchaser
and MergerCo in connection with the merger agreement, the ancillary
agreements and the transactions contemplated thereby, and all documents
and instruments incident thereto, shall be reasonably satisfactory in
substance and form to Saratoga and its counsel, and Saratoga and its
counsel shall have received all such documents and instruments, or
copies thereof, certified if requested, as may be reasonably requested.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned
at any time prior to the effective time, notwithstanding any approval of the
merger agreement by the stockholders of Saratoga:
o by mutual written consent of Saratoga, the Purchaser and MergerCo;
o by either Saratoga or the Purchaser, if the merger has not been
consummated by May 31, 2000; provided that no party that has materially
breached its obligations under the merger agreement shall be entitled
to terminate the merger agreement under this clause;
o by either Saratoga or the Purchaser, if there shall be any law or
regulation that makes consummation of the merger illegal or if any
judgment, injunction, order or decree enjoining the Purchaser or
Saratoga from consummating the merger is entered and any judgment,
injunction, order or decree shall become final and nonappealable;
o by Saratoga, upon 15 days' prior written notice, in the event of a
material breach of any representation, warranty, covenant or agreement
on the part of MergerCo or Purchaser, which breach is not cured prior
to the expiration of the 15 day period, provided that if the breach is
not curable, Saratoga may terminate the merger agreement immediately;
except where Saratoga is in material breach of any representation,
warranty, covenant or agreement.
o by Saratoga,
o if holders of at least a majority, by vote, of the outstanding
Class A common stock and Class B common stock fail to approve
and adopt the merger agreement and the transactions
contemplated thereby at the special meeting of the
stockholders of Saratoga; or
o if prior to the effective time either of the board or the
special committee withdraws, modifies or changes in a manner
adverse to MergerCo its recommendation of the merger agreement
or the merger, in accordance with the fiduciary out provisions
of the merger agreement; provided in the case of this clause
that this termination shall not be effective until Saratoga
has made payment
68
<PAGE>
to North Castle of the termination fee in accordance with the
merger agreement so long as MergerCo and Purchaser have not
breached their obligations under the merger agreement.
o by Purchaser, if
o holders of at least a majority, by vote, of the outstanding
Class A common stock and Class B common stock fail to approve
and adopt the merger agreement and the transactions
contemplated by the merger agreement at the special meeting;
o either the board or the special committee withdraws, modifies
or changes its recommendation of the merger agreement or the
merger in a manner adverse to MergerCo or shall have resolved
to do any of the foregoing or the board shall have recommended
to the stockholders any company takeover proposal (as defined
in the Merger Agreement) or resolved to do so;
o a tender offer or exchange offer for outstanding shares of
capital stock of Saratoga then representing 35% or more of the
combined power to vote generally for the election of directors
is commenced, and the board does not recommend that
stockholders not tender their shares into such tender or
exchange offer; or
o any person shall have acquired beneficial ownership or right
to acquire beneficial ownership of, or any "group", as that
term is defined under Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, shall have
been formed that beneficially owns, or has the right to
acquire beneficial ownership of, outstanding shares of capital
stock of Saratoga then representing 35% or more of the
combined power to vote generally for the election of
directors.
o by Purchaser, upon 15 days' prior written notice, in the event of a
material breach of any representation, warranty, covenant or agreement
on the part of Saratoga, which breach is not cured prior to the
expiration of the 15 day period, provided that if the breach is not
curable, Purchaser may terminate the merger agreement immediately;
except where Purchaser or MergerCo is in material breach of any
representation, warranty, covenant or agreement.
o by Purchaser, on the one hand, or Saratoga, on the other hand, if any
event shall occur or exist that otherwise shall have made it impossible
to satisfy a condition precedent to the obligation of the terminating
party or parties to consummate the transactions contemplated by the
merger agreement, unless the occurrence or existence of such event,
fact or condition shall be due to the failure of the terminating party
or parties to perform or comply with any of the agreements, covenants
or conditions hereof to be performed or complied with by the party
prior to the effective time.
o by Saratoga, if the board determines in good faith, based upon the
opinion of its outside legal counsel, that the failure to terminate the
merger agreement would constitute a breach
69
<PAGE>
of the fiduciary duties of the board to the stockholders under
applicable law.
If the merger agreement is terminated as described above, the merger
agreement shall become void and of no effect with no liability on the part of
any party thereto, other than for breaches and except that provisions relating
to the termination fee and costs and expenses shall survive the termination
thereof. Additionally, the voting agreements between the Purchaser and each
Continuing Stockholder pursuant to which each Continuing Stockholder appointed
the Purchaser as his, her or its irrevocable proxy to vote all of his, her or
its shares in favor of the merger agreement terminate upon termination of the
merger agreement.
Saratoga may not consent to or exercise any right to terminate the
merger agreement, unless that action is approved by the special committee.
TERMINATION FEE
Saratoga shall promptly pay North Castle a termination fee of $1.2
million and reimbursement of costs and expenses not to exceed $300,000 in the
event that the merger agreement is terminated only in the following
circumstances:
o the board or special committee withdraws, modifies or changes in a
manner adverse to the MergerCo its recommendation of the merger
agreement or the merger or resolves to do so;
o the board recommends to the stockholders any company takeover proposal,
as defined in the merger agreement, or resolves to do so;
o the board does not recommend that stockholders not tender their shares
into a tender offer or exchange offer for shares representing 35% or
more of the voting power of Saratoga; or
o any person or group, as defined in the Exchange Act, shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of shares representing 35% or more of the voting power of
Saratoga.
AMENDMENT AND WAIVER
Any provision of the merger agreement may be amended, modified, waived
or discharged prior to the effective time if, and only if, the amendment,
modification, waiver or discharge is in writing and duly executed by the party
against whom enforcement of the amendment, modification, waiver or discharge is
sought.
FEES AND EXPENSES
Except as described under " -- Termination Fee", the merger agreement
calls for all costs
70
<PAGE>
and expenses incurred in connection with the merger to be paid by the party
incurring such cost or expense. If the merger is consummated, Saratoga shall pay
all costs and expenses incurred in connection with the merger by MergerCo, the
Purchaser and Saratoga.
The following is an estimate of fees and expenses to be incurred in
connection with the merger:
Legal Fees and Expenses................................ $ 850,000
Accountants' Fees and Expenses......................... 200,000
Financing Costs and Fees............................... 2,200,000
Financial Advisor to Special Committee................. 520,000
Legal Fees and Expenses of Special Committee........... 150,000
Special Committee Fees and Expenses.................... 25,000
Printing............................................... 50,000
Filing Fees............................................ 7,237.88
Information/Transfer Agent............................. 10,000
Mailing................................................ 10,000
Miscellaneous.......................................... 750,000
================
Total......................................... $ 4,772,237.88
Saratoga currently expects that approximately $32.6 million will be
required to pay the merger consideration to the Continuing Stockholders and the
other stockholders, assuming no holders exercise appraisal rights. Saratoga
currently expects that approximately $3.6 million will be required to pay the
holders of options and warrants in exchange for the cancellation of those
options and warrants. For a description of the sources of these funds, see "The
Merger -- Merger Financing."
71
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial data
of Saratoga has been prepared to give effect to the merger and the other
transactions contemplated by the merger agreement as a leveraged
recapitalization for financial reporting purposes. Accordingly, the historical
basis of Saratoga's assets and liabilities will not be affected by the
transactions. For a discussion of the merger and the other transactions, see
"The Merger."
The pro forma adjustments presented are based upon available
information and certain assumptions that Saratoga believes are reasonable under
the circumstances. The historical condensed consolidated statement of income
data for the nine months ended September 30, 1999, and the historical condensed
consolidated balance sheet data as of September 30, 1999, were derived from the
unaudited condensed consolidated financial statements of Saratoga included in
Saratoga's Quarterly Report on Form 10-QSB incorporated by reference in this
document and included with this document. The historical condensed consolidated
statement of income data for the year ended December 31, 1998 were derived from
the audited consolidated financial statements of Saratoga included in Saratoga's
Annual Report on Form 10-KSB incorporated by reference in this document and
included with this document.
The unaudited pro forma condensed consolidated statement of operations
data of Saratoga for the nine months ended September 30, 1999 gives effect to
the merger as if it had occurred on January 1, 1999. The unaudited pro forma
condensed consolidated statement of operations data of Saratoga for the year
ended December 31, 1998 gives effect to (i) the merger as if it had occurred on
January 1, 1998, and (ii) the acquisition of Fresh Juice on January 29, 1999 as
if that acquisition has occurred on January 1, 1998. The unaudited pro forma
consolidated balance sheet data of Saratoga as of September 30, 1999 gives
effect to the merger assuming that it was completed on January 1, 1998.
The unaudited pro forma financial data should be read in conjunction
with the historical consolidated financial statements of Saratoga and notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the other financial data incorporated by reference in
this document and included with this document, as well as the information
concerning the merger, including the sources and uses of the merger, contained
in "The Merger."
72
<PAGE>
The pro forma financial data and related notes are provided for
informational purposes only and do not necessarily reflect the results of
operations or financial position of Saratoga that would have actually resulted
had the events referred to above or in the notes to the unaudited pro forma
financial data been consummated as of the date and for the period indicated and
are not intended to project Saratoga's financial position or results of
operations for any future period.
73
<PAGE>
PRO FORMA (UNAUDITED) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SARATOGA PRO FORMA
BEVERAGE GROUP INCLUDING PRO FORMA
(1) ACQUISITION (2) ACQUISITION ADJUSTMENTS (6) PRO FORMA
-------------- --------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
[To be Filed by Amendment]
</TABLE>
74
<PAGE>
PRO FORMA (UNAUDITED) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SARATOGA BEVERAGE GROUP RECAPITALIZATION
(1) ADJUSTMENTS (6) PRO-FORMA
----------------------- ---------------- ----------
<S> <C> <C> <C>
[To be Filed by Amendment]
</TABLE>
75
<PAGE>
PRO FORMA (UNAUDITED) CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SARATOGA PRO FORMA
BEVERAGE GROUP INCLUDING PRO FORMA
ASSETS (1) ACQUISITION (2) ACQUISITION ADJUSTMENTS PRO FORMA
-------------- --------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
[To be Filed by Amendment]
</TABLE>
76
<PAGE>
PRO FORMA (UNAUDITED) CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SARATOGA BEVERAGE PRO FORMA
ASSETS GROUP (1) ADJUSTMENTS PRO FORMA
----------------- ----------- ---------
<S> <C> <C> <C>
[To be Filed by Amendment]
</TABLE>
77
<PAGE>
Saratoga Beverage Group, Inc.
Computation of Ratio of Earnings to Fixed Charges
(in 000s, except for ratio amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30 Twelve Months Ended December 31
1999 1998 1999 1998 1999 1998
---------- ---------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
[To be Filed by Amendment]
</TABLE>
Saratoga Beverage Group, Inc.
Computation of Ratio of Earnings to Fixed Charges
After Adjustment for Refinancing
(in 000s, except for ratio amounts)
(unaudited)
Nine Months Ended Twelve Months Ended
September 30 1999 December 31 1998
-------------------- -------------------
[To be Filed by Amendment]
78
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 14, 2000, certain information with
respect to the beneficial ownership of the common stock by (i) each director and
nominee for director of the Company, (ii) each person named in the compensation
table, (iii) all persons known by the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Company's voting securities and (iv)
all officers, directors and nominees for directors of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares
Name and Stock of Common Stock Percentage Beneficially Owned
Address of Beneficially Owned at -----------------------------
Beneficial Owner January 14, 2000 (1) Of Shares (1)(2)(3) Of Voting Power (2)(3)
----------------- ---------------- --------- ---------------
<S> <C> <C> <C>
Anthony Malatino (6) 718,127(25) 12.0% 26.5%
Robin Prever (4) 418,285(14) 6.9% 13.3%
Adam Madkour (4) 81,716(15) 1.4% 1.0%
Gayle Henderson (4) 7,793(16) * *
Warren Lichtenstein (5) 552,512(17) 9.2% 6.8%
John Morabito (7) 25,000(21) * *
Leonard Toboroff (8) 207,500(18) 3.4% 2.5%
Jeffrey Heavirland (9) 81,106(19) * *
Steven Bogen (10) 409,293(20) 6.8% 5.0%
R. J. Barry Cox (11) 2,500(22) * *
Kim James (12) 0(23) * *
William Colaianni (13) 87,500(24) 1.4% 1.1%
All officers and
directors as a group
1,873,205 28.6% 29.5%
(11 persons)
</TABLE>
- -----------------
* Less than 1%.
(1) Based upon 5,460,218 shares of Class A common stock and 522,955 shares
of Class B common stock outstanding at January 14, 2000. This table
does not include the impact of the execution of the voting agreements
by the Continuing Stockholders on the beneficial ownership of Purchaser
or MergerCo. Purchaser and MergerCo have informed Saratoga that they
beneficially owned no shares of Class A common stock of Saratoga as of
January 14, 2000, other than any beneficial ownership which may be
attributed to Purchaser or MergerCo as a result of their execution of
the voting agreements.
(2) The information presented with respect to stock ownership and related
percentage information is based on common stock as a percentage of the
aggregate number of shares of common stock outstanding, treating the
Class A common stock and the Class B common stock as a single class.
The number of shares of Class A common stock outstanding does not
include (i) 30,000 shares issuable upon exercise of
79
<PAGE>
warrants to Global Financial Group, Inc. for acting as placement agent
in connection with the offering of the 5% subordinated convertible
note, (ii) shares issuable upon exercise of certain outstanding stock
options or reserved for issuance pursuant to the Company's Stock Option
Plan.
(3) The Class A common stock and the Class B common stock are identical,
except that the holders of the Class A common stock are entitled to one
vote per share, whereas the holders of the Class B common stock are
entitled to five votes per share on all matters submitted for
stockholder vote.
(4) The business address of each of Mr. Madkour, Ms. Henderson, and Ms.
Prever is c/o Saratoga Beverage Group, Inc., 11 Geyser Road, Saratoga
Springs, New York 12866.
(5) The business address of Mr. Lichtenstein is c/o Steel Partners II, LP,
750 Lexington Avenue, New York, NY 10022.
(6) The business address of Mr. Malatino is c/o Morgan Stanley Dean Witter,
340 Broadway, Saratoga Springs, NY 12866.
(7) The business address of Mr. Morabito is 11 Geyser Road, Saratoga
Springs, NY 12866.
(8) The business address of Mr. Toboroff is c/o Lincolnshire Management,
Inc., 780 3rd Avenue, 40th Floor, New York, NY 10017.
(9) The business address of Mr. Heavirland is c/o The Fresh Juice Company
of California, Inc., 875 West Eighth Street, Azusa, CA 91702-2247.
(10) The business address of Mr. Bogen is The Fresh Juice Company of New
York, Inc., 280 Wilson Avenue, Newark, NJ 07105.
(11) The business address of Mr. Cox is 11 Geyser Road, Saratoga Springs,
NY 12866.
(12) The business address of Mr. James is The Fresh Juice Company of
Florida, Inc., 1000 American Superior Boulevard, Winter Haven, Florida
33880.
(13) The business address of Mr. Colaianni is Holding Capital Group, Inc.,
10 E. 53rd St., 30th Floor, New York, NY 10022
(14) Includes 100,000 shares of Class A common stock issuable upon exercise
of certain options that are exercisable within 60 days, 150,325 shares
of Class A common stock outstanding and 167,960 shares of Class B
common stock outstanding, and excludes 200,000 shares issuable upon
options that are not exercisable within 60 days.
(15) Includes 80,666 shares of Class A common stock issuable upon exercise
of certain options that are exercisable within 60 days, 1,050 shares of
Class A common stock outstanding, and excludes 19,334 shares issuable
upon options that are not exercisable within 60 days.
(16) Includes 6,668 shares of Class A common stock issuable upon exercise of
certain options that are exercisable within 60 days, 1,125 shares of
Class A common stock
80
<PAGE>
outstanding, and excludes 8,332 shares issuable upon options that are
not exercisable within 60 days.
(17) No shares of Class A common stock issuable upon exercise of certain
options that are exercisable within 60 days, 552,512 shares of Class A
common stock outstanding, and excludes 2,500 shares issuable upon
options that are not exercisable within 60 days.
(18) Includes 207,500 shares of Class A common stock issuable upon exercise
of certain options that are exercisable within 60 days, and excludes
2,500 shares issuable upon options that are not exercisable within 60
days.
(19) Includes 50,000 shares of Class A common stock issuable upon exercise
of certain options that are exercisable within 60 days, 31,106 shares
of Class A common stock outstanding, and excludes 50,000 shares
issuable upon options that are not exercisable within 60 days
(20) Includes 2,500 shares of Class A common stock issuable upon exercise of
certain options that are exercisable within 60 days, 406,793 shares of
Class A common stock outstanding, and excludes 2,500 shares issuable
upon options that are not exercisable within 60 days.
(21) Includes 25,000 shares of Class A common stock issuable upon exercise
of certain options that are exercisable within 60 days, no shares of
Class A common stock are outstanding, and excludes 50,000 shares
issuable upon options that are not exercisable within 60 days.
(22) Includes 2,500 shares of Class A common stock issuable upon exercise of
certain options that are exercisable within 60 days, no shares of Class
A common stock are outstanding, and excludes 4,500 shares issuable upon
options that are not exercisable within 60 days.
(23) No shares of Class A common stock issuable upon exercise of certain
options that are exercisable within 60 days, no shares of Class A
common stock are outstanding, and excludes 20,000 shares issuable upon
options that are not exercisable within 60 days.
(24) Includes 87,500 shares of Class A common stock issuable upon exercise
of certain options that are exercisable within 60 days, no shares of
Class A common stock are outstanding, and excludes 2,500 shares
issuable upon options that are not exercisable within 60 days.
(25) Includes 363,132 shares of Class A common stock outstanding and 354,995
shares of Class B common stock outstanding.
81
<PAGE>
PURCHASES OF COMMON STOCK BY,
AND OTHER TRANSACTIONS WITH, CERTAIN PERSONS
On January 5, 2000, Warren Lichtenstein, a director of Saratoga,
exercised options to purchase an aggregate of 95,500 shares of Class A common
stock with an aggregate exercise price of $233,920. Mr. Lichtenstein exercised
his options using a cashless exercise and, therefore, received 46,254 shares of
common stock upon exercise of his options.
On December 23, 1999, Robin Prever, Chairman, President and Chief
Executive Officer, exercised options to purchase 115,000 shares of Class A
common stock with an aggregate exercise price of $273,750.
In February 1998, Steel Partners purchased 275,000 shares of
unregistered Class A common stock from Saratoga at a purchase price of $2.25 per
share. Steel Partners, an affiliate of Warren Lichtenstein, is a private
investment fund that invests in small-cap companies.
Carl T. Wolf became co-chairman of the board and director in February
1998. At that time, he purchased 175,000 shares of unregistered Class A common
stock from Saratoga at a purchase price of $2.25 per share. In connection with
his purchase, Mr. Wolf was issued an option to purchase 200,000 shares of Class
A common stock at an exercise price of $2.875 per share. Mr. Wolf resigned from
the board on April 17, 1998 for personal reasons and, on that date, Saratoga
repurchased 150,000 shares of unregistered Class A common stock at a price of
$2.25 per share. In connection with Mr. Wolf's resignation, the option was
amended to be exercisable for 75,000 shares and the expiration date of the
options was extended to February 3, 2003.
Saratoga also repurchased 100,000 shares of unregistered Class A common
stock for $1.62 per share in a private transaction from an unaffiliated
stockholder during the first quarter of 1998.
82
<PAGE>
During the second quarter of 1998, 250,000 shares held in treasury were
retired.
In connection with the execution of the merger agreement, each of Robin
Prever, Anthony Malatino, Steven Bogen, Warren Lichtenstein, Steel Partners, an
affiliate of Warren Lichtenstein, Pershing Securities Limited and Jurg Walker
entered into the voting agreements with the Purchaser described in "The Merger
- -- Voting Agreements."
Anthony Malatino, the chairman of the board of Saratoga until December
12, 1995, and Robin Prever, entered into a voting trust agreement, dated August
17, 1992, as amended in April 1993. This agreement expired in 1998.
On October 13, 1998, Saratoga, Steven Bogen, Robin Prever and Anthony
Malatino entered in a stockholder agreement in which it was agreed to vote all
of their Saratoga securities to elect, re-elect and prevent any proposed removal
of, Mr. Bogen as a member of Saratoga's board. This stockholder agreement shall
expire on the earlier of the date (i) that Mr. Bogen directly owns less than
400,000 shares of Class A common stock, (ii) Mr. Bogen is convicted of a felony
or a misdemeanor involving moral turpitude, dishonesty, theft or unethical
business conduct, or (iii) Mr. Bogen breaches his fiduciary duties, in a
material fashion, to Saratoga or its stockholders. The stockholder agreement
will terminate upon the effective time of the merger.
REGULATORY CONSIDERATIONS
ANTITRUST
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules promulgated thereunder, certain merger transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and certain waiting periods have expired or been terminated. The merger is
subject to the filing requirements of the HSR Act.
83
<PAGE>
THE PURCHASER AND MERGERCO
The Purchaser is a newly formed Delaware limited partnership and
Mergerco is a newly formed corporation, both organized at the direction of North
Castle in connection with the transactions contemplated by the merger agreement.
The Purchaser and Mergerco were formed for the purpose of effecting the
transactions contemplated by the merger agreement and are not expected to have
significant assets or liabilities other than in connection with the transactions
contemplated by the merger agreement or to engage in any activities other than
those incident to their formations and the transactions contemplated by the
merger agreement, and, in the case of the Purchaser, actions contemplated by the
voting agreements.
The authorized capital stock of MergerCo consists of 1,000 shares of
common stock, par value $0.01, all of which shares have been issued and are held
by the Purchaser. The general partner of the Purchaser is NCP-SBG GP, L.L.C., a
Delaware limited liability company organized at the direction of North Castle to
serve, along with the Purchaser and MergerCo, as investment vehicles in
connection with the transactions contemplated by the merger agreement and
related agreements. The sole member of NCP-SBG GP, L.L.C. is North Castle
Partners II, L.P., a Delaware limited partnership ("North Castle Fund II"). The
general partner of North Castle Partners II, L.P. is NCP G.P. II, L.P., a
Delaware limited partnership. The general partner of NCP G.P. II, L.P. is North
Castle GP II, L.L.C., a Delaware limited liability company. The sole member of
North Castle GP II, L.L.C. is Charles F. Baird, Jr., an individual.
North Castle Fund II is a private equity fund and, along with NCP G.P.
II, L.P. and North Castle GP II, L.L.C., are private investment vehicles formed
for the purpose of investing in transactions arranged by North Castle Partners,
L.L.C. The present principal occupation of Mr. Baird is as the senior managing
member of North Castle Partners, L.L.C. Mr. Baird is a citizen of the United
States.
The principal executive offices of MergerCo, the Purchaser, NCP-SBG GP,
L.L.C., North Castle Partners II, L.P., NCP G.P. II, L.P. and North Castle GP
II, L.L.C. are c/o North Castle Partners, L.L.C., 60 Arch Street, Greenwich,
Connecticut 06830.
As described in "The Merger -- Consulting Agreement," Saratoga and
North Castle have entered into a consulting agreement, to be effective upon the
closing of the merger, pursuant to which North Castle will provide financial and
other advisory services to Saratoga in exchange for certain fees following the
merger.
DISSENTING STOCKHOLDERS' RIGHTS
Holders of shares of Class A common stock are entitled to appraisal
rights under Section 262 of the DGCL, provided that they comply with the
conditions established by Section 262. Section 262 is reprinted in its entirety
as Annex C to this document. The following discussion is not a complete
statement of the law relating to appraisal rights and is qualified in its
entirety by reference to Annex C. This discussion and Annex C should be reviewed
carefully by any holder who wishes to exercise statutory appraisal rights or who
wishes to preserve the right to do so, as failure to comply with the procedures
set forth in this document or Section 262 may result in the loss of appraisal
rights. Stockholders of record who desire to exercise their appraisal rights
must:
84
<PAGE>
o hold shares of Class A common stock on the date of making a demand for
appraisal;
o continuously hold those shares through the effective time of the
merger;
o not exchange his shares for the merger consideration;
o deliver a properly executed written demand for appraisal to Saratoga
prior to the vote by the stockholders of Saratoga on the merger;
o not vote in favor of the merger or consent to the merger in writing;
o file any necessary petition in the Delaware Chancery Court, as more
fully described below, within 120 days after the effective time of the
merger; and
o otherwise satisfy all of the conditions described more fully below and
in Annex C.
A record holder of shares of Class A common stock who makes the demand
described below with respect to his shares, who continuously is the record
holder of his shares through the effective time of the merger, who otherwise
complies with the statutory requirements of Section 262 and who neither votes in
favor of the merger nor consents to the merger in writing will be entitled, if
the merger is consummated, to receive payment of the fair value of his shares of
Class A common stock as appraised by the Delaware Chancery Court. All references
in Section 262 and in this summary of appraisal rights to a "stockholder" or
"holders of shares of Class A common stock" are to the record holder or holders
of shares of Class A common stock.
Under Section 262, not less than 20 days prior to the special meeting,
Saratoga is required to notify each stockholder eligible for appraisal rights of
the availability of appraisal rights. This document constitutes notice to
holders of Class A common stock that appraisal rights are available to them.
Stockholders of record who desire to exercise their appraisal rights must
satisfy all of the conditions set forth in this document. A written demand for
appraisal of any shares of Class A common stock must be filed with Saratoga
before the taking of the vote on the merger. This written demand must reasonably
inform Saratoga of the identity of the stockholder of record and of the
stockholder's intention to demand appraisal of the Class A common stock held by
the stockholder. This written demand for appraisal of shares must be in addition
to and separate from any proxy or vote abstaining from or voting against the
merger. Voting against, abstaining from voting on, failing to return a proxy
with respect to, or failing to vote on the merger will not constitute a demand
for appraisal within Section 262.
Stockholders who desire to exercise appraisal rights must not vote in
favor of the merger, consent to the merger in writing, or exchange their shares
for the merger consideration. Voting in favor of the merger or delivering a
proxy in connection with the special meeting, unless the proxy votes against, or
expressly abstains from the vote on, the approval of the merger, will constitute
a waiver of the stockholder's right of appraisal and will nullify any written
demand for appraisal submitted by the stockholder.
85
<PAGE>
A demand for appraisal must be executed by or on behalf of the
stockholder of record, fully and correctly, as the stockholder's name appears on
the certificate or certificates representing the shares of Class A common stock.
A person having a beneficial interest in shares of Class A common stock that are
held of record in the name of another person, including a broker, fiduciary or
other nominee, must act promptly to cause the record holder to follow the steps
summarized in this document properly and in a timely manner to perfect any
appraisal rights. If the shares of Class A common stock are owned of record by a
person other than the beneficial owner, including a broker, fiduciary, trustee,
guardian, custodian or other nominee, the demand must be executed by or for the
record owner. If the shares of Class A common stock are owned of record by more
than one person, as in a joint tenancy or tenancy in common, the demand must be
executed by or for all joint owners. An authorized agent, including an agent for
two or more joint owners, may execute the demand for appraisal for a stockholder
of record; however, the agent must identify the record owner and expressly
disclose the fact that, in exercising the demand, this person is acting as agent
for the record owner. A record owner, including a broker, fiduciary or other
nominee, who holds shares of Class A common stock, may exercise appraisal rights
with respect to all or less than all shares held, and in the case of a record
owner who holds as a nominee for more than one other stockholder may exercise
appraisal rights for the shares held for all or less than all beneficial owners
of shares as to which the person is the record owner. In this case, the written
demand must set forth the number of shares covered by the demand. Where the
number of shares is not expressly stated, the demand will be presumed to cover
all shares of Class A common stock outstanding in the name of the record owner.
A stockholder who elects to exercise appraisal rights should mail or deliver his
or her written demand to: Saratoga Beverage Group, Inc., 11 Geyser Road,
Saratoga Springs, New York 12866, Attention: Secretary. The written demand for
appraisal should specify the stockholder's name and mailing address, the number
of shares of Class A common stock owned, and that the stockholder is demanding
appraisal of his or her shares. A proxy or vote against the merger will not
constitute a demand. If the demand is not physically received by Saratoga prior
to the special meeting, irrespective of when mailed, then the demand will not be
duly made.
Within ten days after the effective time, the surviving corporation
must provide notice of the effective time to all stockholders who have complied
with Section 262. Within 120 days after the effective time, either the surviving
corporation or any stockholder who has complied with the required conditions of
Section 262 may file a petition in the Delaware Chancery Court, with a copy
served on the surviving corporation in the case of a petition filed by a
stockholder, demanding a determination of the fair value of the shares of all
dissenting stockholders. The surviving corporation does not currently intend to
file an appraisal petition and stockholders seeking to exercise appraisal rights
should not assume that the surviving corporation will file a petition or that
the surviving corporation will initiate any negotiations with respect to the
fair value of Saratoga shares. Accordingly, stockholders who desire to have
their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. Within 120 days after the effective time, any
stockholder who has complied with the applicable provisions of Section 262 will
be entitled,
86
<PAGE>
upon written request, to receive from the surviving corporation a statement
setting forth the aggregate number of shares of Class A common stock not voted
in favor of the merger and with respect to which demands for appraisal were
received by Saratoga and the number of holders of the shares. This statement
must be mailed within 10 days after the written request for appraisal rights has
been received by the surviving corporation or within 10 days after expiration of
the time for delivery of demands for appraisal under Section 262, whichever is
later.
If a petition for an appraisal is timely filed, at the hearing on the
petition, the Delaware Chancery Court will determine which stockholders are
entitled to appraisal rights and will appraise the shares of Class A common
stock owned by the stockholders, determining the fair value of the shares
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining fair value, the
Delaware Chancery Court is to take into account all relevant factors. In
Weinberger v. UP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that, "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that in making this determination of fair value
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which are known or
which can be ascertained as of the date of the merger and which throw any light
on future prospects of the merged corporation. In Weinberger, the Delaware
Supreme Court stated that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation, may be considered." Section 262, however,
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."
Stockholders considering seeking appraisal should recognize that the
fair value of their shares as determined under Section 262 could be more than,
the same as or less than the merger consideration to be received if they do not
seek appraisal of their shares. The cost of the appraisal proceeding may be
determined by the Delaware Chancery Court and taxed against the parties as the
Delaware Chancery Court deems equitable in the circumstances. Upon application
of a dissenting stockholder of Saratoga, the Delaware Chancery Court may order
that all or a portion of the expenses incurred by any dissenting stockholder in
connection with the appraisal proceeding, including without limitation,
reasonable attorneys' fees and the fees and expenses of experts, be charged pro
rata against the value of all shares of stock entitled to appraisal.
87
<PAGE>
Any holder of shares of Class A common stock who has duly demanded
appraisal in compliance with Section 262 will not, after the effective time, be
entitled to vote for any purpose any shares subject to the demand or to receive
payment of dividends or other distributions on the shares, except for dividends
or distributions payable to stockholders of record at a date prior to the
effective time.
At any time within 60 days after the effective time, any stockholder
will have the right to withdraw the demand for appraisal and to accept the terms
offered in the merger; after this period, the stockholder may withdraw the
demand for appraisal only with the consent of the surviving corporation. If no
petition for appraisal is filed with the Delaware Chancery Court within 120 days
after the effective time, stockholders' rights to appraisal will cease, and all
holders of shares of Class A common stock will be entitled to receive the merger
consideration. Inasmuch as the surviving corporation has no obligation to file a
petition, and has no present intention to do so, any holder of shares of Class A
common stock who desires a petition to be filed is advised to file it on a
timely basis.
Failure to take any required step in connection with the exercise of
appraisal rights may result in termination of appraisal rights. In view of the
complexity of these provisions of the DGCL, stockholders who are considering
exercising their rights under Section 262 should consult with their legal
advisors.
INDEPENDENT AUDITORS
The consolidated balance sheets as of December 31, 1998 and December
31, 1997, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the two fiscal years in the period ended
December 31, 1998, incorporated by reference in this document and included with
this document, have been audited by PricewaterhouseCoopers, LLP, independent
auditors. A representative of PricewaterhouseCoopers, LLP will be at the special
meeting to answer appropriate questions from stockholders and will have the
opportunity to make a statement, if so desired.
88
<PAGE>
FUTURE STOCKHOLDER PROPOSALS
Saratoga will hold an annual meeting in the year 2000 only if the
merger has not already been completed. If the annual meeting is held, then
stockholders' proposals must be sent to the attention of the Secretary of
Saratoga at 11 Geyser Road, Saratoga Springs, New York 12866 by certified mail,
returned receipt requested. Any proposal that a stockholder wishes to have
presented at the next annual meeting of Saratoga must be received at the main
office of Saratoga for inclusion in the proxy statement no later than 120 days
in advance of August 18, 2000; provided, however, that if the 2000 Annual
Meeting is held prior to July 19, 2000 or after September 17, 2000, Saratoga
will notify stockholders of a revised date for submitting notice to Saratoga.
89
<PAGE>
ANNEX A
================================================================================
STOCK PURCHASE AGREEMENT AND
AGREEMENT AND PLAN OF MERGER
among
SARATOGA BEVERAGE GROUP, INC.
NCP-SBG RECAPITALIZATION CORP.
and
NCP-SBG, L.P.
---------------------------
Dated as of January 5, 2000
---------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- --------- -----
ARTICLE I
MERGER; PURCHASE OF SHARES
1.1 Merger; Purchase of Shares ................................... A-1
1.2 Issuance of Purchased Shares and Cash Payment ................ A-2
1.3 Conversion or Cancellation of Shares ......................... A-2
1.4 Exchange of Certificates ..................................... A-3
1.5 Options; Warrants; 2000 Note ................................. A-4
1.6 Dissenting Shares ............................................ A-4
1.7 Certificate of Incorporation; By-Laws ........................ A-5
1.8 Directors and Officers of the Surviving Corporation .......... A-5
1.9 Effective Time ............................................... A-5
1.10 Closing ...................................................... A-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Corporate Status, etc. ....................................... A-5
2.2 Authorization, etc. .......................................... A-6
2.3 No Conflicts; Consents ....................................... A-6
2.4 Capitalization ............................................... A-7
2.5 Investments .................................................. A-7
2.6 Undisclosed Liabilities, etc. ................................ A-7
2.7 Absence of Changes ........................................... A-8
2.8 Tax Matters .................................................. A-8
2.9 Assets ....................................................... A-9
2.10 Real Property ................................................ A-9
2.11 Material Contracts ........................................... A-9
2.12 Intellectual Property ........................................ A-10
2.13 Insurance .................................................... A-11
2.14 Litigation ................................................... A-11
2.15 Compliance with Laws and Instruments ......................... A-11
2.16 Environmental Matters ........................................ A-11
2.17 Employees, Labor Matters, etc. ............................... A-12
2.18 Employee Benefit Plans and Related Matters; ERISA ............ A-12
2.19 Product Liability ............................................ A-13
2.20 Brokers, Finders, etc. ....................................... A-14
2.21 SEC Reports and Financial Statements ......................... A-14
2.22 Proxy Statement; Exchange Act Schedules ...................... A-14
2.23 Required Vote by Company Stockholders ........................ A-14
2.24 Fairness Opinion ............................................. A-15
2.25 Takeover Statutes ............................................ A-15
2.26 Substantial Suppliers and Customers .......................... A-15
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF MERGERCO AND PURCHASER
3.1 Status; Authorization, etc. .................................. A-15
3.2 No Conflicts, etc. ........................................... A-15
3.3 Litigation ................................................... A-16
i
<PAGE>
SECTION PAGE
- --------- -----
3.4 Brokers, Finders, etc. ...................................... A-16
3.5 No Prior Business ........................................... A-16
3.6 Financing ................................................... A-16
3.7 Proxy Statement; Exchange Act Schedules ..................... A-16
3.8 Beneficial Ownership of Shares .............................. A-16
3.9 Liabilities ................................................. A-16
ARTICLE IV
COVENANTS OF THE COMPANY
4.1 Conduct of the Business ..................................... A-17
4.2 No Solicitation ............................................. A-17
4.3 Access and Information ...................................... A-18
4.4 Further Assurances .......................................... A-18
ARTICLE V
COVENANTS OF MERGERCO, PURCHASER AND THE COMPANY
5.1 Public Announcements ........................................ A-18
5.2 Further Actions ............................................. A-18
5.3 Company Stockholder Approval; Proxy Statement ............... A-19
5.4 Directors' and Officers' Insurance and Indemnification ...... A-20
5.5 Stockholder Litigation ...................................... A-21
5.6 Recapitalization ............................................ A-21
5.7 Certain Employee Matters .................................... A-21
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligations of Each Party ..................... A-21
6.2 Conditions to Obligations of MergerCo and Purchaser ......... A-22
6.3 Conditions to Obligations of the Company .................... A-23
ARTICLE VII
TERMINATION
7.1 Termination ................................................. A-23
7.2 Effect of Termination ....................................... A-25
ARTICLE VIII
DEFINITIONS
8.1 Definition of Certain Terms ................................. A-25
ARTICLE IX
MISCELLANEOUS
9.1 Survival .................................................... A-32
9.2 Expenses .................................................... A-32
9.3 Severability ................................................ A-32
9.4 Notices ..................................................... A-32
9.5 Entire Agreement ............................................ A-33
9.6 Counterparts; Headings ...................................... A-33
9.7 Governing Law, etc. ......................................... A-33
9.8 Binding Effect; No Third Party Beneficiaries ................ A-34
9.9 Assignment .................................................. A-34
9.10 Amendment; Waivers, etc. .................................... A-34
9.11 Attorneys' Fees ............................................. A-35
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ----------- ------
<S> <C> <C>
EXHIBIT INDEX
Exhibit A Form of Amended and Restated Certificate of Incorporation of the Company.....
Exhibit B Form of Amended and Restated By-laws at the Company .........................
Exhibit C Form of Stockholders Agreement ..............................................
Exhibit D Form of Registration Rights Agreement .......................................
Exhibit E Form of Employment Agreement ................................................
Exhibit F Form of Consulting Agreement ................................................
Exhibit G Form of Voting Agreement ....................................................
ANNEX
Annex A List of Continuing Stockholders; Cashed Out Shares & Rollover Shares ........
</TABLE>
iii
<PAGE>
STOCK PURCHASE AGREEMENT AND AGREEMENT AND PLAN OF MERGER, dated as of
January 5, 2000, among NCP-SBG, L.P., a Delaware limited partnership (the
"Purchaser"), NCP-SBG Recapitalization Corp., a Delaware corporation
("MergerCo"), and Saratoga Beverage Group, Inc., a Delaware corporation (the
"Company"). Capitalized terms used herein have the meanings ascribed in Section
8.1.
W I T N E S S E T H:
WHEREAS, the Board of Directors of MergerCo has approved, and deems it
advisable and in the best interests of the stockholders of MergerCo to
participate in the recapitalization (the "Recapitalization") of the Company,
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company, based upon the unanimous
recommendation of a special committee of independent directors of the Company
(the "Special Committee"), has approved, and deems it advisable and in the best
interests of the stockholders of the Company to consummate, the Recapitalization
of the Company, upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such Recapitalization, the Board of Directors of
the Company, based upon the unanimous recommendation of the Special Committee,
and the Board of Directors of MergerCo have each approved this Agreement and the
merger of MergerCo with and into the Company in accordance with the terms of
this Agreement and the Delaware General Corporation Law (the "DGCL");
WHEREAS, in connection with the Recapitalization, Purchaser desires to
purchase and the Company desires to issue and sell to Purchaser shares of common
stock of the Company on the terms and conditions set forth in this Agreement;
and
WHEREAS, MergerCo has entered into voting agreements, dated as of the date
hereof (the "Voting Agreements"), with each of the Continuing Stockholders (as
defined herein), pursuant to which the Continuing Stockholders agree to vote
their shares of common stock of the Company in favor of the Merger (as defined
herein);
NOW, THEREFORE, in consideration of the foregoing premises and respective
covenants, representations, warranties and agreements made herein and of the
mutual benefits to be derived therefrom, and for other good and valuable
consideration the receipt and adequacy of which is hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
MERGER; PURCHASE OF SHARES
1.1. Merger; Purchase of Shares. (a) On the terms and subject to the
conditions of this Agreement and in accordance with the applicable provisions of
the DGCL, at the Effective Time, MergerCo shall be merged (the "Merger") with
and into the Company and the separate corporate existence of MergerCo shall
cease. After the Merger, the Company shall continue as the surviving corporation
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Delaware. The Merger shall
have the effect as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, upon the Merger, all the rights,
privileges, immunities, powers and franchises of the Company and MergerCo shall
vest in the Surviving Corporation and all restrictions, obligations, duties,
debts and liabilities of the Company and MergerCo shall be the restrictions,
obligations, duties, debts and liabilities of the Surviving Corporation.
(b) On the terms and subject to the conditions of this Agreement,
immediately after the Effective Time, the Surviving Corporation shall, in
consideration for the payment of the Purchase Price, issue, transfer, deliver
and sell to Purchaser and Purchaser shall purchase and accept from the Surviving
Corporation (the "Stock Purchase") the Purchased Shares. The "Purchase Price"
shall mean
A-1
<PAGE>
$28,660,000, provided that if the full amount (the "Debt Commitment Amount") of
the debt financing contemplated by the letters referred to in Section 3.6(ii)
and (iii) is unavailable at the Effective Time from the financial institutions
party to such letters or from other financing sources on terms substantially
similar to the terms contained in such letters or on less favorable terms that
are acceptable to Purchaser, then the "Purchase Price" shall equal the sum of
(x) $28,660,000 and (y) 90% of the positive difference between (A) the Debt
Commitment Amount and (B) the amount of debt financing actually obtained at the
Effective Time, provided, further, that the "Purchase Price" shall not exceed
$38,660,000 under any circumstance. Purchaser shall provide written notice to
the Company two Business Days prior to the Effective Time of the Purchase
Price.
1.2. Issuance of Purchased Shares and Cash Payment. At the Closing (i)
the Surviving Corporation shall deliver to Purchaser certificates representing
the Purchased Shares, duly authorized and issued in blank, free and clear of
all Liens and (ii) Purchaser shall deliver or cause to be delivered to the
Surviving Corporation the Purchase Price by wire transfer of immediately
available funds, to an account or accounts designated at least three Business
Days prior to the Closing by the Company in a written notice to Purchaser.
1.3. Conversion or Cancellation of Shares. The manner of converting or
canceling shares of Company Common Stock and shares of common stock of MergerCo
in the Merger shall be as follows:
(a) At the Effective Time, each share of Class A Common Stock of the
Company, par value $.01 per share (the "Class A Common Stock") and Class B
Common Stock of the Company, par value $.01 per share (the "Class B Common
Stock", and together with the Class A Common Stock, the "Company Common Stock")
that is issued and outstanding immediately prior to the Effective Time (other
than shares that are held by Stockholders (the "Dissenting Stockholders")
exercising appraisal rights with respect to such shares pursuant to Section 262
of the DGCL) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive, without interest:
(i) with respect to each such share held by any Non-Continuing
Stockholder, cash in an amount equal to the Per Share Merger Consideration;
(ii) with respect to each Cashed Out Share held by any Continuing
Stockholder, cash in an amount equal to the Per Share Merger Consideration;
and
(iii) with respect to each Rollover Share held by any Continuing
Stockholder, a number of shares of Surviving Corporation Common Stock equal
to the quotient of (x) the Per Share Merger Consideration divided by (y)
the Per Share Amount.
(b) Notwithstanding the foregoing, no fractions of a share of Surviving
Corporation Common Stock shall be issued in the Merger, but in lieu thereof
each holder of Company Common Stock otherwise entitled to a fraction of a share
of Surviving Corporation Common Stock shall, upon surrender of his or her
certificate or certificates, be entitled to receive an amount of cash (without
interest) determined by multiplying the Per Share Amount by the fractional
share interest to which such holder would otherwise be entitled.
(c) At the Effective Time, each share of Company Common Stock issued and
held in the Company's treasury immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be canceled and retired without payment
of any consideration therefor and shall cease to exist.
(d) At the Effective Time, each share of common stock, par value $.01 per
share, of MergerCo issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of
MergerCo or the holders thereof, cease to be outstanding, shall be canceled and
retired without payment of any consideration therefor and shall cease to exist.
(e) At the Effective Time, the stock transfer books of the Company shall
be closed and there shall be no transfers on the stock transfer books of the
Surviving Corporation of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time.
A-2
<PAGE>
1.4. Exchange of Certificates. (a) Prior to the Effective Time, MergerCo
shall designate the Company's registrar and transfer agent or such other bank
or trust company as may be approved in writing by the Company (which approval
shall not be unreasonably withheld), to act as exchange agent for the holders
of shares of Company Common Stock in connection with the Merger (the "Exchange
Agent"), to receive the certificates representing the shares of Surviving
Corporation Common Stock and the funds to which holders of shares of Company
Common Stock shall become entitled pursuant to this Article I. On or prior to
the Effective Time, the Company will deposit in trust with the Exchange Agent,
for the benefit of holders of Company Common Stock, (i) the funds necessary to
complete the payments contemplated by this Article I and (ii) the certificates
representing the shares of Surviving Corporation Common Stock to be issued
hereunder.
(b) At the Effective Time, the Surviving Corporation will instruct the
Exchange Agent to promptly, and in any event not later than three Business Days
following the Effective Time, mail (and to make available for collection by
hand) to each holder of record of a certificate or certificates, which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock, whose shares were converted pursuant to Section 1.3 into
the right to receive the Merger Consideration (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to such certificates shall pass, only upon delivery of such certificates
to the Exchange Agent and shall be in such form and have such other provisions
as MergerCo and the Company may reasonably specify) and (ii) instructions for
use in effecting the surrender of such certificates in exchange for the Merger
Consideration (which shall provide that, at the election of the surrendering
holder, such certificates may be surrendered, and payment therefor collected,
by hand delivery). Upon surrender of such certificates for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by the
Company, together with such letter of transmittal, duly executed, the holder of
such certificates shall be entitled to receive in exchange therefor the Merger
Consideration specified in Section 1.3 for each share of Company Common Stock
formerly represented by such certificate, to be mailed (or made available for
collection by hand if so elected by the surrendering holder) within three
Business Days of receipt thereof, and the certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made to
a person other than the person in whose name the surrendered certificate is
registered, it shall be a condition of payment that the certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 1.4, each certificate (other than
certificates representing Dissenting Shares) shall be deemed at any time after
the Effective Time to represent only the right to receive the Merger
Consideration as contemplated by this Section 1.4.
(c) In the event any certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such certificate to be lost, stolen or destroyed, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article I, provided that the Person to whom the Merger Consideration is
paid shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the certificate
claimed to have been lost, stolen or destroyed.
(d) Any portion of the funds deposited with the Exchange Agent (and the
proceeds of any interest and other income received by the Exchange Agent in
respect of all such funds) and any certificates representing shares of
Surviving Corporation Common Stock that remain unclaimed by the former
stockholders of the Company one year after the Effective Time shall be
delivered to the Surviving Corporation. Any former stockholders of the Company
who have not theretofore complied
A-3
<PAGE>
with this Article I shall thereafter look only to the Surviving Corporation for
payment of any Merger Consideration that may be payable upon surrender of any
certificates such stockholder holds, as determined pursuant to this Agreement,
without any interest thereon.
(e) None of MergerCo, the Company, the Surviving Corporation, the Exchange
Agent or any other Person shall be liable to any former holder of shares of
Company Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(f) Any payment or issuance made pursuant to this Section 1.4 shall be
subject to and made net of applicable withholding Taxes.
1.5. Options; Warrants; 2000 Note. (a) At or immediately prior to the
Effective Time, all options to purchase shares of Company Common Stock (each
such option, a "Company Stock Option") outstanding under the Company's 1993
Stock Option Plan, as amended, the Company's 1998 Stock Option Plan and any
other stock option (or other equity-related award) or compensation plan or
arrangement of the Company (collectively, the "Company Stock Option Plans"),
and any other outstanding Company Stock Options, whether or not exercisable or
vested, shall be repurchased or canceled, and the Surviving Corporation shall
pay each such holder at or promptly after the Effective Time for each such
option an amount in cash determined by multiplying (i) the excess, if any, of
the Per Share Merger Consideration over the per share exercise price of such
option by (ii) the number of shares of Company Common Stock such holder could
have purchased (assuming full vesting of all options) had such holder exercised
such options in full immediately prior to the Effective Time, such amount
subject to any required withholding. The Company shall use its best efforts to
obtain all necessary consents of the holders of Company Stock Options to the
cancellation or repurchase of such options.
(b) At or immediately prior to the Effective Time, all warrants to
purchase shares of Company Common Stock (each such warrant, a "Company Stock
Warrant") outstanding under the Warrant issued to Global Financial Group and
any other outstanding Company Stock Warrant, whether or not exercisable or
vested, shall be repurchased or canceled, and the Surviving Corporation shall
pay each such holder at or promptly after the Effective Time for each such
warrant an amount in cash determined by multiplying (i) the excess, if any, of
the Per Share Merger Consideration over the per share exercise price of such
warrant by (ii) the number of shares of Company Common Stock such holder could
have purchased (assuming full vesting of all warrants) had such holder
exercised such warrants in full immediately prior to the Effective Time, such
amount subject to any required withholding. The Company shall use its best
efforts to obtain all necessary consents of the holders of Company Stock
Warrants to the cancellation or repurchase of such warrants on the terms
provided in the preceding sentence.
(c) At or immediately prior to the Effective Time, the 2000 Note shall be
repurchased or canceled, and the Surviving Corporation shall pay the holder
thereof at or promptly after the Effective Time an amount in cash equal to (x)
the quotient of (I) 1.5 million plus a number equal to the amount of accrued
but unpaid interest on the 2000 Note through the Effective Time divided by (ii)
3.5, multiplied by (y) the Per Share Merger Consideration, such amount subject
to any required withholding. The Company shall use its best efforts to obtain
all necessary consents of the holder of the 2000 Note to the cancellation or
repurchase of the 2000 Note on the terms provided in the preceding sentence.
1.6. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by stockholders who
have perfected any dissenters' rights provided under the DGCL, if applicable
(the "Dissenting Shares"), shall not be converted into or be exchangeable for
the right to receive the Merger Consideration unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost such
holder's right to appraisal and payment under the DGCL. If such holder shall
have so failed to perfect or shall have effectively withdrawn or lost such
right, such holder's shares shall thereupon be deemed to have been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive the Merger Consideration, without any interest thereon.
A-4
<PAGE>
1.7. Certificate of Incorporation; By-Laws. (a) The certificate of
incorporation of the Company as in effect immediately prior to the Effective
Time shall, in accordance with the terms thereof and the DGCL, be amended and
restated as set forth in Exhibit A and, as so amended, shall be the certificate
of incorporation of the Surviving Corporation until duly amended in accordance
with the terms thereof and the DGCL.
(b) By-laws. The by-laws of the Company, as in effect immediately prior to
the Effective Time shall, in accordance with the terms thereof, the certificate
of incorporation and applicable law, be amended and restated as set forth in
Exhibit B and, as so amended, shall be the by-laws of the Surviving Corporation
until thereafter amended as provided by applicable law, the certificate of
incorporation of the Surviving Corporation and such by-laws.
1.8. Directors and Officers of the Surviving Corporation. (a) The
directors of MergerCo immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Corporation until
their successors shall have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's certificate of incorporation and by-laws.
(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold
office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
1.9. Effective Time. On the Closing Date, MergerCo and the Company will
cause the appropriate certificate of merger (the "Certificate of Merger") to be
executed and filed with the Secretary of State of the State of Delaware (the
"Delaware Secretary of State") in such form and executed as provided in Section
251(c) of the DGCL. The Merger shall become effective on the date on which the
Certificate of Merger has been duly filed with the Delaware Secretary of State
(the "Effective Time").
1.10. Closing. The closing of the Merger and the Stock Purchase (the
"Closing") shall take place at the offices of Debevoise & Plimpton, 875 Third
Avenue, New York, New York, at 10:00 a.m., New York time, on a date to be
specified by the parties, which shall be no later than the second Business Day
after satisfaction or waiver of all of the conditions set forth in Article VI
hereof. The "Closing Date" shall be the date the Closing actually occurs.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, the Company represents
and warrants to MergerCo and Purchaser as follows:
2.1. Corporate Status, etc.
(a) Organization. Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has full corporate power and authority to
conduct the Business and to own or lease and to operate its properties as and
in the places where the Business is conducted and such properties are owned,
leased or operated.
(b) Qualification. Each of the Company and its Subsidiaries is duly
qualified to do business and in good standing as a foreign corporation in all
jurisdictions in which the nature of its business or the properties owned or
leased by it makes such qualification necessary, except for such failures to be
so qualified and in good standing as would not have, individually or in the
aggregate, a Material Adverse Effect. Schedule 2.1(b) of the disclosure letter
delivered by the Company to the Purchaser concurrently with the execution and
delivery of this Agreement (the "Company Disclosure Letter") lists all
jurisdictions in which such qualification is necessary.
(c) Organizational Documents. Purchaser has been furnished complete and
correct copies of the certificate of incorporation and by-laws or other
organizational documents of the Company and each of its Subsidiaries, as
amended, modified or waived through and in effect on the date hereof (the
A-5
<PAGE>
"Organizational Documents"). Each of the Organizational Documents is in full
force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any of the provisions of its Organizational Documents. The minute
books of the Company and each of its Subsidiaries, which have heretofore been
made available to Purchaser, correctly reflect in all material respects for
each (i) all corporate actions taken by the stockholders that such stockholders
were required by applicable Law to take, (ii) all corporate actions taken by
the directors that such board of directors was required by applicable Law to
take and (iii) all other corporate actions taken by the stockholders and
directors (including by any committee of the board of directors).
2.2. Authorization, etc. (a) The Company has full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party, and, subject to the approval of its stockholders as
contemplated by Section 5.3 hereof, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Ancillary Agreements to
which the Company is a party, the performance by the Company of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly recommended by the Special Committee and
duly authorized by the Board of Directors of the Company and, other than
adoption and approval of this Agreement by the holders of a majority, by vote,
of the outstanding shares of the Class A Common Stock and Class B Common Stock
voting as a single class (the "Company Stockholder Approval"), no other
corporate proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement and the Ancillary Agreements by the
Company and the consummation of the transactions contemplated hereby and
thereby other than the filing of the Certificate of Merger with the Delaware
Secretary of State. The Company has duly executed and delivered this Agreement
and the Ancillary Agreements to which it shall be a party. This Agreement and
each such Ancillary Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
2.3. No Conflicts; Consents. (a) Except as set forth on Schedule 2.3(a) of
the Company Disclosure Letter, neither the execution, delivery and performance
of this Agreement and the Ancillary Agreements by the Company, nor the
consummation of the transactions contemplated hereby and thereby, will conflict
with, contravene, result in a violation or breach of or default under (with or
without the giving of notice or the lapse of time or both), give rise to a
right or claim of termination, amendment, modification, vesting, acceleration
or cancellation of any right or obligation or loss of any material benefit
under, result in the creation of any Lien (or any obligation to create any
Lien) upon, or give rise to the creation of a right or claim by any Person
other than the Company to, any of the Assets under, (i) any Law applicable to
the Company or its Subsidiaries, or any of their respective properties or
assets, (ii) any provision of any of the Organizational Documents or (iii) any
Material Contract, or any other material agreement or instrument to which the
Company or its Subsidiaries is a party or by which any of their respective
properties or assets may be bound, except, in the case of clause (i) or (iii)
above, for such violations or defaults as would not have, individually or in
the aggregate, a Material Adverse Effect.
(b) Consents. Except as set forth on Schedule 2.3(b) of the Company
Disclosure Letter, no Consent of or with any court, arbitral tribunal,
administrative agency or commission or other governmental or regulatory
authority or administrative agency or commission, whether domestic or foreign,
(a "Governmental Authority") or other Person is required to be obtained by the
Company or any of its Subsidiaries in connection with the execution, delivery
and performance by the Company of this Agreement and the Ancillary Agreements
to which it shall be a party or the consummation of the transactions
contemplated hereby and thereby, except for (i) applicable requirements under
the Exchange Act, (ii) applicable requirements under the Securities Act, (iii)
the filing by the Company under the HSR Act described in Section 5.2(c), (iv)
the filing of the Certificate of Merger with the Delaware Secretary of State,
(v) with respect to Consents of or with any Person other than a Governmental
Authority, Consents which individually or in the aggregate are not material to
the Company and its Subsidiaries taken as a whole, and (vi) applicable
requirements under securities or "blue sky" laws of various states.
A-6
<PAGE>
2.4. Capitalization.
(a) Authorized Capital Stock of the Company. The authorized capital stock
of the Company consists of 50,000,000 shares of Class A Common Stock, 2,000,000
shares of Class B Common Stock, and 5,000,000 shares of Preferred Stock, par
value $.01 per share, of which 4,985,393, 522,955 and 0 shares, respectively,
were issued and outstanding as of the close of business on January 4, 2000. The
Class A Common Stock and Class B Common Stock are identical in their powers,
rights and preferences, except that each share of Class A Common Stock carries
one vote and each share of Class B Common Stock carries five votes. As of the
close of business on January 5, 2000 there were outstanding under the Company's
Stock Option Plans, options to acquire an aggregate of 1,126,600 shares of
Class A Common Stock and 0 shares of Class B Common Stock. Set forth on
Schedule 2.4(a) of the Company Disclosure Letter is a list of all such
outstanding options, their respective exercise prices, and scheduled vesting
and expiration dates. All issued and outstanding shares of Company Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. As of the date hereof, the Company has outstanding (i) a
$1,500,000 5% Subordinated Convertible Note Due 2000, convertible at the option
of the holder at any time prior to maturity into shares of Class A Common Stock
at a conversion price of $3.50 per share (the "2000 Note"), and (ii) a warrant
to acquire 30,000 shares of Class A Common Stock for an exercise price of $3.50
per share (the "GFG Warrant").
(b) Ownership of Capital Stock of the Company and Subsidiaries; No Equity
Rights. Schedule 2.4(b) of the Company Disclosure Letter contains a complete
and correct description of the shares of stock or other equity interests that
are authorized, or issued and outstanding, of each of the Subsidiaries of the
Company. The Company is the record and beneficial owner of all of the
outstanding capital stock of each of its Subsidiaries, free and clear of any
Lien. There are no preemptive or similar rights on the part of any holders of
any class of securities of the Company or its Subsidiaries. Except for the 2000
Note and the GFG Warrant and except as set forth on Schedule 2.4(b), (i) there
are no outstanding shares of capital stock or other securities of either the
Company or its Subsidiaries, and (ii) no subscriptions, options, warrants,
instruments, conversion or other rights, agreements, commitments, arrangements
or understandings of any kind obligating the Company or its Subsidiaries,
contingently or otherwise, to issue or sell, or cause to be issued or sold, any
shares of capital stock of the Company or its Subsidiaries, or any securities
convertible into or exchangeable for any such shares, are outstanding, and no
authorization therefore has been given. Except as set forth on Schedule 2.4(b),
there are no outstanding contractual or other rights or obligations to or of
the Company or its Subsidiaries to (x) repurchase, redeem or otherwise acquire
any outstanding shares or other equity interests of the Company or its
Subsidiaries or (y) make any payment based upon the value or earnings of the
Company or its Subsidiaries. Each of the 2000 Note and the GFG Warrant permits,
by its terms, and without the consent of the holders thereof, the transactions,
contemplated by Section 1.5(b).
2.5. Investments. Except as set forth on Schedule 2.5 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries owns any
shares of capital stock or other securities, including, without limitation, any
options, warrants, conversion or other rights, of, or interest in, any other
Person (other than, as to the Company, its Subsidiaries).
2.6. Undisclosed Liabilities, etc. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether known,
unknown, absolute, accrued, contingent or otherwise and whether due or to
become due, except (a) as set forth on Schedule 2.6 of the Company Disclosure
Letter, (b) as and to the extent disclosed on and adequately reserved against
in the Balance Sheet, or (c) for liabilities and obligations that (i) were
incurred after December 31, 1998 in the ordinary course of business and (ii)
individually and in the aggregate have not had a Material Adverse Effect. Since
December 31, 1998, there has not occurred or come to exist any Material Adverse
Effect or any event, occurrence, fact, condition, change, development or effect
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Except as disclosed on Schedule 2.6 of the Company
Disclosure Letter, there are no liabilities or obligations of the Company or
its Subsidiaries, contingent or otherwise, to any Person with respect to the
value of the Company Common Stock.
A-7
<PAGE>
2.7. Absence of Changes. Since December 31, 1998, except (a) as set forth
on Schedule 2.7 of the Company Disclosure Letter, (b) as disclosed in the
Company SEC documents filed and publicly available prior to the date hereof, or
(c) as specifically permitted after the date hereof pursuant to Section 4.1,
the Company and its Subsidiaries have conducted the Business in the ordinary
course consistent with past practice and there have not been any events,
changes or developments which, individually or in the aggregate, would have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole;
it being understood that the enactment of any regulation by the Food and Drug
Administration mandating pasteurization of fresh juice products shall not
constitute a Material Adverse Effect unless the Company would be unable to
comply with such new regulation without the occurrence of a Material Adverse
Effect.
2.8. Tax Matters. (a) Except as set forth on Schedule 2.8(a) of the
Company Disclosure Letter and for such failures as would not have, individually
or in the aggregate, a Material Adverse Effect, (i) all income and other
material Returns required to be filed by the Company or its Subsidiaries with
respect to Taxes have been filed, (ii) all such Returns are complete and
accurate in all material respects, (iii) all Taxes due by the Company or its
Subsidiaries (whether or not shown on any Return), chargeable as a Lien upon
the assets of the Company or its Subsidiaries, claimed to be due by any
Governmental Authority, or that may become due by the Company or its
Subsidiaries with respect to any period (or portion thereof) ending on or
before the Closing Date have been paid or have been adequately reserved for in
the books and records of the Company or its Subsidiaries in accordance with
GAAP and will be paid when due if due on or before the Closing, (iv) each of
the Company and its Subsidiaries has duly and timely withheld all Taxes
required to be withheld and such withheld Taxes have been either duly and
timely paid to the proper Governmental Authority or properly set aside in
accounts for such purpose and will be duly and timely paid to the proper
Governmental Authority if such payment is due before the Closing.
(b) Except as set forth on Schedule 2.8(b) of the Company Disclosure
Letter, (i) no agreement or other document waiving, extending, or having the
effect of waiving or extending, the statute of limitations, the period of
assessment or collection of any Taxes on or in respect of the Company or its
Subsidiaries, and no power of attorney with respect to any such Taxes has been
filed with any Governmental Authority which waiver, extension or power of
attorney is currently in effect and (ii) neither the Company nor its
Subsidiaries has requested or been granted an extension of time for filing any
Return to a date later than the date of this Agreement.
(c) Except as set forth on Schedule 2.8(c) of the Company Disclosure
Letter, no Returns of or in respect of the Company or its Subsidiaries are
currently under audit, examination or investigation by any Governmental
Authority. Except as set forth on Schedule 2.8(c) of the Company Disclosure
Letter, no Governmental Authority is now asserting or, to the knowledge of the
Company or any of its Subsidiaries threatening to assert against the Company or
its Subsidiaries any deficiency or claim for Taxes or any adjustment to Taxes,
and, to the knowledge of the Company or any of its Subsidiaries, no
circumstances exist to form the basis for asserting such a claim or deficiency.
(d) No amount will be required to be withheld under section 1445 of the
Code in connection with any of the transactions contemplated by this Agreement.
(e) Neither the Company nor its Subsidiaries, will, as a result of the
transactions contemplated by this Agreement, make or become obligated to make
any "parachute payment" as defined in Section 280G of the Code.
(f) Except as set forth on Schedule 2.8(f) of the Company Disclosure
Letter, no written claim against or in respect of the Company or any of its
Subsidiaries (other than a claim that has been finally settled) has ever been
made by any Governmental Authority in a jurisdiction where the Company or any
of its Subsidiaries, as the case may be, does not file Returns or pay or
collect Taxes in respect of a particular type of Tax imposed by that
jurisdiction, that the Company or any of its Subsidiaries is or may be subject
to an obligation to file Returns or pay or collect Taxes in respect of such Tax
in that jurisdiction.
A-8
<PAGE>
(g) Except as set forth on Schedule 2.8(g) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is liable for the Taxes
of any other Person (other than the Company and its Subsidiaries), whether
pursuant to United States Treasury Regulation section 1.1502-6 (or comparable
provision of state or local law), as a transferee or successor, by contract
(including, without limitation, any Tax allocation, sharing, indemnity or
similar agreement or arrangement) or otherwise.
(h) Except as set forth on Schedule 2.8(h) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has received or applied
for a Tax ruling, the receipt or failure of which to receive would have,
individually or in the aggregate, a Material Adverse Effect, or has entered
into a closing agreement pursuant to Section 7121 of the Code, or any
predecessor provision or similar provision of state or local law which closing
agreement currently is in effect.
(i) Except as set forth on Schedule 2.8(i) of the Company Disclosure
Letter, there are no outstanding adjustments for Tax purposes applicable to the
Company or any of its Subsidiaries as a result of changes in methods of
accounting, and no material elections for Tax purposes have been made except as
reflected in the Returns (i) with respect to the Company or any of its
Subsidiaries that are currently in force or (ii) by which the Company or any of
its Subsidiaries is bound.
(j) True, correct and complete copies of all income, and all material
franchise, sales, use, property and payroll Returns filed by or with respect to
the Company or any of its Subsidiaries for the past three years have been
provided to the Purchaser.
(k) The Company has elected for the 1998 taxable year to file Returns on a
consolidated basis with its Subsidiaries for U.S. federal income Tax purposes.
2.9. Assets. The Company and its Subsidiaries own, or otherwise have full,
exclusive, sufficient and legally enforceable rights to use, all of the
properties and assets (real, personal or mixed, tangible or intangible), used
or held for use in connection with, necessary for the conduct of, or otherwise
material to, the Business (the "Assets"), except for such failures to own or
have such rights to use the Assets as would not, individually or in the
aggregate, result in a Material Adverse Effect. The Company and its
Subsidiaries have good, valid and marketable title to, or in the case of leased
property have good and valid leasehold interests in, all Assets, including but
not limited to all such Assets reflected on the Balance Sheet or acquired since
the date thereof (except as disposed of in the ordinary course of business
consistent with past practice after the date thereof and in accordance with
this Agreement), in each case free and clear of any Lien, except Permitted
Liens. There are no Assets used in the operation of the Business that will not,
following the Closing, be owned by the Company or its Subsidiaries, or leased
or licensed to the Company or its Subsidiaries under valid current leases or
license arrangements. All tangible Assets currently being used in and material
to the Business are in good working order, except for normal wear and tear.
Schedule 2.9 of the Company Disclosure Letter identifies the location of all
tangible Assets that are owned by the Company or its Subsidiaries that are
material to the Business, including but not limited to buildings, machinery,
equipment, vehicles, inventory and real property.
2.10. Real Property. Except as set forth on Schedule 2.10(i) of the
Company Disclosure Letter, neither the Company nor its Subsidiaries owns any
real property. Either the Company or one of its Subsidiaries has good, valid
and marketable fee simple title to the Owned Real Property, free and clear of
any Liens other than Permitted Liens. Schedule 2.10(ii) of the Company
Disclosure Letter contains a complete and correct list of all Leases setting
forth the location and landlord for each Lease. Copies of such Leases have been
delivered to Purchaser. Either the Company or one of its Subsidiaries has valid
or subsisting leasehold interests in the Leased Real Property, free and clear
of any Liens other than Permitted Liens. No material damage or destruction has
occurred since December 31, 1998 with respect to any of the Company Real
Property.
2.11. Material Contracts. (a) Disclosure. Schedule 2.11(a) of the Company
Disclosure Letter contains a complete and correct list, as of the date hereof,
of all Material Contracts. The Company
A-9
<PAGE>
and its Subsidiaries have delivered to Purchaser complete and correct copies of
all written Material Contracts, and accurate descriptions of all material terms
of all oral Material Contracts, set forth or required to be set forth on
Schedule 2.11(a) of the Company Disclosure Letter.
(b) Enforceability. All Material Contracts are legal, valid, binding, in
full force and effect and enforceable against the Company or one of its
Subsidiaries, as the case may be, and, to the knowledge of the Company, each
other party thereto. Except as set forth on Schedule 2.11(b)(i) of the Company
Disclosure Letter, there does not exist under any Material Contract any
violation, breach or event of default, or event or condition that, after notice
or lapse of time or both, would constitute a violation, breach or event of
default thereunder, on the part of the Company, or its Subsidiaries or, to the
knowledge of the Company, any other Person, other than such violations,
breaches, events of default, or events or conditions that, individually and in
the aggregate, could not reasonably be expected to have or result in a Material
Adverse Effect. Except as set forth on Schedule 2.11(b)(ii) of the Company
Disclosure Letter, the enforceability of all Material Contracts will not be
affected in any manner by the execution, delivery or performance of this
Agreement, and no Material Contract contains any change in control or other
terms or conditions that will, with or without obtaining consent or waiver,
become applicable or inapplicable as a result of the consummation of the
transactions contemplated by this Agreement or the Ancillary Agreements.
2.12. Intellectual Property.
(a) Disclosure. Schedule 2.12(a) of the Company Disclosure Letter sets
forth a list of all issued patents, pending patent applications, issued
trademark registrations, pending trademark applications, issued copyright
registrations, and all material non-registered Intellectual Property owned,
licensed, used or held for use by the Company or any Subsidiary ("Listed
Intellectual Property"), specifying as to each, as applicable: (i) the nature
of such Listed Intellectual Property; (ii) the owner of such Listed
Intellectual Property; (iii) the jurisdictions in which such Listed
Intellectual Property has been issued or registered or in which an application
for such issuance or registration has been filed; (iv) the registration or
application numbers; and (v) the current status of such registration or
application. The Company or a Subsidiary holds good, valid and enforceable
right, title and interest, free and clear of any Liens, or has valid and
enforceable rights to use, all Listed Intellectual Property used in the conduct
of its Business. The Listed Intellectual Property includes all of the
Intellectual Property that is material to the Business.
(b) Licenses. Schedule 2.12(b) of the Company Disclosure Letter sets forth
a list of all licenses and other agreements, oral and written, as to which the
Company or any Subsidiary is a party (i) pursuant to which any Person is
authorized to use any Listed Intellectual Property, or (ii) pursuant to which
the Company or a Subsidiary holds or uses or is authorized to use any
Intellectual Property, except, in the case of this clause (ii), any
"shrink-wrap" software. To the knowledge of the Company, there is no material
pending or threatened bankruptcy, insolvency or similar proceeding with respect
to any party to such licenses or agreements, and no event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence
of any other event) would constitute a material default by any party to such
licenses or agreements.
(c) No Infringement. Except as set forth on Schedule 2.12(c)(i) of the
Company Disclosure Letter, to the knowledge of the Company, no Person has
interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Listed Intellectual Property. Except as set forth on Schedule
2.12(c) (ii) of the Company Disclosure Letter, to the knowledge of the Company
the conduct of the Business does not infringe or otherwise conflict with any
rights of any person in respect of any Intellectual Property.
(d) Protection. Except as set forth on Schedule 2.12(d) of the Company
Disclosure Letter, the Company and its Subsidiaries have taken all commercially
reasonable actions to ensure full protection of the Listed Intellectual
Property (including maintaining the secrecy of all confidential Intellectual
Property) under any applicable law.
(e) No Intellectual Property Litigation. No Listed Intellectual Property
is subject to any outstanding judgment, injunction, order, decree or agreement
restricting use thereof by the Company
A-10
<PAGE>
or any Subsidiary, except for such matters as, individually or in the
aggregate, have not had and do not have a Material Adverse Effect. Except as
set forth on schedule 2.12(e) of the Company Disclosure Letter, no Listed
Intellectual Property is or since January 1, 1996 has been the subject of any
pending or, to the knowledge of the Company, threatened Litigation.
(f) Calendar Function. The disclosure as to Year 2000 Compatibility issues
in the Company's Quarterly Report on Form 10-Q for the period ended September
30, 1999 is complete and correct in all material respects and does not omit to
state a material fact necessary to make the statements contained therein not
misleading.
2.13. Insurance. (a) Schedule 2.13 of the Company Disclosure Letter
contains a complete and correct list of all insurance policies maintained by or
on behalf of the Company or its Subsidiaries (the "Policies"). Purchaser has
been furnished with complete and correct copies of all Policies together with
all riders and amendments thereto. The Policies are in full force and effect,
and all premiums due thereon have been paid. The Company and its Subsidiaries
have complied in all material respects with the terms and provisions of the
Policies. The Company and its Subsidiaries have been and are adequately insured
with respect to their respective property and the conduct of their respective
business.
2.14. Litigation. Except as set forth on Schedule 2.14 of the Company
Disclosure Letter, there is no Litigation pending or, to the knowledge of the
Company, threatened, against the Company or its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
2.15. Compliance with Laws and Instruments.
(a) Compliance. Except as set forth in the Company SEC Documents or on
Schedule 2.15(a) of the Company Disclosure Letter, the Company and each of its
Subsidiaries is in compliance with all Laws applicable to it, and neither the
Company nor any of its Subsidiaries has received any notice alleging
non-compliance with any Law except, with reference to all the foregoing, where
the failure to be in compliance would not, individually or in the aggregate,
have a Material Adverse Effect.
(b) Governmental Approvals, etc. Schedule 2.15(b)(i) of the Company
Disclosure Letter contains a complete and correct list of all Governmental
Approvals and other Consents necessary for, or otherwise material to, the
conduct of the Business. Except as set forth on Schedule 2.15(b)(ii) of the
Company Disclosure Letter and such failures as would not have, individually or
in the aggregate, a Material Adverse Effect, all such Governmental Approvals
and other Consents have been duly obtained and are held by the Company and are
in full force and effect. The execution, delivery and performance of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby do not and will not violate any such
Governmental Approval or Consent, or result in any revocation, cancellation,
suspension, modification or nonrenewal thereof, except, with respect to
Consents of or with any Person other than a Governmental Authority, for such
violations, revocations, cancellations, suspensions, modifications or
nonrenewals that individually or in the aggregate are not and will not be
material to the Company and its Subsidiaries, taken as a whole.
2.16. Environmental Matters.
(a) Compliance with Environmental Law. Except as set forth on Schedule
2.16(a) of the Company Disclosure Letter and such failures as would not have,
individually or in the aggregate, a Material Adverse Effect, the Company and
each of its Subsidiaries have complied and are in compliance in all respects
with all applicable Environmental Laws pertaining to their respective
properties and Assets (including the Real Property) and the use and ownership
thereof, and to the operation of the Business. No violation by the Company or
its Subsidiaries of any applicable Environmental Law relating to any of the
properties and assets of the Company or its Subsidiaries or the use or
ownership thereof, or to the operation of the Business is being or has been
alleged, except for such violations or failures as would not have, individually
or in the aggregate, a Material Adverse Effect. Except as set forth on Schedule
2.16(a) of the Company Disclosure Letter and for such failures
A-11
<PAGE>
to be in possession and compliance as would not, individually or in the
aggregate, result in a Material Adverse Effect, the Company and its
Subsidiaries are in possession of, and in compliance with, all permits,
authorizations and consents required under applicable Environmental Laws.
(b) Other Environmental Matters. (i) None of the Company, its Subsidiaries
or any other Person, has caused or taken any action that will result in, and
neither the Company nor its Subsidiaries is subject to, any liability relating
to (x) the environmental conditions on, under, or about the Real Property or
other properties or assets currently or formerly owned, leased or operated by
the Company, its Subsidiaries or any predecessor thereto, including without
limitation, the air, soil and groundwater conditions at such properties or (y)
the past or present use, management, handling, transport, treatment,
generation, storage, disposal or Release of any Hazardous Materials.
(ii) No Environmental Claims have been asserted against the Company, its
Subsidiaries, or, to the knowledge of the Company, any predecessor in interest,
nor does the Company have knowledge or written notice of any threatened or
pending Environmental Claim against the Company, its Subsidiaries or any
predecessor in interest.
(iii) Purchaser has been furnished with all material information,
including, without limitation, all studies, analyses, reports and
investigations, in the possession, custody or control of the Company or its
agents or otherwise known to the Company or its Subsidiaries relating to (x)
the environmental conditions on, under or about the Real Property or other
properties or assets currently or formerly owned, leased or operated by the
Company, its Subsidiaries or any predecessor in interest thereto, and (y) any
Hazardous Materials used, managed, handled, transported, treated, generated,
stored or Released by the Company, its Subsidiaries or any other Person on,
under, about or from any of the Real Property, or otherwise in connection with
the use or operation of any of the properties and assets of the Company or its
Subsidiaries or the Business.
2.17. Employees, Labor Matters, etc. Except as set forth on Schedule 2.17
of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to or bound by any collective bargaining agreement, and
there are no labor unions or other organizations representing, purporting to
represent or attempting to represent any employees employed by the Company or
its Subsidiaries. Since December 31, 1998, there has not occurred or, to the
Company's knowledge, been threatened any strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime or other similar labor activity
with respect to any employees of the Company or its Subsidiaries that would,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth on Schedule 2.17 of the Company Disclosure Letter, there are no material
labor disputes currently subject to any grievance procedure, arbitration or
litigation and there is no representation petition pending or, to the knowledge
of the Company, threatened with respect to any employee of the Company or its
Subsidiaries. Except as set forth on Schedule 2.17 of the Company Disclosure
Letter, the Company and its Subsidiaries have complied with all applicable Laws
pertaining to the employment or termination of employment of their respective
employees, including, without limitation, all such Laws relating to labor
relations, equal employment opportunities, fair employment practices,
prohibited discrimination or distinction and other similar employment
activities, except where the failure to so comply would not, individually or in
the aggregate, result in a Material Adverse Effect.
2.18. Employee Benefit Plans and Related Matters; ERISA.
(a) Employee Benefit Plans. Schedule 2.18(a) of the Company Disclosure
Letter sets forth a complete and correct list of each Plan. With respect to
each such Plan, Purchaser has been furnished with complete and correct copies
of: (i) such Plan, if written, or a description of such Plan if not written,
and (ii) to the extent applicable to such Plan, all trust agreements, insurance
contracts or other funding arrangements, the two most recent actuarial and
trust reports, the two most recent Forms 5500 required to have been filed with
the IRS and all schedules thereto, the most recent IRS determination letter,
the current summary plan description, any communication received from or sent
to the IRS, the Pension Benefit Guaranty Corporation or the Department of Labor
indicating that the Company or any of its Subsidiaries has or may have a
material liability (including, to the Company's knowledge, any existing written
description of any oral communication), any actuarial study of any
A-12
<PAGE>
post-employment life or medical benefits provided under any such Plan, if any,
statements or other communications regarding withdrawal or other multi employer
plan liabilities, if any, and all material amendments and modifications to any
such document. Neither the Company nor any of its Subsidiaries has communicated
to any Employee any intention or commitment to modify any Plan or to establish
or implement any other employee or retiree benefit or compensation plan or
arrangement.
(b) Qualification. Except as set forth on Schedule 2.18(b) of the Company
Disclosure Letter, each Plan intended to be qualified under Section 401(a) of
the Code, and the trust (if any) forming a part thereof, has received a
favorable determination letter from the IRS as to its qualification under the
Code and to the effect that each such trust is exempt from taxation under
Section 501(a) of the Code, and nothing has occurred since the date of such
determination letter that could reasonably be expected to adversely affect such
qualification or tax-exempt status.
(c) Compliance; Liability. (i) Neither the Company nor any of its
Subsidiaries has been involved in any transaction that could cause the Company
or any of its Subsidiaries or, following the Closing, Purchaser, to be subject
to material liability under Section 4069 or 4212 of ERISA. Neither the Company
nor any of its Subsidiaries has incurred (either directly or indirectly,
including as a result of an indemnification obligation) any material liability
under or pursuant to Title I or IV of ERISA or the penalty, excise Tax or joint
and several liability provisions of the Code relating to employee benefit plans
and no event, transaction or condition has occurred or exists that could result
in any such material liability to the Company or any of its Subsidiaries or,
following the Closing, Purchaser or any of its Affiliates. All contributions
and premiums required to have been paid by the Company or its Subsidiaries to
any employee benefit plan (within the meaning of Section 3(3) of ERISA) under
the terms of any such plan or its related trust, insurance contract or other
funding arrangement, or pursuant to any applicable Law (including ERISA and the
Code) or collective bargaining agreement have been paid within the time
prescribed by any such plan, arrangement, applicable Law, or agreement.
(ii) Except as set forth on Schedule 2.18(c)(ii) of the Company Disclosure
Letter, each of the Plans has been operated and administered in all material
respects in compliance with its terms, all applicable Laws and all applicable
collective bargaining agreements. There are no material pending or, to the
knowledge of the Company, material threatened claims by or on behalf of any of
the Plans, by any Employee or otherwise involving any such Plan or the assets
of any Plan (other than routine claims for benefits, all of which have been
fully reserved for on the regularly prepared balance sheets of the Company or
its Subsidiaries).
(iii) No Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA or a "multiple employer plan" within the meaning of Section
4063 or 4064 of ERISA.
(iv) No Plan is subject to Section 412 of the Code or Section 302 or Title
IV of ERISA.
(v) No Employee is or will become entitled to post-employment benefits of
any kind by reason of employment with the Company or its Subsidiaries,
including, without limitation, death or medical benefits (whether or not
insured), other than (x) coverage mandated by Section 4980B of the Code, or (y)
retirement benefits payable under any Plan qualified under Section 401(a) of
the Code. Except as set forth on Schedule 2.18(c) of the Company Disclosure
Letter, the consummation of the transactions contemplated by this Agreement and
the Ancillary Agreements will not result in an increase in the amount of
compensation or benefits or the acceleration of the vesting or timing of
payment of any compensation or benefits payable to or in respect of any
Employee.
2.19. Product Liability. Except as set forth on Schedule 2.19 of the
Company Disclosure Letter, neither the Company nor its Subsidiaries has any
liability or obligation of any nature (whether known or unknown, accrued,
absolute, contingent or otherwise, and whether due or to become due), whether
based on strict liability, negligence, breach of warranty (express or implied),
breach of contract or otherwise, in respect of any product, component or other
item manufactured, sold, designed or produced prior to the Closing by or on
behalf of the Company or its Subsidiaries or any predecessor
A-13
<PAGE>
thereto, that (i) is not fully and adequately covered by policies of insurance
or by indemnity, contribution, cost sharing or similar agreements or
arrangements by or with other Persons and (ii) is not otherwise fully and
adequately reserved against as reflected in the Financial Statements.
2.20. Brokers, Finders, etc. Except for Schroder & Co. Inc., whose fees
shall be paid by the Company, neither the Company nor any of its Subsidiaries
has retained any broker, finder or investment banker or other intermediary in
connection with the transactions contemplated herein so as to give rise to any
claim against Purchaser, the Company or its Subsidiaries for any brokerage,
finder's or investment banker's commission, fee or similar compensation.
2.21. SEC Reports and Financial Statements. The Company has timely filed
with the SEC, any applicable state securities authorities and any other
Governmental Authority all forms and documents required to be filed by it since
January 1, 1996 (collectively, the "Company Reports") and has heretofore made
available to Purchaser (i) its Annual Reports on Form 10-K or Form 10-KSB, as
the case may be, for the last three fiscal years, (ii) its Quarterly Reports on
Form 10-Q for the periods ended March 31, 1999, June 30, 1999, and September
30, 1999, (iii) all proxy statements relating to meetings of Stockholders since
January 1, 1996 (in the form mailed to Stockholders) and (iv) all other forms,
reports and registration statements filed by the Company with the SEC since
January 1, 1996 (other than registration statements on Form S-8 or Form 8-A,
filings on Form T-1 or preliminary materials and registration statements in
forms not declared effective). The documents described in clauses (i)-(iv)
above (whether filed before, on or after the date hereof) are referred to in
this Agreement collectively as the "Company SEC Documents". As of their
respective dates, the Company Reports (a) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in
all material respects with the applicable requirements of Law, including in the
case of SEC filings, the Exchange Act and the Securities Act, as the case may
be, and the applicable rules and regulations of the SEC thereunder. The
consolidated financial statements included in the Company SEC Documents have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as otherwise noted therein and except that the
quarterly financial statements are subject to year-end adjustment and do not
contain all footnote disclosures required by GAAP) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows of the Company and its consolidated
Subsidiaries as at the dates thereof and for the periods presented therein.
2.22. Proxy Statement; Exchange Act Schedules. (a) The Proxy Statement
(and any amendment thereof or supplement thereto) at the date mailed to the
Stockholders and at the time of the Special Meeting, (i) will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading and (ii)
will comply in all material respects with the provisions of the Exchange Act
and the rules and regulations thereunder; except that no representation is made
by the Company with respect to statements made in the Proxy Statement based on
information supplied by MergerCo or Purchaser specifically for inclusion in the
Proxy Statement.
(b) Any Schedule 14A or 13E-3 and any related schedules (and any amendment
or supplement to any of the foregoing) filed with the SEC at the date so filed
(i) will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading and (ii) will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder; except
that no representation is made by the Company with respect to statements made
in any such document based on information supplied by MergerCo or Purchaser
specifically for inclusion therein.
2.23. Required Vote by Company Stockholders. The Company Stockholder
Approval is the only vote of any class of capital stock of the Company that is,
and no separate class vote by the holders of either the Class A Common Stock or
the Class B Common Stock is, required by the DGCL or the Organizational
Documents to adopt this Agreement and approve the transactions contemplated
hereby.
A-14
<PAGE>
2.24. Fairness Opinion. The Company has received from Schroder & Co. Inc.
(the "Financial Advisor") and provided to Purchaser on or prior to the date
hereof, an executed copy of its opinion (the "Fairness Opinion") that the
Merger Consideration to be received by the Stockholders in the Merger is fair,
from a financial point of view, to such holders. The Company has been
authorized by the Financial Advisor to include the Fairness Opinion in the
Proxy Statement and has not been notified by the Financial Advisor that the
Fairness Opinion has been withdrawn or modified.
2.25. Takeover Statutes. No "Fair price," "Moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States, applicable to the Company or any of
its Subsidiaries is applicable to the execution, delivery and performance of
this Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
2.26. Substantial Suppliers and Customers. Except as set forth on Schedule
2.26 of the Company Disclosure Letter, since December 31, 1998 none of the top
ten (10) suppliers (by dollar volume) or the top ten (10) customers (by dollar
volume) of the Company and its Subsidiaries has substantially reduced the use
or supply of the products or goods made available for purchase by the Company
and its Subsidiaries in their business or has ceased, or, to the Company's
knowledge, threatened to cease, to use or to supply such products or goods, nor
does the Company have any reason to believe that any such supplier or customer
will do so.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERGERCO AND PURCHASER
As of the date hereof and as of the Closing Date, MergerCo and Purchaser
jointly and severally represent and warrant to the Company as follows:
3.1. Status; Authorization, etc. MergerCo is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of MergerCo
and Purchaser has all requisite power and authority to execute and deliver this
Agreement and the Ancillary Agreements, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which MergerCo or Purchaser is a party, and the consummation of
the transactions contemplated thereby, have been duly authorized by all
requisite action of MergerCo and Purchaser. Each of MergerCo and Purchaser has
duly executed and delivered this Agreement and the Ancillary Agreements to
which it is a party. This Agreement and each of the Ancillary Agreements to
which MergerCo and Purchaser are a party constitute the valid and legally
binding obligations of MergerCo and Purchaser, enforceable against MergerCo and
Purchaser in accordance with its terms.
3.2. No Conflicts, etc. (a) The execution, delivery and performance by
each of MergerCo and Purchaser of this Agreement and the Ancillary Agreements
to which it will be a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with, contravene,
result in a violation or breach of or default under (with or without the giving
of notice or the lapse of time, or both), give rise to a right or claim of
termination, amendment, modification, vesting, acceleration or cancellation of
any right or obligation or loss of any material benefit under, result in the
creation of any Lien (or any obligation to create any Lien) upon, or give rise
to the creation or claim by any Person other than MergerCo or Purchaser to any
of the properties or assets of MergerCo or Purchaser under, (i) any provision
of any organizational document of MergerCo or Purchaser, (ii) any Law
applicable to MergerCo or Purchaser, or any of their respective properties or
assets or (iii) any contract, or any other agreement or instrument to which
either MergerCo or Purchaser is a party or by which any of their respective
properties or assets may be bound.
(b) Consents. No Consent of or with any Governmental Authority or other
Person is required or advisable to be obtained by MergerCo or Purchaser in
connection with the execution, delivery and performance by MergerCo and
Purchaser of this Agreement and the Ancillary Agreements or
A-15
<PAGE>
consummation of the transactions contemplated hereby and thereby, except for
(i) the filing by the "ultimate parent entity" of Purchaser and MergerCo under
the HSR Act described in Section 5.2(c), (ii) applicable requirements under the
Exchange Act, (iii) applicable requirements under the Securities Act, (iv) the
filing of the Certificate of Merger with the Delaware Secretary of State, (v)
applicable requirements under securities or "blue sky" laws of various states,
and (vi) such other consents, approvals, orders, authorizations, notifications,
registrations, dec larations and filings (x) required to be obtained or made by
the Company or any of its Subsidiaries or (y) the failure of which to be
obtained or made would not have a material adverse effect on the business,
results of operations or financial condition of MergerCo, taken as a whole, or
materially impair or delay the consummation of the transactions contemplated by
this Agreement.
3.3. Litigation. There is no litigation pending or, to the knowledge of
MergerCo or Purchaser, threatened, against MergerCo or Purchaser that could
reasonably be expected to have or result in a material adverse effect on the
ability of MergerCo or Purchaser to consummate the transactions contemplated by
this Agreement.
3.4. Brokers, Finders, etc. Except for the transaction fee payable to
North Castle Partners L.L.C. pursuant to the Consulting Agreement, neither
MergerCo nor Purchaser has retained any broker, finder or investment banker or
other intermediary in connection with the transactions contemplated herein so
as to give rise to any claim against the Company or any of its Subsidiaries for
any brokerage, finder's or investment banker's commission, fee or similar
compensation.
3.5. No Prior Business. MergerCo has not engaged in any business or
activity of any kind, or entered into any agreement or arrangement with any
person or any entity or incurred, directly or indirectly, any material
liabilities or obligations, other than in connection with the transactions
contemplated hereby, and was formed for the purpose of effecting the
Recapitalization.
3.6. Financing. Purchaser has delivered to the Company (i) a complete and
correct copy of a commitment letter from North Castle Partners II, L.P. (the
"Fund"), whereby the Fund has committed, upon the terms and subject to the
conditions set forth therein, to provide equity financing to Purchaser in
respect of the transactions contemplated hereby up to $38,660,000, (ii) a
complete and correct copy of a commitment letter from Bank of America, N.A. and
Banc of America Securities, whereby such financial institution has committed,
upon the terms and subject to the conditions set forth therein, to provide debt
financing in the amount of $30 million and (iii) a complete and correct copy of
a letter from Key Mezzanine Capital Fund I, L.P. expressing its intention upon
the terms and subject to the conditions set forth therein, to provide debt
financing in the amount of $10 million.
3.7. Proxy Statement; Exchange Act Schedules. (a) None of the information
supplied in writing by MergerCo or Purchaser specifically for inclusion in the
Proxy Statement (including any amendments thereof or supplements thereto) will,
at the date mailed to stockholders or at the time of the Special Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(b) None of the information supplied in writing by MergerCo or Purchaser
specifically for inclusion in any Schedule 14A or 13E-3 and any related
schedules (and any amendment or supplement to any of the foregoing) will, at
the date such documents are filed with the SEC, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.8. Beneficial Ownership of Shares. MergerCo does not "beneficially own"
(as defined in Rule 13d-3 under the Exchange Act) more than 1% of the
outstanding shares of the Company Common Stock or any securities convertible
into or exchangeable for the Company Common Stock.
3.9. Liabilities. Except as set forth herein, MergerCo has no obligations
of any nature, whether known, unknown, absolute, accrued, contingent or
otherwise and whether due or to become due.
A-16
<PAGE>
ARTICLE IV
COVENANTS OF THE COMPANY
4.1. Conduct of the Business. On and after the date hereof until the
Closing Date, except as expressly required by this Agreement, as disclosed on
Schedule 4.1 of the Company Disclosure Letter or as otherwise expressly
consented to by Purchaser in writing, the Company and its Subsidiaries shall:
(i) carry on the Business in the ordinary course of business in
substantially the same manner as heretofore conducted, and use commercially
reasonable efforts to (x) preserve intact its present business
organization, (y) keep available the services of its present officers,
employees and consultants, and (z) preserve intact its relationships with
customers, suppliers and others having business dealings with it, to the
end that its goodwill and going business shall be in all material respects
unimpaired following the Closing;
(ii) promptly advise Purchaser in writing of any event, occurrence,
fact, condition, change, development or effect that, individually or in the
aggregate, could reasonably be expected to have or result in a Material
Adverse Effect or a breach of this Section 4.1; it being understood that
the enactment of any regulation by the Food and Drug Administration
mandating pasteurization of fresh juice products shall not constitute a
Material Adverse Effect unless the Company would be unable to comply with
such new regulation without the occurrence of a Material Adverse Effect;
(iii) not take any action or omit to take any action within its
reasonable control, which action or omission would result in a breach of
any of the representations and warranties set forth in Article II; it being
agreed that the actions of (x) entering into contracts to purchase fruit in
the ordinary course consistent with past practice and (y) making and
committing to make capital expenditures not in excess of $1 million in the
aggregate in accordance with the Company's budget for the fiscal year 2000,
which has been provided to Purchaser, shall not be deemed breaches of this
Section 4.1(iii).
(iv) not agree or otherwise commit to take any of the actions
proscribed by the foregoing paragraphs (i) through (iii); and
(v) conduct all Tax affairs relating to it only in the ordinary course
of business, and in good faith in substantially the same manner as such
affairs would have been conducted if this Agreement had not been entered
into.
4.2. No Solicitation. (a) The Company shall not, nor shall it permit any
of its Subsidiaries to, nor shall it authorize or permit any of its directors,
officers or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its Subsidiaries
to, directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes a Company Takeover Proposal or (ii) negotiate with respect
to, agree to or endorse any Company Takeover Proposal; provided, however, that
if and to the extent that the Board of Directors of the Company determines in
good faith, after consultation with outside counsel, that it is necessary to do
so in order to act in a manner consistent with its fiduciary duties to the
Stockholders under applicable law, the Company may, in response to any Company
Takeover Proposal which was not solicited by it and which did not otherwise
result from a breach of this Section 4.2(a), and subject to providing prior
written notice of its decision to take such action to Purchaser and compliance
with Section 4.2(c), (x) furnish information with respect to the Company and
its Subsidiaries to any person making a Company Takeover Proposal pursuant to a
customary confidentiality agreement (as determined by the Company based on the
advice of its outside counsel) and (y) participate in discussions or
negotiations regarding such Company Takeover Proposal.
(b) Except as expressly permitted by this Section 4.2, neither the Board
of Directors of the Company, the Special Committee nor any other committee
shall (i) withdraw, modify or, following a request by Purchaser to do so, fail
to reconfirm, or propose publicly to withdraw, modify or fail to reconfirm, in
a manner adverse to MergerCo or Purchaser, the approval or recommendation by
such
A-17
<PAGE>
Board of Directors or such committee of the Merger or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend any Company
Takeover Proposal, or (iii) cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement (each, a "Company Acquisition Agreement") related to any Company
Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of the
Company may take such actions if it determines in good faith, based upon the
recommendation of the Special Committee and after consultation with outside
counsel, that in light of a Company Superior Proposal it is necessary to do so
in order to act in a manner consistent with its fiduciary duties to the
Stockholders under applicable law; provided, that it may only take such actions
at a time that is after the third Business Day following Purchaser's receipt of
written notice advising Purchaser that the Board of Directors of the Company is
prepared to accept a Company Superior Proposal, specifying the material terms
and conditions of such Company Superior Proposal, all of which information will
be kept confidential by Purchaser in accordance with the terms of the
confidentiality agreement between the Company and North Castle.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.2, the Company shall immediately advise Purchaser
of any request for information or of any Company Takeover Proposal and the
material terms and conditions of such request or Company Takeover Proposal. The
Company will keep Purchaser reasonably informed of the status and details
(including amendments or proposed amendments) of any such request or Company
Takeover Proposal.
(d) Nothing contained in this Section 4.2 shall prohibit the Company from
taking and disclosing to its Stockholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's Stockholders if, in the good faith judgment of the
Board of Directors of the Company, after consultation with outside counsel,
failure to so disclose would be inconsistent with its obligations under
applicable law; provided, however, that, neither the Company nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Agreement or
the Merger or approve or recommend, or propose publicly to approve or
recommend, a Company Takeover Proposal except to the extent permitted by
Section 4.2(b).
4.3. Access and Information. From the date hereof to the Closing, the
Company and its Subsidiaries shall give Purchaser and its accountants, counsel,
consultants, employees and agents, full, complete and timely access during
normal business hours to, and furnish them with all documents, records, work
papers, tax returns and information with respect to, all of the Company's and
its Subsidiaries' properties, Assets, books, Material Contracts, reports,
records and senior management personnel, as Purchaser shall from time to time
reasonably request. The Company and its Subsidiaries shall keep Purchaser and
its representatives informed as to the affairs of the Business.
4.4. Further Assurances. Following the Closing, the Company and its
Subsidiaries shall execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be necessary, or
otherwise reasonably requested by Purchaser, to confirm and assure the rights
and obligations provided for in this Agreement and the Ancillary Agreements,
and render effective the consummation of the transactions contemplated hereby
and thereby.
ARTICLE V
COVENANTS OF MERGERCO, PURCHASER AND THE COMPANY
5.1. Public Announcements. Prior to the Closing, except as required by
applicable Law, no party shall, nor shall permit its Affiliates to, make any
public announcement in respect of this Agreement or the transactions
contemplated hereby without the prior written consent of the other parties.
5.2. Further Actions. (a) From the date hereof to the Closing, each party
agrees to use commercially reasonable efforts to take all actions and to do all
things necessary or appropriate to consummate the transactions contemplated
hereby and by the Ancillary Agreements as promptly as possible, including,
without limitation: (i) filing or supplying all applications, notifications and
A-18
<PAGE>
information required to be filed or supplied by it pursuant to applicable Law,
(ii) obtaining all Consents and Governmental Approvals necessary or appropriate
to be obtained by it in order to consummate transactions contemplated hereby
and thereby, (iii) providing all information necessary or appropriate to the
Company's obtaining new senior and mezzanine financing arrangements as
contemplated hereby, and (iv) coordinating and cooperating with the other
parties in exchanging such information and supplying such reasonable assistance
as may be reasonably requested by the other parties.
(b) At all times prior to the Closing, each party shall promptly notify
the other parties in writing of any fact, condition, event or occurrence that
will or is reasonably likely to result in the failure of any of the conditions
contained in Article VI to be satisfied.
(c) Purchaser and MergerCo on the one hand, and the Company on the other
hand, shall use their respective reasonable efforts to resolve such objections,
if any, as may be asserted with respect to the transactions contemplated hereby
under the laws, rules, guidelines or regulations of any Governmental Authority.
Without limiting the foregoing, each of the Company and MergerCo shall, as soon
as practicable, file (or cause its respective "ultimate parent entity" within
the meaning of the HSR Act to file) Notification and Report Forms under the HSR
Act with the Federal Trade Commission (the "FTC") and Antitrust Division of the
Department of Justice (the "Antitrust Division") and shall use reasonable
efforts to respond as promptly as practicable to all inquiries received from
the FTC or the Antitrust Division for additional information or documen tation.
Each party hereto shall use its reasonable efforts to take or cause to be taken
all actions necessary, proper or advisable to obtain any consent, waiver,
approval or authorization relating to any Competition Law that is required for
the consummation of the transactions contemplated by this Agreement.
(d) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist the shares of Company
Common Stock from the NASDAQ SmallCap Market System, provided that such
delisting shall not be effective until after the Effective Time. The parties
also acknowledge that it is Purchaser's intent that the shares of Surviving
Corporation Common Stock following the Merger will not be quoted on the NASDAQ
SmallCap Market System or listed on any national securities exchange.
5.3. Company Stockholder Approval; Proxy Statement. (a) As promptly as
practicable after the date hereof, the Company will prepare and file with the
SEC a proxy statement relating to the Special Meeting (as amended or
supplemented and including documents incorporated by reference therein, the
"Proxy Statement"), and shall use its commercially reasonable efforts to
respond to any comments of the SEC or its staff and to cause the Proxy
Statement to be cleared by the SEC. The Company shall notify Purchaser of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and shall supply Purchaser and its counsel 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. After the Proxy Statement has been cleared by the SEC, the
Company shall mail the Proxy Statement to the Stockholders. The Company shall
include in the Proxy Statement the recommendation of the Board of Directors of
the Company and the Special Committee that the Stockholders approve and adopt
this Agreement and the transactions contemplated hereby. If at any time prior
to the Special Meeting (as defined herein) there shall occur any event that
should be set forth in an amendment or supplement to the Proxy Statement, the
Company will prepare and mail to the Stockholders such an amendment or
supplement.
(b) The Company shall, as soon as practicable, in accordance with
applicable law and the Organizational Documents of the Company, duly call, set
a record date for, give notice of, convene and hold a special meeting of the
Stockholders (the "Special Meeting") for the purpose of considering and taking
action upon this Agreement and such other matters as may be appropriate at the
Special Meeting. Except as would constitute a breach of the fiduciary duties of
the Board of Directors of the Company to the Stockholders under applicable law,
the Company shall, through its Board of Directors, recommend that the
Stockholders approve the Merger and shall use all reasonable efforts to solicit
from the Stockholders proxies in favor of the approval and adoption of this
Agreement and the transactions contemplated hereby.
A-19
<PAGE>
(c) The Company and MergerCo shall together prepare and file a Transaction
Statement on Schedule 13E-3 (as amended or supplemented and including documents
incorporated by reference therein, the "Schedule 13E-3") under the Exchange
Act. Each of MergerCo and the Company shall furnish all information concerning
it, its Affiliates and the holders of its capital stock required to be included
in the Schedule 13E- 3 and, after consultation with each other, shall respond
promptly to any comments made by the SEC with respect to the Schedule 13E-3.
(d) The information supplied by the Company for inclusion in the Proxy
Statement or the Schedule 13E-3 shall not, at the time the Proxy Statement is
mailed, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or, at the time of the Special Meeting, as then amended or
supplemented, or at the Effective Time, omit to state any material fact
necessary to correct any statement originally supplied by the Company for
inclusion in the Proxy Statement or the Schedule 13E-3 which has become false
or misleading. If at any time prior to the Effective Time any event relating to
the Company or any of its Affiliates, or the Company's or its Affiliates'
respective officers, directors or stockholders, should be discovered which
should be set forth in an amendment of, or a supplement to such Proxy Statement
or Schedule 13E-3, the Company shall promptly so inform MergerCo and will
furnish all necessary information to MergerCo relating to such event and an
appropriate amendment or supplement to such Proxy Statement or Schedule 13E-3
will thereafter be filed with the SEC by the Company. All documents that the
Company is responsible for filing with the SEC in connection with the
transactions contemplated by this Agreement shall comply in all material
respects, both as to form and otherwise, with the Exchange Act and/or the
Securities Act, as the case may be, and the rules and regulations thereunder.
The Company shall also take any action required to be taken under any
applicable state securities laws in connection with the registration and
qualification in connection with the Merger of the Surviving Corporation Common
Stock following the Merger.
(e) All filings with the SEC and any amendments or supplements thereto,
all responses to requests for additional information by, and replies to
comments of, the SEC, and all mailings to the Stockholders, in each case in
connection with the Merger, shall be subject to the prior review and comment of
Purchaser.
(f) The information supplied or to be supplied by MergerCo for inclusion
in the Proxy Statement or the Schedule 13E-3 shall not, at the time the Proxy
Statement is mailed, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading or, at the time of the Special Meeting, as then
amended or supplemented, or at the Effective Time, omit to state any material
fact necessary to correct any statement originally supplied by MergerCo for
inclusion in the Proxy Statement or the Schedule 13E-3 which has become false
or misleading. If at any time prior to the Effective Time any event relating to
MergerCo or any of its Affiliates, or its Affiliates' respective officers,
directors or stockholders should be discovered which should be set forth in an
amendment of, or a supplement to, such Proxy Statement or Schedule 13E-3,
MergerCo shall promptly so inform the Company and will furnish all necessary
information to the Company relating to such event. All documents that MergerCo
is responsible for filing with the SEC in connection with the transactions
contemplated by this Agreement shall comply in all material respects, both as
to form and otherwise, with the Exchange Act and the rules and regulations
thereunder.
5.4. Directors' and Officers' Insurance and Indemnification. (a) For a
period of six years after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors,
employees and agents of the Company and its Subsidiaries in such capacities
against all losses, claims, damages, expenses or liabilities arising out of
actions or omissions or alleged actions or omissions occurring at or prior to
the Effective Time to the same extent and on the same terms and conditions
(including with respect to advancement of expenses) provided for in the
Company's Organizational Documents in effect at the date hereof (to the extent
consistent with applicable Law).
A-20
<PAGE>
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall maintain in effect directors' and officers' liability
insurance covering the persons who are currently covered by the Company's
existing directors' and officers' liability insurance with respect to claims
arising from facts or events which occurred before the Effective Time, on terms
and conditions no less favorable to such directors and officers than those in
effect on the date hereof; provided that in no event shall the Surviving
Corporation be required to make annual premium payments for such insurance in
excess of 200% of the premiums paid by the Company for such insurance as of the
date hereof.
5.5. Stockholder Litigation. Each of the Company on the one hand and
MergerCo and Purchaser, on the other hand, shall give the other the reasonable
opportunity to participate in the defense of any stockholder litigation against
the Company, MergerCo or Purchaser, as applicable, and its directors, relating
to the transactions contemplated hereby.
5.6. Recapitalization. Each of the Company, MergerCo and Purchaser shall
use its best efforts to cause the transactions contemplated hereby, including
the Merger, to be accounted for as a recapitalization and such accounting
treatment to be accepted by their respective accountants and by the SEC, and
each of the Company, MergerCo and Purchaser agrees that it shall take no action
that, to their respective knowledge, would cause such accounting treatment not
to be obtained.
5.7. Certain Employee Matters. For a period of not less than one year
following the Closing Date, the Surviving Corporation shall provide employees
of the Company with compensation and benefits which are substantially
comparable in the aggregate to the compensation and benefits provided to such
employees as of the date of this Agreement (other than with respect to any
equity based compensation).
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Obligations of Each Party. The obligation of the
parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment of the following conditions on or prior to the Closing Date:
(a) No Injunction, etc. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any Governmental Authority of
competent jurisdiction (whether temporary, preliminary or permanent) that
is in effect and has the effect of prohibiting the consummation of the
Merger or making the Merger illegal. There shall be no order or injunction
of a Governmental Authority of competent jurisdiction (whether temporary,
preliminary or permanent) in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; provided, however, that the parties
shall use their reasonable commercial efforts to cause such order or
injunction to be vacated or lifted.
(b) Securities Law Matters. The Proxy Statement in form and substance
consistent with the intent of the parties set forth in Section 5.6 shall
have been cleared by the SEC, and any material "blue sky" and other state
securities Laws applicable to the registration and qualification of the
Surviving Corporation Common Stock following the Merger shall have been
complied with; and
(c) HSR and Other Approvals. The applicable waiting period (and any
extension thereof) under the HSR Act with respect to the actions
contemplated by this Agreement shall have expired or been terminated and
all other material authorizations, consents, orders or approvals of, or
regulations, declarations or filings with, or expirations of applicable
waiting periods imposed by, any Governmental Authority (including, without
limitation, any foreign antitrust filing) necessary for the consummation of
the transactions contemplated hereby, shall have been obtained or filed or
shall have occurred.
(d) Financing. The Company shall have received at least $22.5 million
of debt financing pursuant to definitive financing agreements on terms
substantially similar to the terms set forth in the commitment letters
described in Section 3.6(ii) and (iii) (including the market flex
provisions thereof) or on less favorable terms that are acceptable to
Purchaser.
A-21
<PAGE>
(e) Stockholder Approval. The Company Stockholder Approval shall have
been obtained.
(f) Ancillary Agreements. On or prior to the Closing Date, (i) the
Company and Purchaser shall have entered into a Stockholders Agreement (the
"Stockholders Agreement"), in the form of Exhibit C, dated as of the date
hereof, to become effective as of the Effective Time; (ii) the Company and
Purchaser shall have entered into a Registration Rights Agreement (the
"Registration Rights Agreement") in the form of Exhibit D, dated as of the
date hereof, to become effective as of the Effective Time; and (iii) the
Purchaser and each of the Continuing Stockholders shall have entered into a
Voting Agreement (each a "Voting Agreement") substantially in the form of
Exhibit G, dated as of the date hereof, to become effective as of the date
hereof; and all such agreements shall be in full force and effect.
6.2. Conditions to Obligations of MergerCo and Purchaser. The obligation
of MergerCo and Purchaser to consummate the transactions contemplated hereby
shall be subject to the fulfillment on or prior to the Closing Date of the
following conditions:
(a) Representations, Performance, etc. The representations and
warranties of the Company contained herein shall be true and correct in all
respects (in the case of any representation or warranty qualified as to
materiality) or in all material respects (in the case of any representation
or warranty not so qualified) at and as of the date hereof and on and as of
the Closing Date with the same effect as though made on and as of the
Closing Date, and Purchaser shall have received a certificate signed by the
chief executive officer and chief financial officer of the Company to such
effect.
(b) Performance of Obligations of the Company. The Company shall have
performed or complied in all material respects with all conditions,
agreements, obligations and covenants required to be performed or complied
with prior to the Closing by the Company under this Agreement and Purchaser
shall have received a certificate signed by the chief executive officer and
chief financial officer of the Company to such effect.
(c) Consents. The Company shall have obtained and shall have delivered
to Purchaser on or prior to the Closing Date copies of all Governmental
Approvals and all Consents required or appropriate to be obtained by the
Company or its Subsidiaries in connection with the execution and delivery
of this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby, including without limitation,
the Consents set forth on Schedule 6.2(c) of the Company Disclosure Letter.
(d) No Material Adverse Effect. From the date hereof through and
including the Effective Time, no event, occurrence, fact, condition,
change, development or effect shall have occurred, exist or come to exist
that, individually or in the aggregate, has constituted or resulted in, or
could reasonably be expected to constitute or result in, a Material Adverse
Effect; it being understood that the enactment of any regulation by the
Food and Drug Administration mandating pasteurization of fresh juice
products shall not constitute a Material Adverse Effect unless the Company
would be unable to comply with such new regulation without the occurrence
of a Material Adverse Effect.
(e) Corporate Proceedings. As of the Closing Date, all corporate
proceedings of the Company in connection with this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby, and all
documents and instruments incident thereto, shall be reasonably
satisfactory in substance and form to Purchaser and its counsel, and
Purchaser and its counsel shall have received all such documents and
instruments (including the resignations of any officers of the Company or
of its Subsidiaries), or copies thereof, certified if requested, as may be
reasonably requested.
(f) Dissenting Shares. The number of Dissenting Shares shall not exceed
5% of the issued and outstanding shares of Company Common Stock.
(g) FIRPTA Certificate. Purchaser shall have received a certificate of
the Company, in accordance with Treasury Regulations Section 1.897-2(h), to
the effect that Company is not, and has not during the five year period
preceding the Effective Time been, a U.S. real property holding corporation
within the meaning of Section 897 of the Code.
A-22
<PAGE>
(h) Employment Agreement. The Company and Robin Prever shall have
entered into an employment agreement (the "Employment Agreement"), in the
form of Exhibit E, dated as of the date hereof, to become effective as of
the Effective Time, and such agreement shall be in full force and effect.
(i) Consulting Agreement. The Company and North Castle Partners, L.L.C.
shall have entered into a Consulting Agreement (the "Consulting
Agreement"), in the form of Exhibit F, dated as of the date hereof, to
become effective as of the Effective Time, and such agreement shall be in
full force and effect.
6.3. Conditions to Obligations of the Company. The obligation of the
Company to consummate the transactions contemplated hereby shall be subject to
the fulfillment, on or prior to the Closing Date, of the following conditions:
(a) Representations, Performance, etc. The representations and
warranties of MergerCo and Purchaser contained herein shall be true and
correct in all respects (in the case of any representation or warranty
qualified as to materiality) or in all material respects (in the case of
any representation or warranty not so qualified) at and as of the date
hereof and on and as of the Closing Date with the same effect as though
made at and as of the Closing Date and the Company shall have received a
certificate of an officer of each of MergerCo and Purchaser to such effect.
(b) Performance of Obligations of MergerCo and Purchaser. MergerCo and
Purchaser shall have performed or complied in all material respects with
all conditions, agreements, obligations and covenants required to be
performed or complied with prior to the Closing by MergerCo and Purchaser
under this Agreement and the Company shall have received a certificate of
an officer of each of MergerCo and Purchaser to such effect.
(c) Consents. Purchaser and MergerCo shall have obtained and shall have
delivered to the Company on or prior to the Closing Date copies of all
Governmental Approvals and all Consents required or appropriate to be
obtained by Purchaser and MergerCo in connection with the execution and
delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby.
(d) Organizational Proceedings. As of the Closing Date, all
organizational proceedings of Purchaser and MergerCo in connection with
this Agreement, the Ancillary Agreements and the transactions contemplated
hereby and thereby, and all documents and instruments incident thereto,
shall be reasonably satisfactory in substance and form to the Company and
its counsel, and the Company and its counsel shall have received all such
documents and instruments, or copies thereof, certified if requested, as
may be reasonably requested.
ARTICLE VII
TERMINATION
7.1. Termination. Notwithstanding anything herein to the contrary, this
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Time, whether before or after the Company Stockholder Approval
has been given:
(a) by the written agreement of the parties hereto;
(b) by either the Purchaser or the Company if (i) the Merger has not
been consummated on or prior to May 31, 2000 or such other date, if any, as
Purchaser and the Company shall agree upon (provided that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be
available to a party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
be consummated on or before such date), or (ii) any Governmental Authority
shall have issued a statute, order, decree or regulation or taken any other
action (which statute, order, decree, regulation or other action the
parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise
A-23
<PAGE>
prohibiting the Merger or making the Merger illegal and such statute,
order, decree, regulation or other action shall have become final and
non-appealable.
(c) by the Company, upon 15 days' prior written notice, in the event of
a material breach of any representation, warranty, covenant or agreement on
the part of MergerCo or Purchaser such that the conditions set forth in
Section 6.3(a) or 6.3(b) would not be satisfied as of the Effective Time,
which breach is not cured prior to the expiration of such 15 day period
(provided that if such breach is not curable, the Company may terminate
this Agreement immediately under this Section 7.1(c)); except where the
Company is in material breach of any representation, warranty, covenant or
agreement.
(d) By the Company, (i) if holders of at least a majority, by vote, of
the outstanding Company Common Stock fail to approve and adopt this
Agreement and the transactions contemplated hereby at the Special Meeting
(including any postponement or adjournment thereof), or (ii) if prior to
the Effective Time either the Board of Directors of the Company or the
Special Committee withdraws, modifies or changes in a manner adverse to
MergerCo its recommendation of this Agreement or the Merger pursuant to
Section 4.2; provided in the case of clause (ii) that such termination
shall not be effective until the Company has made payment to North Castle
of the Termination Fee and the Expense Reimbursement Fee in accordance with
Section 9.2 so long as MergerCo and Purchaser have not breached their
obligations hereunder.
(e) by Purchaser, if (i) holders of at least a majority, by vote, of
the outstanding Company Common Stock fail to approve and adopt this
Agreement and the transactions contemplated hereby at the Special Meeting
(including any postponement or adjournment thereof); (ii) either the Board
of Directors of the Company or the Special Committee withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner
adverse to MergerCo or shall have resolved to do any of the foregoing or
the Board of Directors of the Company shall have recommended to the
Stockholders any Company Takeover Proposal or resolved to do so; (iii) a
tender offer or exchange offer for outstanding shares of capital stock of
the Company then representing 35% or more of the combined power to vote
generally for the election of directors is commenced, and the Board of
Directors of the Company does not recommend that Stockholders not tender
their shares into such tender or exchange offer; or (iv) any Person shall
have acquired beneficial ownership or right to acquire beneficial ownership
of, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder), shall
have been formed that beneficially owns, or has the right to acquire
beneficial ownership of, outstanding shares of capital stock of the Company
then representing 35% or more of the combined power to vote generally for
the election of directors.
(f) by Purchaser, upon 15 days' prior written notice, in the event of a
material breach of any representation, warranty, covenant or agreement on
the part of the Company such that the conditions set forth in Section
6.2(a) or 6.2(b) would not be satisfied as of the Effective Time, which
breach is not cured prior to the expiration of such 15 day period (provided
that if such breach is not curable, Purchaser may terminate this Agreement
immediately under this Section 7.1(f)); except where Purchaser or MergerCo
is in material breach of any representation, warranty, covenant or
agreement.
(g) by Purchaser, on the one hand, or the Company, on the other hand,
if any event shall occur or exist that otherwise shall have made it
impossible to satisfy a condition precedent to the obligation of the
terminating party or parties to consummate the transactions contemplated by
this Agreement, unless the occurrence or existence of such event, fact or
condition shall be due to the failure of the terminating party or parties
to perform or comply with any of the agreements, covenants or conditions
hereof to be performed or complied with by such party prior to the Closing
Date.
(h) by the Company, if the Board of Directors of the Company determines
in good faith, based upon the opinion of its outside legal counsel, that
the failure to terminate this Agreement would constitute a breach of the
fiduciary duties of the Board of Directors of the Company to the
Stockholders under applicable law.
A-24
<PAGE>
7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 7.1, this Agreement shall
become void and have no effect, without any liability to any Person in respect
hereof or of the transactions contemplated hereby on the part of any party
hereto, or any of its directors, officers, employees, agents, consultants,
representatives, advisers, or Affiliates, except as specified in Section 9.2
and except for any liability resulting from such party's breach of this
Agreement.
ARTICLE VIII
DEFINITIONS
8.1. Definition of Certain Terms. The terms defined in this Section 8.1,
whenever used in this Agreement (including in the Schedules), shall have the
respective meanings indicated below for all purposes of this Agreement (each
such meaning to be equally applicable to the singular and the plural forms of
the respective terms so defined). All references herein to a Section, Article
or Schedule are to a Section, Article or Sched ule of or to this Agreement,
unless otherwise indicated.
2000 Note: as defined in Section 2.4(a).
Affiliate: of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first Person, and with respect to a natural person shall
include any child, stepchild, grandchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in- law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, and shall include adoptive relationships. "Control" (including
the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
Agreement: this Stock Purchase Agreement and Agreement and Plan of Merger,
as the same may be amended from time to time.
Ancillary Agreements: the Stockholders Agreement, Voting Agreements,
Registration Rights Agreement, Employment Agreement and Consulting Agreement.
Antitrust Division: as defined in Section 5.2(c).
Assets: as defined in Section 2.9.
Audited Financial Statements: the audited consolidated financial
statements of the Company as at and for the years ended December 31, 1998, 1997
and 1996, including (i) balance sheets and statements of income, cash flows and
stockholders equity, (ii) the notes thereto, and (iii) a report thereon from
PricewaterhouseCoopers, LLP, the Company's independent auditors.
Balance Sheet: the balance sheet of the Company as of December 31, 1998
included in the Audited Financial Statements.
Business: any business in which the Company or its Subsidiaries is engaged
as of the Effective Time.
Business Day: shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in The City of New York are authorized or required to
close.
Cashed Out Shares: with respect to any Continuing Stockholder, a number of
shares of Company Common Stock equal to the number listed under the column
captioned "Cashed Out Shares" opposite such Continuing Stockholder's name on
Annex A to this Agreement, subject to the adjustment provisions in Annex A.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601 et seq.
Certificate of Merger: as defined in Section 1.9.
A-25
<PAGE>
Class A Common Stock: as defined in Section 1.3(a).
Class B Common Stock: as defined in Section 1.3(a).
Closing: as defined in Section 1.10.
Closing Date: as defined in Section 1.10.
Code: the Internal Revenue Code of 1986, as amended.
Company: as defined in the recitals to this Agreement.
Company Acquisition Agreement: as defined in Section 4.2(b).
Company Common Stock: as defined in Section 1.3(a).
Company Disclosure Letter: as defined in Section 2.1(b).
Company Reports: as defined in Section 2.21.
Company SEC Documents: as defined in Section 2.21.
Company Stock Option: as defined in Section 1.5(a).
Company Stock Option Plans: as defined in Section 1.5(a).
Company Stockholder Approval: as defined in Section 2.2.
Company Superior Proposal: any proposal made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash and/or
securities, more than 25% of the combined voting power of the shares of the
Company's capital stock then outstanding or all or substantially all the assets
of the Company and otherwise on terms which the Special Committee determines in
its good faith judgment, based on the advice of the Financial Advisor or an
investment banking firm of national reputation and after consultation with
outside counsel, to be more favorable to the Stockholders than the Merger and
for which financing, to the extent required, is then committed or which, in the
good faith judgment of the Special Committee, is reasonably capable of being
obtained by such third party.
Company Takeover Event: any direct or indirect acquisition or purchase of
a business that constitutes 25% or more of the net revenues, net income or
assets of the Company and its Subsidiaries, taken as a whole, or 25% or more of
any class of equity securities of the Company, any tender offer or exchange
offer that if consummated would result in any person beneficially owning 25% or
more of any class of any equity securities of the Company, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company (or any Subsidiary whose business
constitutes 25% or more of the net revenues, net income or assets of the
Company and its Subsidiaries taken as a whole), other than the transactions
contemplated by this Agreement.
Company Takeover Proposal: any inquiry, proposal or offer from any person
relating to any Company Takeover Event.
Competition Laws: statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization, lessening of competition or restraint of trade, including
the HSR Act.
Computer System: with respect to any Person, any and all Software,
semiconductor chips, microprocessors, embedded microcontrollers and other
hardware containing programming instructions of any kind, whether owned or
licensed or otherwise held by such Person for use.
Consent: any consent, approval, order, authorization, waiver, agreement,
license, declaration, filing or report or notice to, any Person.
A-26
<PAGE>
Consulting Agreement: as defined in Section 6.2(i).
Continuing Stockholders: the Stockholders listed on Annex A to this
Agreement.
Delaware Secretary of State: as defined in Section 1.9.
DGCL: as defined in the recitals to this Agreement.
Dissenting Shares: as defined in Section 1.6.
Dissenting Stockholders: as defined in Section 1.3(a).
Effective Time: as defined in Section 1.9.
Employees: any employee or former employee of the Company or its
Subsidiaries or the beneficiaries or dependants of any such employee or former
employee.
Employment Agreement: as defined in Section 6.2(h).
Environmental Claims: any complaint, notice, directive, order, claim,
litigation, investigation, judicial or administrative proceeding, judgment,
letter or other communication from any governmental agency, office or other
authority, or any third party, involving violations of Environmental Laws or
Releases of Hazardous Materials (i) from any assets, properties or businesses
of the Company or its Subsidiaries; (ii) from properties or businesses
adjoining any of the Real Property; or (iii) from or onto any facilities which
received Hazardous Materials generated by the Company or its Subsidiaries.
Environmental Laws: all applicable Laws relating to the protection of the
environment, to human health and safety, to natural resources or to any use,
sale, manufacture, treatment, generation, processing, storage, disposal,
abatement, existence, Release, threatened Release, transportation or handling
of any Hazardous Materials, including, without limitation, (i) CERCLA, the
Resource Conservation and Recovery Act, and the Occupational Safety and Health
Act, and (ii) all other governmental requirements pertaining to reporting,
licensing, permitting, investigation or remediation of Releases or threatened
Releases of Hazardous Substances into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport or handling of Hazardous
Substances.
ERISA: the Employee Retirement Income Security Act of 1974, as amended.
Exchange Act: the Securities Exchange Act of 1934, as amended.
Exchange Agent: as defined in Section 1.4(a).
Expense Reimbursement Fee: as defined in Section 9.2(b).
Fairness Opinion: as defined in Section 2.24.
Financial Advisor: as defined in Section 2.24.
Financial Statements: the Audited Financial Statements and the Interim
Financial Statements.
FTC: as defined in Section 5.2(c).
Fund: as defined in Section 3.6.
GAAP: United States generally accepted accounting principles.
GFG Warrant: as defined in Section 2.4(a).
Governmental Approval: any written consent, approval, authorization,
waiver, permit, concession, franchise, Agreement, license, exemption or order
of, declaration or filing with, or report or notice to, any Governmental
Authority.
Governmental Authority: as defined in Section 2.3(b).
Hazardous Materials: any substance that: (i) is or contains asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, or radon gas, or (ii) requires
investigation, removal or remediation under any applicable Environmental Law,
or is defined, listed or identified as a "hazardous waste" or "hazardous
substance" thereunder.
A-27
<PAGE>
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Intellectual Property: any and all United States and foreign: patents and
applications, including all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; trademarks, service
marks, trade names, trade dress, domain names, logos, business and product
names, slogans, and registrations and applications for registration or renewal
thereof; copyrights and registrations or renewals thereof; copyrightable works;
World Wide Web sites; Software; inventions, processes, designs, formulae, trade
secrets, know-how, R&D, manufacturing and production processes and techniques;
confidential business and technical information; all other intellectual
property and proprietary rights similar to the foregoing; all rights to sue for
and remedies against past, present and future infringements of any or all of
the foregoing; rights of priority and protection of interests therein under the
Laws of any jurisdiction, copies and tangible embodiments thereof (in whatever
form or medium, including electronic media).
Interim Financial Statements: the unaudited consolidated financial
statements of the Company for the periods ended March 31, 1999, June 30, 1999,
and September 30, 1999, including a balance sheet and statements of income,
cash flows and stockholders equity.
IRS: the Internal Revenue Service.
Law: all applicable provisions of all (a) constitutions, treaties,
statutes, laws (including the common law), codes, rules, regulations,
ordinances or orders of any Governmental Authority, (b) Governmental Approvals
and (c) orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Authority.
Leased Real Property: all interests leased pursuant to Leases.
Leases: the real property leases, subleases, licenses and occupancy
agreements pursuant to which the Company or its Subsidiaries is lessee,
sublessee, licensee or occupant.
Lien: any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention Agreement, voting trust Agreement, interest, equity,
option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever, including but not limited to such as may
arise under any Material Contracts.
Listed Intellectual Property: as defined in Section 2.12(a).
Litigation: any action, cause of action, claim, demand, suit, proceeding,
citation, summons, subpoena, inquiry or investigation of any nature, civil,
criminal, regulatory or otherwise, in law or in equity, pending or threatened,
by or before any court, tribunal, arbitrator or other Governmental Authority,
or by or on behalf of any third party.
Material Adverse Effect: (i) any event, occurrence, fact, condition,
change or effect that is, or would reasonably be expected to be, materially
adverse to the Business, Assets, liabilities, prospects, results of operations
or financial or other condition of the Company or its Subsidiaries, taken as a
whole, or (ii) a material impairment of the ability of the Company to perform
its obligations hereunder or to consummate the transactions contemplated hereby
and thereby.
Material Contracts: all loan agreements, indentures, letters of credit
(including related letter of credit applications and reimbursement
obligations), mortgages, security agreements, pledge agreements, deeds of
trust, bonds, notes, guarantees, surety obligations, warranties, material
licenses, material franchises, permits, powers of attorney, material leases,
endorsement agreements, and other agreements, contracts, instruments,
obligations, material arrangements and understandings, written or oral, to
which the Company or any of its Subsidiaries is a party or by which any of
their properties or assets may be bound or affected, in each case as amended,
supplemented, waived or otherwise modified, that are of the types listed in
clauses (i) through (xiv) below:
(i) leases, subleases, licenses, occupancy agreements, material permits,
insurance policies, material agreements, Governmental Approvals and other
Material Contracts concerning or relating to the Real Property;
A-28
<PAGE>
(ii) material employment, consulting, severance, agency, bonus,
compensation, or other trusts, funds and other Material Contracts (other than
the Plans) relating to or for the benefit of current, future or former
employees, officers, directors, sales representatives, distributors, dealers,
agents, independent contractors or consultants (whether or not legally binding)
of the Company or its Subsidiaries, requiring annual payments in excess of
$100,000, including sales agency, copacking or distributorship agreements or
arrangements for the sale of any of the products or services of the Company or
its Subsidiaries;
(iii) Intellectual Property licenses;
(iv) broker's or finder's contracts;
(v) joint venture, partnership and similar contracts, agreements,
arrangements and understandings involving a sharing of profits or expenses;
(vi) stock purchase agreements, asset purchase agreements and other
acquisition or divestiture agreements, including but not limited to any
agreements relating to the acquisition, lease or disposition of the Company or
its Subsidiaries, any material assets or properties (other than sales of
inventory made in the ordinary course of business), any business, or any
capital stock of or other interest in any Person by the Company or its
Subsidiaries, within the last three years, which involve continuing indemnity
or other obligations;
(vii) contracts prohibiting or restricting the ability of the Company, its
Subsidiaries or the Business to engage in any business or operate in any
geographical area or to compete with any Person;
(viii) orders and other contracts for the purchase or sale of materials,
supplies, products or services, involving aggregate payments in excess of
$100,000 in each case or, other than with respect to such orders or contracts
entered into in the ordinary course of business, $250,000 in the aggregate;
(ix) contracts providing for future payments that are conditioned, in
whole or in part, on a change in control of any of the Company or its
Subsidiaries;
(x) powers of attorney, except routine powers of attorney relating to
representation before governmental agencies or given in connection with
qualification to conduct business in another jurisdiction;
(xi) contracts not entered into in the ordinary course of business;
(xii) contract or series of related contracts with respect to which the
aggregate amount that could reasonably be expected to be paid or received
thereunder in the future exceeds $25,000 per annum or, other than with respect
to such contracts entered into in the ordinary course of business, $100,000 in
the aggregate;
(xiii) contracts that are or will be material to the business, operations,
results of operations, condition (financial or otherwise), assets or properties
of the Company or its Subsidiaries; and
(xiv) contracts providing for future payments that are conditioned, in
whole or in part, on the future performance of the Company or its Subsidiaries.
Merger: as defined in Section 1.1(a).
MergerCo: as defined in the recitals to this Agreement.
Merger Consideration: the cash and shares of Surviving Corporation Common
Stock paid to Stockholders pursuant to Section 1.3.
Non-Continuing Stockholder: any Stockholder not listed on Annex A to this
Agreement.
Organizational Documents: as defined in Section 2.1(c).
Owned Intellectual Property: as defined in Section 2.12(a).
A-29
<PAGE>
Owned Real Property: the real property owned by the Company or its
Subsidiaries, together with all structures, facilities, improvements, fixtures
and systems attached or appurtenant thereto and all easements, licenses and
rights relating to the foregoing.
Permitted Liens: (i) Liens securing liabilities for which adequate
reserves are included on the Balance Sheet, to the extent so reserved, that do
not materially interfere with the use of the property subject thereto or extend
to or cover any assets of any other Affiliate of Purchaser upon consummation of
the transactions contemplated by this Agreement, (ii) Liens for Taxes not yet
due and payable, or that are being contested in good faith by appropriate
proceedings, (iii) mechanic's Liens, landlord's Liens and warehouseman's Liens
securing obligations arising in the ordinary course of business that are not
more than 30 days past due or are being contested in good faith by appropriate
proceedings or (iv) Liens that, indi vidually and in the aggregate, do not and
would not materially detract from the value of any of the property or Assets or
materially interfere with the use thereof as currently used or proposed to be
used.
Per Share Amount: an amount equal to the quotient obtained by dividing the
Purchase Price by the number of Purchased Shares.
Per Share Merger Consideration: $6.00.
Person: any natural person, firm, partnership, association, corporation,
company, trust, business trust, Governmental Authority or other entity.
Plan: each "employee benefit plan", as such term is defined in Section
3(3) of ERISA, and each bonus, incentive or deferred compensation, severance,
termination, retention, change of control, stock option, stock appreciation,
stock purchase, phantom stock or other equity-based, performance or other
employee or retiree benefit or compensation plan, program, arrangement,
Agreement, policy or understanding, whether written or unwritten, that provides
or may provide benefits or compensation in respect of any Employee, or under
which any Employee is or may become eligible to participate or derive a benefit
and that is or has been maintained or established by the Company or its
Subsidiaries or to which the Company or its Subsidiaries contributes or is or
has been obligated or required to contribute.
Policies: as defined in Section 2.13.
Proxy Statement: as defined in Section 5.3(a).
Purchaser: as defined in the recitals to this Agreement.
Purchase Price: as defined in Section 1.1(b).
Purchased Shares: a number (rounded down to the nearest whole share) of
newly issued shares of Surviving Corporation Common Stock equal to the Purchase
Price divided by the Per Share Merger Consideration.
Real Property: the Owned Real Property and the Leased Real Property.
Registration Rights Agreement: as defined in Section 6.1(f).
Release: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment.
Return: any return, report, declaration, form, claim for refund or in
formation return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Rollover Shares: with respect to any Continuing Stockholder, a number of
shares of Company Common Stock equal to the number listed under the column
captioned "Rollover Shares" opposite a Continuing Stockholder's name on Annex A
to this Agreement, subject to the adjustment provisions in Annex A.
A-30
<PAGE>
Schedule 13E-3: as defined in Section 5.3(c).
SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as amended.
Software: all computer software, including but not limited to application
software and system software, including all source code and object code
versions thereof, in any and all forms and media, whether recorded on paper,
magnetic media or other electronic or non-electronic media (including data and
related documentation, user manuals, training materials, flow charts, diagrams,
descriptive tests and programs, computer print-outs, underlying tapes, computer
databases and similar items), integrated circuits, embedded systems, and other
electro-mechanical or processor based systems.
Special Committee: as defined in the recitals hereto.
Special Meeting: as defined in Section 5.3(b).
Stock Purchase: as defined in Section 1.1(b).
Stockholders: the holders of the Company Common Stock.
Stockholders Agreement: as defined in Section 6.1(f).
Subsidiaries: each corporation or other Person in which a Person owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
Surviving Corporation: as defined in Section 1.1(a).
Surviving Corporation Common Stock: common stock, par value $.01 per
share, of the Surviving Corporation.
Tax: any federal, state, provincial, local, foreign or other income, alter
native, minimum, accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits, windfall profits, gross receipts,
value added, sales (including, without limitation, bulk sales), use, goods and
services, excise, customs duties, transfer, conveyance, mortgage, registration,
stamp, documentary, recording, premium, severance, environmental (including,
without limitation, taxes under Section 59A of the Code), real property,
personal property, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, withholding, estimated or other
similar tax, levy, impost, fee, duty or other governmental charge or assessment
or deficiencies thereof (in cluding all interest and penalties thereon and
additions thereto, whether disputed or not) imposed by any Governmental
Authority or other taxing authority.
Termination Fee: as defined in Section 9.2(b).
Transaction Expenses: as defined in Section 9.2(a).
Treasury Regulations: the regulations prescribed under the Code.
Voting Agreements: as defined in the recitals to this Agreement.
Year 2000 Compatibility: (and variations thereof) means, with respect to
any Computer System, that such Computer System (i) records, stores, processes
and provides true and accurate dates and calculations for dates and spans of
dates, (ii) is and will be able to operate on a basis comparable to its current
operation during and after calendar year 2000 A.D., including, but not limited
to, leap years, and (iii) shall not end abnormally or provide invalid or
incorrect results as a result of date data which represents or references (or
fails to represent or reference) different centuries or more than one century.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder. The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation."
A-31
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1. Survival. No representations or warranties of the parties set forth
in this Agreement shall survive beyond the Effective Time.
9.2. Expenses. (a) Except as otherwise provided herein, if this Agreement
is terminated prior to Closing, all costs and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated
hereby (the "Transaction Expenses") shall be paid by the party incurring such
expenses. If the Closing does occur, the Company shall pay all Transaction
Expenses of MergerCo, Purchaser and the Company.
(b) The Company shall promptly pay North Castle a termination fee of $1.2
million (the "Termination Fee"), plus documented reasonable out of pocket costs
and expenses incurred by MergerCo and Purchaser in connection with this
Agreement and the consummation of the transactions contemplated hereby in an
amount not to exceed $300,000 (the "Expense Reimbursement Fee") in the event
that this Agreement is terminated pursuant to Sections 7.1(d)(ii) or
7.1(e)(ii)-(iv). Any such payment shall be made by wire transfer of immediately
available funds.
(c) The Company acknowledges that the agreements contained in this Section
9.2 are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Purchaser and MergerCo would not enter into
this Agreement; accordingly, if the Company fails promptly to pay the amount
due pursuant to this Section 9.2, and, in order to obtain such payment,
Purchaser and MergerCo commence a suit which results in a judgment against the
Company for any or all of the Termination Fee or the Expense Reimbursement Fee
set forth in this Section 9.2, the Company shall pay to Purchaser and MergerCo
their costs and expenses (including attorneys' fees and expenses) in connection
with such suit.
(d) This Section 9.2 shall survive any termination of this Agreement.
9.3. Severability. If any provision of this Agreement is inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses, sections or
subsections of this Agreement shall not affect the remaining portions of this
Agreement.
9.4. Notices. All notices and other communications made in connection with
this Agreement shall be in writing and shall be deemed to have been duly given
if (a) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, (b) transmitted by hand delivery, (c) sent by
next-day or overnight mail or delivery or (d) sent by fax or telecopy,
addressed as follows:
(i) if to MergerCo, Purchaser or, from and after the Closing, the
Company, to such person:
c/o North Castle Partners, L.L.C.
60 Arch Street
Greenwich, CT 06830
Telephone: (203) 862-3200
Telecopy: (203) 618-1860
Attention: Peter J. Shabecoff
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
Attention: Franci J. Blassberg, Esq.
A-32
<PAGE>
(ii) if to the Company prior to the Closing, to:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12366
Telephone: (518) 584-6363 x11
Telecopy: (518) 584-0380
Attention: Chief Financial Officer
with a copy to:
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 891-9268
Telecopy: (212) 891-9598
Attention: Charles I. Weissman, Esq.
or, in each case, at such other address as may be specified in writing to the
other party hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent.
9.5. Entire Agreement. This Agreement (including the schedules hereto),
the Ancillary Agreements (when executed and delivered) and the Confidentiality
Agreement constitute the entire Agreement, and supersede all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
9.6. Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument. The headings contained in this
Agreement are for purposes of convenience only and shall not affect the meaning
or interpretation of this Agreement.
9.7. Governing Law, etc. (a) EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF
DELAWARE MANDATORILY APPLY, THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES
THEREOF TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF
THE UNITED STATES OF AMERICA LOCATED IN THE COUNTY OF NEW YORK SOLELY IN
RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS
AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. EACH PARTY HEREBY WAIVES AND
AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE
INTERPRETATION AND ENFORCEMENT HEREOF, OR ANY SUCH DOCUMENT OR IN RESPECT OF
ANY SUCH TRANSACTION, THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT
OR IS NOT MAINTAINABLE IN SUCH COURTS OR THAT THE VENUE THEREOF MAY NOT BE
APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN
OR BY SUCH COURTS. EACH PARTY HEREBY CONSENTS TO AND GRANTS ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE
A-33
<PAGE>
SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREE THAT THE MAILING OF PROCESS OR
OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER
PROVIDED IN SECTION 9.4 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW,
SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OR ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.7(b).
9.8. Binding Effect; No Third Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns, subject to Section 9.9.
Nothing in this Agreement shall confer any rights upon any person or entity
other than the parties hereto and their respective heirs, successors and
permitted assigns.
9.9. Assignment. This Agreement shall not be assignable by any of the
parties hereto without the prior written consent of the other parties,
provided, that, (a) the Company may assign this Agreement and the Ancillary
Agreements to which it is a party to any lenders to the Company as security for
obligations to such lenders, and (b) Purchaser may assign this Agreement to any
of its Affiliates, or to any lender to Purchaser as security for obligations to
such lender, and provided, further, that no assignment by Purchaser shall in
any way affect Purchaser's obligations or liabilities under this Agreement.
9.10. Amendment; Waivers, etc. No amendment, modification or discharge of
this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights
or privileges hereunder. The rights and remedies of any party based upon,
arising out of or otherwise in respect of any inaccuracy or breach of any
representation, warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement as to which there is no inaccuracy or breach.
The representations and warranties of the Company shall not be affected or
deemed waived by reason of any investigation made by or on behalf of MergerCo
or Purchaser (including but not limited to by any of their advisors,
consultants or representatives) or by reason of the fact that MergerCo,
Purchaser or any of their advisors, consultants or representatives knew or
should have known that any such representation or warranty is or might be
inaccurate.
A-34
<PAGE>
9.11. Attorneys' Fees. As between the parties to this Agreement, in any
action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to
its costs and expenses and any other available remedy.
IN WITNESS WHEREOF, the parties have duly executed this Stock Purchase
Agreement and Agreement and Plan of Merger as of the date first above written.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Kim James
------------------------------
Name: Kim James
Title: Chief Financial Officer
NCP-SBG RECAPITALIZATION CORP.
By: /s/ Peter J. Shabecoff
------------------------------
Name: Peter J. Shabecoff
Title: Vice President
NCP-SBG, L.P.
By: NCP-SBG GP, L.L.C.
its General Partner
By: /s/ Peter J. Shabecoff
------------------------------
Name: Peter J. Shabecoff
Title: Executive Vice
President
A-35
<PAGE>
ANNEX A TO ANNEX A
<TABLE>
<CAPTION>
TOTAL CASHED ROLLOVER INCREASE
CONTINUING STOCKHOLDER SHARES OUT SHARES SHARES PERCENTAGE
- ------------------------------------- --------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Robin Prever .......................... 318,285 251,499 66,786 12.1429%
Anthony Malatino ...................... 718,127 557,056 161,071 29.2857%
Warren Lichtenstein ................... 46,254 --- 46,254
Steel Partners II, L.P. ............... 481,258 425,369 55,889 18.5714%
Steven Bogen .......................... 386,793 304,293 82,500 15.0000%
Pershing Securities Limited ........... 200,000 141,071 58,929 10.7143%
Jurg Walker ........................... 224,500 145,929 78,571 14.2857%
--------- --------- ------- --------
TOTAL .............................. 2,375,217 1,825,217 550,000 100.00 %
========= ========= ======= ========
</TABLE>
If the equity investment of the Purchaser exceeds $28,660,000 due to the
unavailability of the full amount of the contemplated debt financing, then the
aggregate number of rollover shares shall be increased so that the aggregate
value of all of the Rollover Stock equals 11.11% of such equity investment, and
the aggregate number of cashed out shares shall be decreased in an amount equal
to the increase in the aggregate number of shares of Rollover Stock. This
increase and decrease in the number of rollover shares and cashed out shares,
respectively, shall be allocated among Robin Prever, Anthony Malatino,
Warren Lichtenstein, Steel Partners, II, L.P., Steve Bogen, Pershing Keen
Nominee Limited and Jurg Walker in accordance with the following respective
percentages: 12.1429%, 29.2857%, [ ]%, 18.5714%, 15.0000%, 10.7143%, and
14.2857%.
A-A-1
<PAGE>
EXHIBIT A TO ANNEX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SARATOGA BEVERAGE GROUP, INC.
Saratoga Beverage Group, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Saratoga Beverage Group, Inc. The
Corporation was initially incorporated in the State of Delaware under the name
of Saratoga Spring Water Company on May 5, 1993.
2. This Amended and Restated Certificate of Incorporation was proposed by
the Board of Directors of the Corporation and adopted by the stockholders of
the Corporation in the manner and by the vote prescribed by Sections 242 and
245 of the General Corporation Law of the State of Delaware, and is as follows:
FIRST: The name of the Corporation is Saratoga Beverage Group, Inc.
SECOND: The Corporation's registered office in the State of Delaware is at
Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business of the Corporation and its purpose is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is shares of common stock, par
value $ per share.
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be fixed and may
be altered from time to time in the manner provided in the By-Laws, and
vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors may be
filled, and directors may be removed, as provided in the By-Laws.
(b) The election of directors may be conducted in any manner approved
by the stockholders at the time when the election is held and need not be
by written ballot.
(c) All corporate powers and authority of the Corporation (except as at
the time otherwise provided by law, by this Certificate of Incorporation or
by the By-Laws) shall be vested in and exercised by the Board of Directors.
(d) The Board of Directors shall have the power without the assent or
vote of the stockholders to adopt, amend, alter or repeal the By-Laws of
the Corporation, except to the extent that the By-Laws or this Certificate
of Incorporation otherwise provide.
(e) No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of his or her fiduciary
duty as a director, provided that nothing contained in this Article shall
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in
Exhibit A-1
<PAGE>
good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit.
SIXTH: The Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights herein
conferred upon stockholders or directors are granted subject to this
reservation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by , its Secretary, this day of , 2000.
SARATOGA BEVERAGE GROUP, INC.
By:
-------------------------------
Name:
Title:
Exhibit A-2
<PAGE>
EXHIBIT B TO ANNEX A
================================================================================
SARATOGA BEVERAGE GROUP, INC.
AMENDED AND RESTATED BY-LAWS
As adopted on , 2000
================================================================================
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
AMENDED AND RESTATED BY-LAWS
TABLE OF CONTENTS
SECTION PAGE
- ------------- -----
ARTICLE I
STOCKHOLDERS ...................................................... 1
Section 1.01. Annual Meetings ..................................... 1
Section 1.02. Special Meetings .................................... 1
Section 1.03. Notice of Meetings; Waiver .......................... 1
Section 1.04. Quorum .............................................. 1
Section 1.05. Voting .............................................. 1
Section 1.06. Voting by Ballot .................................... 2
Section 1.07. Adjournment ......................................... 2
Section 1.08. Proxies ............................................. 2
Section 1.09. Organization; Procedure ............................. 2
Section 1.10. Consent of Stockholders in Lieu of Meeting .......... 3
ARTICLE II
BOARD OF DIRECTORS ................................................ 3
Section 2.01. General Powers ...................................... 3
Section 2.02. Number and Term of Office ........................... 3
Section 2.03. Election of Directors ............................... 3
Section 2.04. Annual and Regular Meetings ......................... 3
Section 2.05. Special Meetings; Notice ............................ 4
Section 2.06. Quorum; Voting ...................................... 4
Section 2.07. Adjournment ......................................... 4
Section 2.08. Action Without a Meeting ............................ 4
Section 2.09. Regulations; Manner of Acting ....................... 4
Section 2.10. Action by Telephonic Communications ................. 4
Section 2.11. Resignations ........................................ 4
Section 2.12. Removal of Directors ................................ 4
Section 2.13. Vacancies and Newly Created Directorships ........... 4
Section 2.14. Compensation ........................................ 5
Section 2.15. Reliance on Accounts and Reports, etc ............... 5
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES .......................... 5
Section 3.01. How Constituted ..................................... 5
Section 3.02. Powers .............................................. 5
Section 3.03. Proceedings ......................................... 5
Section 3.04. Quorum and Manner of Acting ......................... 5
Section 3.05. Action by Telephonic Communications ................. 6
Section 3.06. Absent or Disqualified Members ...................... 6
Section 3.07. Resignations ........................................ 6
Section 3.08. Removal ............................................. 6
Section 3.09. Vacancies ........................................... 6
Exhibit B-i
<PAGE>
SECTION PAGE
- ------------- -----
ARTICLE IV
OFFICERS .................................................................. 6
Section 4.01. Number ...................................................... 6
Section 4.02. Election .................................................... 6
Section 4.03. Salaries .................................................... 6
Section 4.04. Removal and Resignation; Vacancies .......................... 6
Section 4.05. Authority and Duties of Officers ............................ 6
Section 4.06. The President ............................................... 7
Section 4.07. The Vice Presidents ......................................... 7
Section 4.08. The Secretary ............................................... 7
Section 4.09. The Treasurer ............................................... 7
Section 4.10. Additional Officers ......................................... 8
Section 4.11. Security .................................................... 8
ARTICLE V
CAPITAL STOCK ............................................................. 8
Section 5.01. Certificates of Stock ....................................... 8
Section 5.02. Signatures; Facsimile ....................................... 8
Section 5.03. Lost, Stolen or Destroyed Certificates ...................... 9
Section 5.04. Transfer of Stock ........................................... 9
Section 5.05. Record Date ................................................. 9
Section 5.06. Registered Stockholders ..................................... 10
Section 5.07. Transfer Agent and Registrar ................................ 10
ARTICLE VI
INDEMNIFICATION ........................................................... 10
Section 6.01. Nature of Indemnity ......................................... 10
Section 6.02. Successful Defense .......................................... 10
Section 6.03. Determination That Indemnification Is Proper ................ 11
Section 6.04. Advance Payment of Expenses ................................. 11
Section 6.05. Procedure for Indemnification of Directors and Officers ..... 11
Section 6.06. Survival; Preservation of Other Rights ...................... 11
Section 6.07. Insurance ................................................... 12
Section 6.08. Severability ................................................ 12
ARTICLE VII
OFFICES ................................................................... 12
Section 7.01. Registered Office ........................................... 12
Section 7.02. Other Offices ............................................... 12
ARTICLE VIII
GENERAL PROVISIONS ........................................................ 12
Section 8.01. Dividends ................................................... 12
Section 8.02. Reserves .................................................... 13
Section 8.03. Execution of Instruments .................................... 13
Section 8.04. Corporate Indebtedness ...................................... 13
Section 8.05. Deposits .................................................... 13
Section 8.06. Checks ...................................................... 13
Section 8.07. Sale, Transfer, etc. of Securities .......................... 13
Section 8.08. Voting as Stockholder ....................................... 13
Section 8.09. Fiscal Year ................................................. 13
Exhibit B-ii
<PAGE>
SECTION PAGE
- -------------- -----
Section 8.10. Seal ...................................... 13
Section 8.11. Books and Records; Inspection ............. 14
ARTICLE IX
AMENDMENT OF BY-LAWS ..................................... 14
Section 9.01. Amendment ................................. 14
ARTICLE X
CONSTRUCTION ............................................. 14
Section 10.01. Construction ........................... .. 14
Exhibit B-iii
<PAGE>
SARATOGA BEVERAGE GROUP, INC.
AMENDED AND RESTATED BY-LAWS
AS ADOPTED ON , 2000
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as properly may come before such meeting shall be held at such
place, either within or without the State of Delaware, and at 10:00 a.m. local
time on the first Tuesday in July (or, if such day is a legal holiday, then on
the next succeeding business day), or at such other date and hour, as may be
fixed from time to time by resolution of the Board of Directors and set forth
in the notice or waiver of notice of the meeting. [Sections 211(a), (b).]1
Section 1.02. Special Meetings. Special meetings of the stockholders may
be called at any time by the President (or, in the event of his absence or
disability, by any Vice President), or by the Board of Directors. A special
meeting shall be called by the President (or, in the event of his absence or
disability, by any Vice President), or by the Secretary, immediately upon
receipt of a written request therefor by stockholders holding in the aggregate
not less than a majority of the outstanding shares of the Corporation at the
time entitled to vote at any meeting of the stockholders. If such officers or
the Board of Directors shall fail to call such meeting within 20 days after
receipt of such request, any stockholder executing such request may call such
meeting. Such special meetings of the stockholders shall be held at such
places, within or without the State of Delaware, as shall be specified in the
respective notices or waivers of notice thereof. [Section 211(d).]
Section 1.03. Notice of Meetings; Waiver. The Secretary or any Assistant
Secretary shall cause written notice of the place, date and hour of each
meeting of the stockholders, and, in the case of a special meeting, the purpose
or purposes for which such meeting is called, to be given personally or by
mail, not less than ten nor more than sixty days prior to the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited
in the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholders of the Corporation, or, if
he shall have filed with the Secretary of the Corporation a written request
that notices to him be mailed to some other address, then directed to him at
such other address. Such further notice shall be given as may be required by
law.
No notice of any meeting of stockholders need be given to any stockholder
who submits a signed waiver of notice, whether before or after the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders need be specified in a written waiver of
notice. The attendance of any stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened. [Sections 222, 229.]
Section 1.04. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws, a
record date has been fixed, every holder of record of shares entitled to vote
at a meeting of stockholders shall be entitled to one
- ----------
1 Citations are to the General Corporation Law of the State of Delaware as in
effect on April 15, 1999 (the "GCL"), and are inserted for reference only,
and do not constitute a part of the By-Laws.
Exhibit B-1
<PAGE>
vote for each share outstanding in his name on the books of the Corporation at
the close of business on such record date. If no record date has been fixed,
then every holder of record of shares entitled to vote at a meeting of
stockholders shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation at the close of business on the day
next preceding the day on which notice of the meeting is given, or, if notice
is waived, at the close of business on the day next preceding the day on which
the meeting is held. Except as otherwise required by law or by the Certificate
of Incorporation, the vote of a majority of the shares represented in person or
by proxy at any meeting at which a quorum is present shall be sufficient for
the transaction of any business at such meeting. [Sections 212(a), 216.]
Section 1.06. Voting by Ballot. No vote of the stockholders need be taken
by written ballot or conducted by Inspectors of Elections unless otherwise
required by law. Any vote which need not be taken by ballot may be conducted in
any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any meeting of
the stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for
the adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a
notice of the adjourned meeting, conforming to the requirements of Section 1.03
hereof, shall be given to each stockholder of record entitled to vote at such
meeting. At any adjourned meeting at which a quorum is present, any business
may be transacted that might have been transacted on the original date of the
meeting. [Section 222(c).]
Section 1.08. Proxies. Any stockholder entitled to vote at any meeting of
the stockholders or to express consent to or dissent from corporate action
without a meeting may authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. A stockholder may
authorize a valid proxy by executing a written instrument signed by such
stockholder, or by causing his or her signature to be affixed to such writing
by any reasonable means including, but not limited to, by facsimile signature,
or by transmitting or authorizing the transmission of a telegram, cablegram or
other means of electronic transmission to the person designated as the holder
of the proxy, a proxy solicitation firm or a like authorized agent. No such
proxy shall be voted or acted upon after the expiration of three years from the
date of such proxy, unless such proxy provides for a longer period. Every proxy
shall be revocable at the pleasure of the stockholder executing it, except in
those cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary. Proxies by telegram, cablegram or other electronic transmission must
either set forth or be submitted with information from which it can be
determined that the telegram, cablegram or other electronic transmission was
authorized by the stockholder. Any copy, facsimile telecommunication or other
reliable reproduction of a writing or transmission created pursuant to this
section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission. [Sections 212(b), (c).]
Section 1.09. Organization; Procedure. At every meeting of stockholders
the presiding officer shall be the President or, in the event of his absence or
disability, a presiding officer chosen by a majority of the stockholders
present in person or by proxy. The Secretary, or in the event of his absence or
disability, the Assistant Secretary, if any, or if there be no Assistant
Secretary, in the absence of the Secretary, an appointee of the presiding
officer, shall act as Secretary of the meeting. The order of business and all
other matters of procedure at every meeting of stockholders may be determined
by such presiding officer.
Exhibit B-2
<PAGE>
Section 1.10. Consent of Stockholders in Lieu of Meeting. To the fullest
extent permitted by law, whenever the vote of stockholders at a meeting thereof
is required or permitted to be taken for or in connection with any corporate
action, such action may be taken without a meeting, without prior notice and
without a vote of stockholders, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent delivered in the manner required by law to the Corporation,
written consents signed by a sufficient number of holders or members to take
action are delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. [Section 228.]
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be provided by law,
by the Certificate of Incorporation or by these By-Laws, the property, affairs
and business of the Corporation shall be managed by or under the direction of
the Board of Directors and the Board of Directors may exercise all the powers
of the Corporation. [Section 141(a).]
Section 2.02. Number and Term of Office. The number of Directors
constituting the entire Board of Directors shall be seven (7), which number may
be modified from time to time by resolution of the Board of Directors, but in
no event shall the number of Directors be less than one. Each Director
(whenever elected) shall hold office until his successor has been duly elected
and qualified, or until his earlier death, resignation or removal. [Section
141(b).]
Section 2.03. Election of Directors. Except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall
cause the meeting to be held as soon thereafter as convenient. At each meeting
of the stockholders for the election of Directors, provided a quorum is
present, the Directors shall be elected by a plurality of the votes validly
cast in such election. [Sections 211(b), (c), 216.]
Section 2.04. Annual and Regular Meetings. The annual meeting of the Board
of Directors for the purpose of electing officers and for the transaction of
such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time
to time may by resolution provide for the holding of regular meetings and fix
the place (which may be within or without the State of Delaware) and the date
and hour of such meetings. Notice of regular meetings need not be given,
provided, however, that if the Board of Directors shall fix or change the time
or place of any regular meeting, notice of such action shall be mailed
promptly, or sent by telegram, radio or cable, to each Director who shall not
have been present at the meeting at which such action was taken, addressed to
him at his usual place of business, or shall be delivered to him personally.
Notice of such action need not be given to any Director who attends the first
regular meeting after such action is taken without protesting the lack of
notice to him, prior to or at the commencement of such meeting, or to any
Director who submits a signed waiver of notice, whether before or after such
meeting. [Section 141(g).]
Exhibit B-3
<PAGE>
Section 2.05. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the President or, in the event of
his absence or disability, by any Vice President, at such place (within or
without the State of Delaware), date and hour as may be specified in the
respective notices or waivers of notice of such meetings. Special meetings of
the Board of Directors may be called on 24 hours' notice, if notice is given to
each Director personally or by telephone or telegram, or on five days' notice,
if notice is mailed to each Director, addressed to him at his usual place of
business. Notice of any special meeting need not be given to any Director who
attends such meeting without protesting the lack of notice to him, prior to or
at the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting, and any business may be
transacted thereat. [Sections 141(g), 229.]
Section 2.06. Quorum; Voting. At all meetings of the Board of Directors,
the presence of a majority of the total authorized number of Directors shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the vote of a majority of the Directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors.
[Section 141(b).]
Section 2.07. Adjournment. A majority of the Directors present, whether or
not a quorum is present, may adjourn any meeting of the Board of Directors to
another time or place. No notice need be given of any adjourned meeting unless
the time and place of the adjourned meeting are not announced at the time of
adjournment, in which case notice conforming to the requirements of Section
2.05 shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all members of the Board of Directors consent thereto in writing,
and such writing or writings are filed with the minutes of proceedings of the
Board of Directors. [Section 141(f).]
Section 2.09. Regulations; Manner of Acting. To the extent consistent with
applicable law, the Certificate of Incorporation and these By-Laws, the Board
of Directors may adopt such rules and regulations for the conduct of meetings
of the Board of Directors and for the management of the property, affairs and
business of the Corporation as the Board of Directors may deem appropriate. The
Directors shall act only as a Board, and the individual Directors shall have no
power as such.
Section 2.10. Action by Telephonic Communications. Members of the Board of
Directors may participate in a meeting of the Board of Directors by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting pursuant to this provision shall constitute presence in person at
such meeting. [Section 141(i).]
Section 2.11. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
President or the Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. [Section 141(b).]
Section 2.12. Removal of Directors. Any Director may be removed at any
time, either for or without cause, upon the affirmative vote of the holders of
a majority of the outstanding shares of stock of the Corporation entitled to
vote for the election of such Director, cast at a special meeting of
stockholders called for the purpose. Any vacancy in the Board of Directors
caused by any such removal may be filled at such meeting by the stockholders
entitled to vote for the election of the Director so removed. If such
stockholders do not fill such vacancy at such meeting (or in the written
instrument effecting such removal, if such removal was effected by consent
without a meeting), such vacancy may be filled in the manner provided in
Section 2.13 of these By-Laws. [Section 141(b).]
Section 2.13. Vacancies and Newly Created Directorships. If any vacancies
shall occur in the Board of Directors, by reason of death, resignation, removal
or otherwise, or if the authorized number of Directors shall be increased, the
Directors then in office shall continue to act, and such vacancies and newly
created directorships may be filled by a majority of the Directors then in
office, although less than a quorum. A Director elected to fill a vacancy or a
newly created directorship shall hold office until his successor has been
elected and qualified or until his earlier death, resignation or removal. Any
such vacancy or newly created directorship may also be filled at any time by
vote of the stockholders. [Section 223.]
Exhibit B-4
<PAGE>
Section 2.14. Compensation. The amount, if any, which each Director shall
be entitled to receive as compensation for his services as such shall be fixed
from time to time by resolution of the Board of Directors. [Section 141(h).]
Section 2.15. Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. The Board of Directors may designate one or
more Committees, including an Executive Committee, each such Committee to
consist of such number of Directors as from time to time may be fixed by the
Board of Directors. The Board of Directors may designate one or more Directors
as alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. Thereafter,
members (and alternate members, if any) of each such Committee may be
designated at the annual meeting of the Board of Directors. Any such Committee
may be abolished or re-designated from time to time by the Board of Directors.
Each member (and each alternate member) of any such Committee (whether
designated at an annual meeting of the Board of Directors or to fill a vacancy
or otherwise) shall hold office until his successor shall have been designated
or until he shall cease to be a Director, or until his earlier death,
resignation or removal. [Section 141(c).]
Section 3.02. Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee, except as otherwise provided in
this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Corporation. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors.
Neither the Executive Committee nor any such other Committee shall have the
power or authority:
(a) to approve or adopt, or to recommend to the stockholders, any
action or matter expressly required by the General Corporation Law of the
State of Delaware to be submitted to the stockholders for approval; or,
(b) to adopt, amend or repeal any by-law of the Corporation.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.03. Proceedings. Each such Committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each such Committee shall keep minutes of its proceedings and shall
report such proceedings to the Board of Directors at the meeting of the Board
of Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a
majority of the total authorized membership of such Committee shall constitute
a quorum for the transaction of business. The act of the majority of the
members present at any meeting at which a quorum is present shall be the act of
such Committee. Any action required or permitted to be taken at any meeting of
any such Committee may be taken without a meeting, if all members of such
Committee shall consent to such action in writing and such writing or
Exhibit B-5
<PAGE>
writings are filed with the minutes of the proceedings of the Committee. The
members of any such Committee shall act only as a Committee, and the individual
members of such Committee shall have no power as such. [Section 141(c).]
Section 3.05. Action by Telephonic Communications. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. [Section 141(i).]
Section 3.06. Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. [Section 141(c).]
Section 3.07. Resignations. Any member (and any alternate member) of any
Committee may resign at any time by delivering a written notice of resignation,
signed by such member, to the Chairman or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 3.08. Removal. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the whole Board of Directors.
Section 3.09. Vacancies. If any vacancy shall occur in any Committee, by
reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act, and any
such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, one or more Vice Presidents, a
Secretary and a Treasurer. The Board of Directors also may elect one or more
Assistant Secretaries and Assistant Treasurers in such numbers as the Board of
Directors may determine, and such other officers as the Board of Directors
deems desirable. Any number of offices may be held by the same person. No
officer need be a Director of the Corporation. [Section 142(a), (b).]
Section 4.02. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual
meeting, officers may be elected at any regular or special meeting of the Board
of Directors. Each officer shall hold office until his successor has been
elected and qualified, or until his earlier death, resignation or removal.
[Section 142(b).]
Section 4.03. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. [Section
142(b), (e).]
Section 4.05. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these By-Laws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
Exhibit B-6
<PAGE>
Section 4.06. The President. The President shall preside at all meetings
of the stockholders and directors at which he is present, shall be the chief
executive officer and the chief operating officer of the Corporation, shall
have general control and supervision of the policies and operations of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall manage and administer the
Corporation's business and affairs and shall also perform all duties and
exercise all powers usually pertaining to the office of a chief executive
officer and a chief operating officer of a corporation. He shall have the
authority to sign, in the name and on behalf of the Corporation, checks,
orders, contracts, leases, notes, drafts and other documents and instruments in
connection with the business of the Corporation, and together with the
Secretary or an Assistant Secretary, conveyances of real estate and other
documents and instruments to which the seal of the Corporation is affixed. He
shall have the authority to cause the employment or appointment of such
employees and agents of the Corporation as the conduct of the business of the
Corporation may require, to fix their compensation, and to remove or suspend
any employee or agent elected or appointed by the President or the Board of
Directors. The President shall perform such other duties and have such other
powers as the Board of Directors or the Chairman may from time to time
prescribe.
Section 4.07. The Vice Presidents. Each Vice President shall perform such
duties and exercise such powers as may be assigned to him from time to time by
the President. In the absence of the President, the duties of the President
shall be performed and his powers may be exercised by such Vice President as
shall be designated by the President, or failing such designation, such duties
shall be performed and such powers may be exercised by each Vice President in
the order of their earliest election to that office; subject in any case to
review and superseding action by the President.
Section 4.08. The Secretary. The Secretary shall have the following powers
and duties:
(a) He shall keep or cause to be kept a record of all the proceedings
of the meetings of the stockholders and of the Board of Directors in books
provided for that purpose.
(b) He shall cause all notices to be duly given in accordance with the
provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a resolution
of the Board of Directors, he shall furnish a copy of such resolution to
the members of such Committee.
(d) He shall be the custodian of the records and of the seal of the
Corporation and cause such seal (or a facsimile thereof) to be affixed to
all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments the execution of which on behalf of
the Corporation under its seal shall have been duly authorized in
accordance with these By-Laws, and when so affixed he may attest the same.
(e) He shall properly maintain and file all books, reports, statements,
certificates and all other documents and records required by law, the
Certificate of Incorporation or these By-Laws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in such
manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names (alphabetically
arranged) and the addresses of the holders of record of such shares, the
number of shares held by each holder and the date as of which each became
such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer or
Assistant Secretary shall have signed) certificates representing shares of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(h) He shall perform, in general, all duties incident to the office of
secretary and such other duties as may be specified in these By-Laws or as
may be assigned to him from time to time by the Board of Directors, or the
President.
Section 4.09. The Treasurer. The Treasurer shall be the chief financial
officer of the Corporation and shall have the following powers and duties:
Exhibit B-7
<PAGE>
(a) He shall have charge and supervision over and be responsible for
the moneys, securities, receipts and disbursements of the Corporation, and
shall keep or cause to be kept full and accurate records of all receipts of
the Corporation.
(b) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accordance with Section 8.05 of these
By-Laws.
(c) He shall cause the moneys of the Corporation to be disbursed by
checks or drafts (signed as provided in Section 8.06 of these By-Laws) upon
the authorized depositaries of the Corporation and cause to be taken and
preserved proper vouchers for all moneys disbursed.
(d) He shall render to the Board of Directors or the President,
whenever requested, a statement of the financial condition of the
Corporation and of all his transactions as Treasurer, and render a full
financial report at the annual meeting of the stockholders, if called upon
to do so.
(e) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the Secretary or an
Assistant Secretary shall have signed) certificates representing stock of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(g) He shall perform, in general, all duties incident to the office of
treasurer and such other duties as may be specified in these By-Laws or as
may be assigned to him from time to time by the Board of Directors, or the
President.
Section 4.10. Additional Officers. The Board of Directors may appoint such
other officers and agents as it may deem appropriate, and such other officers
and agents shall hold their offices for such terms and shall exercise such
powers and perform such duties as may be determined from time to time by the
Board of Directors. The Board of Directors from time to time may delegate to
any officer or agent the power to appoint subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties. Any
such officer or agent may remove any such subordinate officer or agent
appointed by him, for or without cause. [Section 142(a), (b).]
Section 4.11. Security. The Board of Directors may require any officer,
agent or employee of the Corporation to provide security for the faithful
performance of his duties, in such amount and of such character as may be
determined from time to time by the Board of Directors. [Section 142(c).]
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors may
provide by resolution or resolutions that some or all of any or all classes or
series of the stock of the Corporation shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until each
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock in the
Corporation represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate signed by, or in
the name of the Corporation, by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, representing the number of shares registered in certificate form.
Such certificate shall be in such form as the Board of Directors may determine,
to the extent consistent with applicable law, the Certificate of Incorporation
and these By-Laws. [Section 158.]
Section 5.02. Signatures; Facsimile. All of such signatures on the
certificate may be a facsimile, engraved or printed, to the extent permitted by
law. In case any officer, transfer agent or registrar who
Exhibit B-8
<PAGE>
has signed, or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
[Section 158.]
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. [Section 167.]
Section 5.04. Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by appropriate evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Within a reasonable time after the transfer of uncertificated stock, the
Corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law
of the State of Delaware. Subject to the provisions of the Certificate of
Incorporation and these By-Laws, the Board of Directors may prescribe such
additional rules and regulations as it may deem appropriate relating to the
issue, transfer and registration of shares of the Corporation. [Section 151.]
Section 5.05. Record Date. In order to determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty nor less than ten days before the date of such meeting. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not
Exhibit B-9
<PAGE>
more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto. [Section 213.]
Section 5.06. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so. [Section 159.]
Section 5.07. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with
such action, suit or proceeding and any appeal therefrom, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful; except
that in the case of an action or suit by or in the right of the Corporation to
procure a judgment in its favor (1) such indemnification shall be limited to
expenses (including attorneys' fees) actually and reasonably incurred by such
person in the defense or settlement of such action or suit, and (2) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02. Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 hereof or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Exhibit B-10
<PAGE>
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01
hereof (unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.01 hereof (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 hereof. Any such
determination shall be made (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than
a quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
Section 6.04. Advance Payment of Expenses. Expenses (including attorneys'
fees) incurred by a director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation as authorized in this
Article. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate. The Board of Directors may authorize the
Corporation's counsel to represent such director, officer, employee or agent in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Sections 6.01
and 6.02, or advance of costs, charges and expenses to a director or officer
under Section 6.04 of this Article, shall be made promptly, and in any event
within 30 days, upon the written request of the director or officer. If a
determination by the Corporation that the director or officer is entitled to
indemnification pursuant to this Article is required, and the Corporation fails
to respond within sixty days to a written request for indemnity, the
Corporation shall be deemed to have approved such request. If the Corporation
denies a written request for indemnity or advancement of expenses, in whole or
in part, or if payment in full pursuant to such request is not made within 30
days, the right to indemnification or advances as granted by this Article shall
be enforceable by the director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim for
the advance of costs, charges and expenses under Section 6.04 of this Article
where the required undertaking, if any, has been received by the Corporation)
that the claimant has not met the standard of conduct set forth in Section 6.01
of this Article, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 6.01 of this Article, nor the fact
that there has been an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously
Exhibit B-11
<PAGE>
existing or any action, suit or proceeding previously or thereafter brought or
threatened based in whole or in part upon any such state of facts. Such a
"contract right" may not be modified retroactively without the consent of such
director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01. Registered Office. The registered office of the Corporation
in the State of Delaware shall be located at Corporation Trust Center, 1209
Orange Street in the City of Wilmington, County of New Castle.
Section 7.02. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends. Subject to any applicable provisions of law and
the Certificate of Incorporation, dividends upon the shares of the Corporation
may be declared by the Board of Directors at any regular or special meeting of
the Board of Directors and any such dividend may be paid in cash, property, or
shares of the Corporation's Capital Stock.
A member of the Board of Directors, or a member of any Committee
designated by the Board of Directors shall be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or Committees of the Board of Directors, or by any other
person as to matters the Director reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid. [Sections 172, 173.]
Exhibit B-12
<PAGE>
Section 8.02. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation,
and the Board of Directors may similarly modify or abolish any such reserve.
[Section 171.]
Section 8.03. Execution of Instruments. The President, any Vice President,
the Secretary or the Treasurer may enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation. The Board
of Directors or the President may authorize any other officer or agent to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. Any such authorization may be general or limited to
specific contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or the President. Such
authorization may be general or confined to specific instances. Loans so
authorized may be effected at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual. All
bonds, debentures, notes and other obligations or evidences of indebtedness of
the Corporation issued for such loans shall be made, executed and delivered as
the Board of Directors or the President shall authorize. When so authorized by
the Board of Directors or the President, any part of or all the properties,
including contract rights, assets, business or good will of the Corporation,
whether then owned or thereafter acquired, may be mortgaged, pledged,
hypothecated or conveyed or assigned in trust as security for the payment of
such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be deposited from
time to time in such banks, trust companies or other depositaries as may be
determined by the Board of Directors or the President, or by such officers or
agents as may be authorized by the Board of Directors or the President to make
such determination.
Section 8.06. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such agent or agents
of the Corporation, and in such manner, as the Board of Directors or the
President from time to time may determine.
Section 8.07. Sale, Transfer, etc. of Securities. To the extent authorized
by the Board of Directors or by the President, any Vice President, the
Secretary or the Treasurer or any other officers designated by the Board of
Directors or the President may sell, transfer, endorse, and assign any shares
of stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend any
meeting of stockholders of any corporation in which the Corporation may hold
stock, and to act, vote (or execute proxies to vote) and exercise in person or
by proxy all other rights, powers and privileges incident to the ownership of
such stock. Such officers acting on behalf of the Corporation shall have full
power and authority to execute any instrument expressing consent to or dissent
from any action of any such corporation without a meeting. The Board of
Directors may by resolution from time to time confer such power and authority
upon any other person or persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on the last day of December.
Section 8.10. Seal. The seal of the Corporation shall be circular in form
and shall contain the name of the Corporation, the year of its incorporation
and the words "Corporate Seal" and
Exhibit B-13
<PAGE>
"Delaware". The form of such seal shall be subject to alteration by the Board
of Directors. The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or reproduced, or may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01. Amendment. These By-Laws may be amended, altered or repealed
(a) by resolution adopted by a majority of the Board of Directors at any
special or regular meeting of the Board if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained
in the notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders if, in the case
of such special meeting only, notice of such amendment, alteration or
repeal is con tained in the notice or waiver of notice of such meeting.
[Section 109(a).]
ARTICLE X
CONSTRUCTION
Section 10.01. Construction. In the event of any conflict between the
provisions of these By-Laws as in effect from time to time and the provisions
of the certi ficate of incorporation of the Corporation as in effect from time
to time, the provisions of such certificate of incorporation shall be
controlling.
Exhibit B-14
<PAGE>
ANNEX B
January 5, 2000
Special Committee to the Board of Directors
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12866
Gentlemen:
We understand that NCP-SBG, L.P. ("North Castle") and Saratoga Beverage
Group, Inc ("TOGA" or the "Company") propose to enter into a Stock Purchase
Agreement and Agreement and Plan of Merger (the "Merger Agreement"), whereby
NCP-SBG, L.P., a wholly-owned subsidiary of North Castle Partners, L.L.C., will
merge with and into the Company (the "Transaction") whereby each outstanding
share of common stock (the "Common Stock"), par value of $0.01 per share, of
the Company (other than shares of Common Stock owned by certain members of
management and other investors (the "Rollover Shares"), which will convert into
shares of the surviving corporation in such merger) will be converted into the
right to receive $6.00 (the "Merger Consideration"). We did not, at your
request, participate in the negotiation of the Merger Consideration.
You have requested our opinion as to the fairness to the shareholders
(other than the holders of Rollover Shares) of the Company, from a financial
point of view, of the Merger Consideration to be paid to such holders in the
Transaction (the "Opinion"). It is understood that the Opinion shall be used by
you solely in connection with your consideration of the fairness of the Merger
Consideration to be paid to the shareholders (other than the holders of
Rollover Shares) of the Company and for no other purpose, and that you will not
furnish the Opinion or any other material prepared by Schroder & Co. Inc.
("Schroders") to any other person or persons or use or refer to the Opinion for
any other purpose without Schroders' prior written approval. Schroders
understands and agrees that its Opinion may be referred to and reproduced in
full in any proxy statement mailed to shareholders of the Company, provided
that the disclosure of the Opinion shall be subject to Schroders' review and
consent, which consent shall not be unreasonably withheld.
Schroders, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuation for estate,
corporate and other purposes.
Our opinion does not address the Company's underlying business decision to
effect the Merger. At your direction, we have not been asked to, nor do we,
offer any opinion as to the material terms of the Merger Agreement or the form
of the Transaction. In rendering this opinion, we have assumed, with your
consent, that the final executed form of the Merger Agreement does not differ
in any material respect from the draft we have examined, and that the
Transaction will be consummated on the terms set forth in the Merger Agreement.
We have further assumed that the Merger will comply with applicable United
States, foreign, federal and state laws.
In connection with our opinion set forth herein, we have, among other
things:
(i) reviewed the Company's Annual Reports on Form 10-K filed with the
Commission for the fiscal year ended December 31, 1998, including
the financial statements for the twelve month period ending December
31, 1997; and its Quarterly Report on Form 10-Q for the nine month
period and quarter ended September 30, 1999, including the financial
statements for the nine month period and quarter ended September 30,
1998;
B-1
<PAGE>
(ii) reviewed The Fresh Juice Company's audited financial statements for
the twelve month period ended November 30, 1998; and its Quarterly
Report on Form 10-Q for the nine month period and quarter ended
August 31, 1998, including the financial statements for the
nine-month period and quarter ended August 31, 1997;
(iii) reviewed the unaudited historical financial information for The
Fresh Juice Company for the one-month period ending January 31,
1999, provided by management;
(iv) reviewed the unaudited balance sheet provided by management, dated
November 30, 1999;
(v) reviewed the combined companies' (The Fresh Juice Company and
Saratoga Beverage Group) financial results for the last twelve
months, derived by management using the following financial
information:
(a) TOGA's 10-K for its fiscal year ended December 31, 1998;
(b) TOGA's 10-Q for the nine-month period ended September 30, 1999;
(c) Fresh Juice's audited financial statements for its twelve month
period ended November 30, 1998;
(d) Fresh Juice's 10-Q for the nine month period ended August 31,
1998;
(e) Management estimates of financial results for Fresh Juice for
the one month period ended January 31, 1999;
(vi) reviewed the combined companies' estimates for the twelve months
ending December 31, 1999, derived by management from management
estimates of Fresh Juice's financial results for the one month
period ended January 31, 1999, the financial statements contained in
the Company's Form 10-Q for the nine month period ending September
30, 1999, and management estimates for the three month period ended
December 31, 1999;
(vii) reviewed certain projected financial information prepared by
management of the Company;
(viii) reviewed certain publicly available information concerning the
Company;
(ix) conducted discussions with the senior management of the Company
concerning the Transaction, the Company's historical financial
results and projected financial information as presented and
described in (i), (iii), (iv), (v), (vi) and (vii) above;
(x) performed various financial analyses, as we deemed appropriate, of
the Company using generally accepted analytical methodologies,
including: (i) the application to the financial results of TOGA of
the public trading multiples of companies which we deemed
comparable; (ii) the application to the financial results of TOGA of
the multiples reflected in recent mergers and acquisitions for
businesses which we deemed comparable; (iii) a discounted cash flow
analysis utilizing the projections referred to in clause (vi) above,
and (iv) the application to the share price of TOGA of the average
equity premiums paid in a large sample of publicly reported
transactions;
(xi) reviewed the historical trading prices and volumes of TOGA's Common
Stock on the NASDAQ National Market System from January 1, 1998 to
December 17, 1999;
(xii) reviewed the draft Merger Agreement as distributed on January 5,
1999, including the form of agreements attached thereto as exhibits;
(xiii) performed such other financial studies, analyses, inquiries and
investigations as we deemed appropriate.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all information supplied or
otherwise made available to us by the Company (including, the estimates of
financial results described in clause (iii), (iv), (v) and (vi) above) or
obtained by us from other sources, and upon the assurance of the Company's
management that
B-2
<PAGE>
they are not aware of any information or facts that would make the information
provided to us incomplete or misleading. We have not attempted to independently
verify any of such information. We have not undertaken an independent appraisal
of the assets or liabilities (contingent or otherwise) of the Company, nor have
we been furnished with any such appraisals. With respect to the projected
financial information (as described in clause (v) and (vi) above), we have been
advised by the Company, and we have assumed, without independent verification
or investigation, that they have been reasonably prepared and reflect the best
estimates of management of the Company. In connection with our engagement, we
were not requested to, and did not, actively solicit third party indications of
interest in the possible acquisition of all or a part of TOGA.
Our opinion is necessarily based upon financial, economic, market and
other conditions as they exist and can be evaluated by us on the date hereof.
We disclaim any undertaking or obligation to advise any person of any change in
any fact or matter affecting our opinion which may come or be brought to our
attention after the date of the opinion unless specifically requested to do so.
Our opinion is provided to the Special Committee of the Board of Directors
of the Company only and does not constitute a recommendation as to any action
any shareholder of the Company should take in connection with the Merger
Agreement or any aspect thereof or alternative thereto. Without limitation to
the foregoing, this letter does not constitute a recommendation to any
shareholder with respect to whether to vote in favor of the Transaction, and
should not be relied upon by any shareholder as such. In rendering our opinion,
we have not been engaged as an agent or fiduciary of the Company's shareholders
or of any other third party. Our opinion relates solely to the fairness, from a
financial point of view, to the shareholders (other than the holders of
Rollover Shares) of the Company of the Merger Consideration to be paid to such
holders pursuant to the Merger Agreement.
We have acted as financial adviser to the Special Committee to the Board
of Directors of TOGA in connection with the Transaction and will receive a fee
for such services, a significant portion of which is contingent upon the
consummation of the Transaction. In addition, the Company has agreed to
indemnify us for certain liabilities that may arise out of the rendering of
this Opinion. We bring to your attention that Schroders has previously provided
a fairness opinion to the Board of Directors of the Company in connection with
the Company's acquisition of The Fresh Juice Company. In the ordinary course of
our business, we may trade in the equity securities of the Company for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Based upon and subject to all the foregoing, we are of the opinion, that
as of the date hereof, the Merger Consideration to be paid to the shareholders
(other than the holders of Rollover Shares) of the Company pursuant to the
Merger Agreement is fair, from a financial point of view, to such holders.
Very truly yours,
SCHRODER & CO. INC.
By: /s/ SCHRODER & CO. INC.
------------------------------------
B-3
<PAGE>
ANNEX C
RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL
In view of the complexity of these provisions of the DGCL, any stockholder
who is considering exercising appraisal rights should consult his or her legal
advisor.
Statutory Appraisal Procedures. The following is a brief summary of the
statutory procedures to be followed by a holder of shares at the Effective Time
who does not wish to accept the per share cash consideration pursuant to the
Merger (a "Remaining Stockholder") in order to dissent from the Merger and
perfect appraisal rights under the DGCL. THIS SUMMARY IS NOT INTENDED TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECTION 262 OF THE
DGCL, THE TEXT OF WHICH IS SET FORTH IN THIS ANNEX C HERETO. ANY REMAINING
STOCKHOLDER CONSIDERING DEMANDING APPRAISAL IS ADVISED TO CONSULT LEGAL
COUNSEL. APPRAISAL RIGHTS WILL NOT BE AVAILABLE UNLESS AND UNTIL THE MERGER (OR
A SIMILAR BUSINESS COMBINATION) IS CONSUMMATED.
Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of shares must be delivered to the Secretary of the Company before
the taking of the vote on the approval and adoption of the Merger Agreement at
the Special Meeting. This written demand for appraisal of shares must be in
addition to and separate from any proxy or vote abstaining from or against the
approval and adoption of the Merger Agreement, and neither voting against,
abstaining from voting, nor failing to vote on the Merger Agreement will
constitute a demand for appraisal within the meaning of Section 262 of the
DGCL. Any stockholder of record seeking appraisal rights must hold the shares
for which appraisal is sought on the date of the making of the demand,
continuously hold such shares through the Effective Time and otherwise comply
with the provisions of Section 262 of the DGCL.
A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on the stock
certificates. If shares are owned of record in a fiduciary capacity, such as by
a trustee, guardian or custodian, such demand must be executed by the
fiduciary. If shares are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by all joint owners.
An authorized agent, including an agent for two or more joint owners, may
execute the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner and expressly disclose the fact that in
exercising the demand, he is acting as agent for the record owner.
A record owner, such as a broker, who holds shares as a nominee for
others, may exercise appraisal rights with respect to the shares held for all
or less than all beneficial owners of shares as to which the holder is the
record owner. In such case the written demand must set forth the number of
shares covered by such demand. Where the number of shares is not expressly
stated, the demand will be presumed to cover all shares outstanding in the name
of such record owner. Beneficial owners who are not record owners and who
intend to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights before the date of the Special Meeting.
Stockholders who elect to exercise appraisal rights must mail or deliver
their written demands to: Secretary, Saratoga Beverage Group, Inc., 11 Geyser
Road, Saratoga Springs, New York 12866. The written demand for appraisal should
specify the stockholder's name and mailing address, the number of Shares
covered by the demand and that the stockholder is thereby demanding appraisal
of such shares. The Company must, within ten days after the Effective Time,
provide notice of the Effective Time to all stockholders who have complied with
Section 262(d) of the DGCL and have not voted for approval and adoption of the
Merger Agreement.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for the approval and adoption of the Merger Agreement or consent
thereto in writing. Voting in favor of the approval and adoption of the Merger
Agreement, or delivering a proxy in connection with the Special
C-1
<PAGE>
Meeting (unless the proxy votes against, or expressly abstains from the vote
on, the approval and adoption of the Merger Agreement), will constitute a
waiver of the stockholder's right of appraisal and will nullify any written
demand for appraisal submitted by the stockholder.
Within 120 days after the Effective Time, either the Company or any
stockholder who has complied with the required conditions of Section 262 and
who is otherwise entitled to appraisal rights may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
shares of the dissenting stockholders. If a petition for an appraisal is timely
filed, after a hearing on such petition, the Delaware Court of Chancery will
determine which stockholders are entitled to appraisal rights and thereafter
will appraise the shares owned by such stockholders, determining the fair value
of such shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value.
The cost of the appraisal proceeding may be determined by the Delaware
Court of Chancery and taxed upon the parties as the Delaware Court of Chancery
deems equitable in the circumstances. Upon application of a dissenting
stockholder, the Delaware Court of Chancery may order that all or a portion of
the expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all shares entitled to appraisal. In the absence of such determination or
assessment, each party bears its own expenses.
Any stockholder who has duly demanded appraisal in compliance with Section
262 of the DGCL will not, after the Effective Time, be entitled to vote for any
purpose the shares subject to such demand or to receive payment of dividends or
other distributions on such shares, except for dividends or other distributions
payable to stockholders of record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any former holder of
shares shall have the right to withdraw his or her demand for appraisal and to
accept the per Share cash consideration pursuant to the Merger. After this
period, such holder may withdraw his or her demand for appraisal only with the
consent of the Surviving Corporation. If no petition for appraisal is filed
with the Delaware Court of Chancery within 120 days after the Effective Time,
stockholders' rights to appraisal shall cease and all stockholders shall be
entitled to receive the per share cash consideration pursuant to the Merger.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMAT10N SET
FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER (OR ANY SIMILAR BUSINESS COMBINATION)
IS CONSUMMATED. THIS PROXY STATEMENT CONSTITUTES NOTICE TO HOLDERS OF COMPANY
COMMON STOCK THAT APPRAISAL RIGHTS ARE AVAILABLE TO THEM. STOCKHOLDERS WHO SELL
SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE APPRAISAL RIGHTS WITH
RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID IN THE OFFER THEREFOR.
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock
C-2
<PAGE>
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 25 1 (g) of this title), Sections 252, 254, 257, 258, 263 or 264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
C-3
<PAGE>
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
C-4
<PAGE>
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by I or more
publications at least I week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
C-5
<PAGE>
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-6
<PAGE>
ANNEX D
VOTING AGREEMENT SCHEDULE
The following persons executed a Voting Agreement with respect to the
following number of shares:
<TABLE>
<CAPTION>
TOTAL CASHED ROLLOVER INCREASE
CONTINUING STOCKHOLDER SHARES OUT STOCK STOCK PERCENTAGE
- --------------------------------------- --------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Robin Prever .......................... 318,285 251,499 66,786 12.1429%
Anthony Malatino ...................... 718,127 557,056 161,071 29.2856%
Warren Lichtenstein ................... 46,254 -- 46,254 0%
Steel Partners II, L.P. ............... 506,258 450,369 55,889 18.5715%
Steve Bogen ........................... 386,793 304,293 82,500 15.0000%
Pershing Securities Limited ........... 200,000 141,071 58,929 10.7144%
Jurg Walker ........................... 224,500 145,929 78,571 14.2856%
--------- --------- ------- --------
TOTAL ................................ 2,400,217 1,850,217 550,000 100.00 %
======= ========
</TABLE>
VOTING AGREEMENT
VOTING AGREEMENT, dated as of January 5, 2000 (this "Agreement"), among
NCP-SBG, L.P., a Delaware limited partnership ("Purchaser"), and
("Stockholder"). Capitalized terms used herein without definition shall have
the meanings set forth in the Merger Agreement (as defined herein).
WHEREAS, as of the date hereof, Stockholder owns or controls shares
of Class A Common Stock, par value $.01 per share (the "Class A Company Common
Stock"), of Saratoga Beverage Group, Inc., a Delaware corporation (the
"Company") , and shares of Class B Common Stock, par value $0.01 per share
of the Company (the "Class B Common Stock") (all such shares of Class A Common
Stock and Class B Common Stock and any shares of Class A Common Stock or Class
B Common Stock of which ownership (either beneficially or of record) or control
is hereafter acquired by the Stockholder prior to the termination of this
Agreement being referred to herein as the "Shares");
WHEREAS, Purchaser, NCP-SBG Recapitalization Corp., a Delaware corporation
("MergerCo"), and the Company are entering into a Stock Purchase Agreement and
Agreement and Plan of Merger, dated as of even date herewith (as the same may
be amended from time to time, the "Merger Agreement"), which provides, upon the
terms and subject to the conditions thereof, for the merger of MergerCo with
and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Purchaser and MergerCo to
enter into the Merger Agreement, Purchaser and MergerCo have required that the
Stockholder agree, and, in order to induce Purchaser and MergerCo to enter into
the Merger Agreement, the Stockholder has agreed, subject to the terms and
conditions hereof, to vote all Shares he or it then owns or controls at the
time of the Special Meeting in favor of the adoption of the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
TRANSFER AND VOTING OF SHARES
Section 1.1. Transfer of Shares. (a) During the term of this Agreement,
the Stockholder shall not (i) take any action that would make any
representation or warranty of Stockholder contained herein untrue or incorrect
or have the effect of preventing or disabling Stockholder from performing its
obligations under this Agreement, or (ii) except pursuant to the terms of the
Merger Agreement
D-1
<PAGE>
and this Agreement (A) sell, tender, pledge or otherwise dispose of any of the
Shares, (B) deposit the Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or grant any proxy or
power of attorney with respect thereto or (C) enter into any instrument or
arrangement with respect to the direct or indirect acquisition or sale,
assignment, transfer or other disposition of any Shares; provided, however,
that the Stockholder shall have the right to transfer Shares by gift to any
Person directly or indirectly controlled by the Stockholder or through the laws
of descent, provided, further that such transferee agrees in writing to become
a party to this Agreement.
(b) Stop Transfer. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement.
Section 1.2. Voting of Shares; Further Assurances. (a) The Stockholder,
with respect to all Shares, does hereby irrevocably (until the termination
hereof in accordance with Section 5.12) constitute and appoint NCP-SBG with
full power of substitution, as his or its true and lawful attorney and proxy,
for and in his or its name, place and stead, to vote each of such Shares as his
or its proxy, at any annual, special or adjourned meeting of the stockholders
of the Company (including the right to sign his or its name, as stockholder, to
any consent, certificate or other document relating to the Company that may be
permitted or required by applicable Law) (i) in favor of the adoption of the
Merger Agreement, (ii) against any transaction pursuant to an Acquisition
Proposal (as defined herein) or any other action or agreement that would result
in a breach of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or which could result in
any of the conditions to the Company's obligations under the Merger Agreement
not being fulfilled or could impede, interfere with, delay or materially
adversely affect the Merger or the transactions contemplated hereby or by the
Merger Agreement and (iii) in favor of any other matter necessary to the
consummation of the transactions contemplated by the Merger Agreement. THE
STOCKHOLDER ACKNOWLEDGES THAT PURCHASER AND MERGERCO ARE ENTERING INTO THE
MERGER AGREEMENT IN RELIANCE UPON THIS AGREEMENT AND INTENDS THIS PROXY TO BE
IRREVOCABLE (UNTIL THE TERMINATION HEREOF IN ACCORDANCE WITH SECTION 5.12) AND
COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND EXECUTE SUCH
OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY
AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY THE STOCKHOLDER WITH RESPECT
TO THE SHARES. NOTWITHSTANDING THE FOREGOING, THIS PROXY SHALL BE AUTOMATICALLY
REVOKED WITHOUT ANY FURTHER ACTION ON THE PART OF ANY STOCKHOLDER OR PURCHASER
UPON THE TERMINATION HEREOF IN ACCORDANCE WITH SECTION 5.12. The Stockholder
further agrees to cause all Shares controlled or owned by him beneficially and
of record to be voted in accordance with the foregoing. The Stockholder hereby
acknowledges both receipt of a copy of the Merger Agreement and that such
Stockholder understands the contents thereof.
(b) The Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
Purchaser the power to carry out the provisions of this Agreement; provided,
however, the Stockholder shall not be required to pay any monies or incur any
liability in connection with the foregoing.
(c) The Stockholder shall take all such other actions as such other
actions as shall be reasonably requested by Purchaser in order to assist in,
and shall cooperate with Purchaser in connection with, the consummation of the
transactions contemplated by the Merger Agreement; provided, however, the
Stockholder shall not be required to pay any monies or incur any liability in
connection with the foregoing.
Section 1.3. Waiver of Appraisal Rights and Dissenter's Rights. The
Stockholder hereby waives any rights of appraisal or rights to dissent that
Stockholder may have under applicable Law in connection with the Merger.
D-2
<PAGE>
Section 1.4. Certain Events. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Shares and shall be binding
upon any Person to which legal or beneficial ownership of such Shares shall
pass, whether by operation of Law or otherwise, including, without limitation,
the Stockholder's heirs, guardians, administrators or successors or as a result
of any divorce.
ARTICLE II
NON-SOLICITATION
Section 2.1. Acquisition Proposals. The Stockholder shall not, directly or
indirectly, through any representative, agent or otherwise, solicit, initiate
or encourage the submission of any proposal or offer from any Person relating
to any acquisition or purchase of all or substantially all of the assets of, or
any equity interest in, the Company or any of its Subsidiaries or any
recapitalization, business combination or similar transaction with the Company
or any of its Subsidiaries (any communication with respect to the foregoing
being an "Acquisition Proposal") or enter into any agreement with respect to,
or sell, transfer or otherwise dispose of any shares of Company Common Stock
pursuant to, any Acquisition Proposal. The Stockholder will immediately cease
all existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. From and after
the execution of this Agreement, the Stockholder shall as promptly as
practicable advise Purchaser in writing of the receipt, directly or indirectly,
of any inquiries, discussions, negotiations or proposals relating to an
Acquisition Proposal that the Stockholder receives (including the material
terms thereof and the identity of the other party or parties involved) and
furnish to Purchaser within two Business Days of such receipt an accurate
description of all material terms (including any changes or adjustments to such
terms as a result of negotiations or otherwise) of any such written proposal in
addition to any information provided to any third party relating thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Purchaser as follows:
Section 3.1. Authorization. The Stockholder has the legal capacity, power
and authority to enter into, and perform all of his or its obligations under,
this Agreement. This Agreement has been duly executed and delivered by the
Stockholder and constitutes the legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms.
Section 3.2. No Conflict; Consents. (a) Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will result in (with or without notice or lapse of time or both) (i)
any breach, violation or default under any agreement or instrument to which the
Stockholder is a party or by which the Stockholder or his or its properties or
assets are bound, (ii) the violation of any Law applicable to or affecting the
Stockholder of any of his or its properties or assets, or (iii) the creation of
any Lien on the Stockholder or his or its properties or assets, except the
encumbrances and proxies on the shares created hereby. There is no beneficiary
or holder of a voting trust certificate or other interest of any trust of which
the Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by the Stockholder of the
transactions contemplated by this Agreement. If such Stockholder is married and
such Stockholder's Shares constitute community property or otherwise require
spousal or other approval for this Agreement to be legal, valid and binding,
this Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, such Stockholder's spouse,
enforceable against such person in accordance with its terms.
(b) No Governmental Approval of any Governmental Authority is necessary
for the execution, delivery or performance by it of this Agreement or the
consummation of the transactions contemplated hereby, except for applicable
requirements, if any, of the Exchange Act and the HSR Act.
D-3
<PAGE>
Section 3.3. Title to Shares. Schedule A sets forth the number and class
of Shares with respect to which the Stockholder is either (i) the record holder
and beneficial owner; (ii) the general partner of a limited partnership that is
the record holder, and whose beneficiaries are the beneficial owners; or (iii)
the beneficial owner but not the record holder. The Stockholder has (i) sole
power of disposition; (ii) sole voting power and (iii) sole power to demand
appraisal rights, in each case with respect to all of the Shares and with no
restrictions on such rights, subject to applicable federal securities laws and
the terms of this Agreement. The Shares and the certificates representing the
Shares are now and at all times during the term hereof will be held by the
Stockholder, or by a nominee or custodian for the benefit of such Stockholder,
free and clear of all Liens, proxies, voting trusts or agreements,
understandings, arrangements or any other encumbrances whatsoever, except for
any such encumbrances or proxies arising hereunder and except for the
Stockholder Agreement, dated as of October 13, 1998, by and among the Company,
, and and the Stockholders' Agreement, as of October 22, 1998 between
and .
Section 3.4. No Brokers. No broker, investment banker, financial adviser
or other Person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
Section 3.5. Stockholders Agreement. The Stockholder hereby covenants and
agrees that, as of the Effective Time, he or it will enter into a Stockholders
Agreement substantially in the form set forth in Exhibit A hereto.
Section 3.6. Merger Agreement Consideration. The Stockholder hereby
acknowledges and agrees that (i) the consideration to be received by such
Stockholder pursuant to the Merger Agreement is different in form and kind than
the consideration to be received by certain other stockholders of the Company,
(ii) subject to the terms and conditions of the Merger Agreement, each Cashed
Out Share (as defined in the Merger Agreement) held by it will be converted
pursuant to the Merger Agreement into the right to receive, without interest,
cash in the amount of the Per Share Merger Consideration (as defined in the
Merger Agreement) and each Rollover Share (as defined in the Merger Agreement)
held by it will be converted pursuant to the Merger Agreement into the right to
receive a number of shares of Surviving Corporation Common Stock (as defined in
the Merger Agreement) equal to the quotient of (x) the Per Share Merger
Consideration divided by (y) the Per Share Amount (as defined in the Merger
Agreement), and (iii) such consideration is equal in value to the consideration
to be received by such other stockholders. The Stockholder hereby waives any
and all claims against the Company and the other parties to the Merger
Agreement with respect to the adequacy of the consideration received by any
Stockholder thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser hereby represent and warrant to the Stockholder as follows:
Section 4.1. Due Organization; Authorization. Purchaser is duly organized
and validly existing under the laws of the State of Delaware. Purchaser has all
necessary limited partnership power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by Purchaser have been duly authorized by all necessary
limited partnership action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser and constitutes the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
Section 4.2. No Conflict; Consents. (a) Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will result in (with or without notice or lapse of time or both) (i)
any breach, violation or default under (x) any provision of the Organizational
Documents of Purchaser, (y) any Law applicable to or affecting Purchaser or any
of its
D-4
<PAGE>
properties or assets, or (z) any agreement or instrument to which Purchaser is
a party or by which Purchaser or any of its properties or assets are bound, or
(ii) the creation of any Lien on Purchaser or its properties or assets.
(b) No Governmental Approval of any Governmental Authority is necessary
for the execution, delivery or performance by it of this Agreement or the
consummation of the transactions contemplated hereby, except for applicable
requirements, if any, of the Exchange Act and the HSR Act.
Section 4.3. No Brokers. No broker, investment banker, financial adviser
or other Person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission from the Stockholder in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf
of NCP-SBG or its Affiliates.
ARTICLE V
GENERAL PROVISIONS
Section 5.1. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
(a) if to Purchaser to it:
c/o North Castle Partners, L.L.C.
60 Arch Street
Greenwich, Connecticut 06830
Facsimile: (203) 618-1860
Telephone: (203) 862-3250
Attention: Peter J. Shabecoff
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Facsimile: (212) 909-6836
Telephone: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
(b) If to Stockholder to the address set forth on the signature page
hereto with a copy to:
Bourne Noll & Kenyon
382 Springfield Avenue
Summit, NJ 07902-0690
Facsimile: (908) 277-6808
Telephone: (908) 277-2200
Attention: John F. Kuntz, Esq.
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
Business Day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
Section 5.2. Severability. If any provision, including any phrase,
sentence, clause, section or subsection, of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering such provision in question invalid, inoperative or
D-5
<PAGE>
unenforceable in any other case or circumstance, or of rendering any other
provision herein contained invalid, inoperative, or unenforceable to any extent
whatsoever.
Section 5.3. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
Section 5.4. Assignment. Except in connection with a transfer of Shares
otherwise permitted hereunder, this Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent of
parties hereto, and any purported assignment or other transfer without such
consent shall be void and unenforceable; provided that Purchaser may assign
this Agreement or any of its rights and obligations hereunder to any of its
Affiliates or any other Person to whom it has validly assigned its rights under
the Merger Agreement.
Section 5.5. Amendment, Waivers, etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of
the provisions of this Agreement, nor the failure by any of the parties, on one
or more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of
any other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights and remedies herein
provided are cumulative and none is exclusive of any other, or of any rights or
remedies that any party may otherwise have at law or in equity.
Section 5.6. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto and
their respective heirs, successors and permitted assigns, except that the
parties hereto hereby agree that the Company is a third party beneficiary of
this Agreement.
Section 5.7. Specific Performance. The parties hereto agree that
irreparable harm would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 5.8. Governing Law. (a) EXCEPT TO THE EXTENT THE LAWS OF THE STATE
OF DELAWARE MANDATORILY APPLY, THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
RULES THEREOF TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY. EACH PARTY HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL
COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE COUNTY OF NEW YORK SOLELY
IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS
AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. EACH PARTY HEREBY WAIVES AND
AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE
INTERPRETATION AND ENFORCEMENT HEREOF, OR ANY SUCH DOCUMENT OR IN RESPECT OF
ANY SUCH TRANSACTION, THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT
OR IS NOT MAINTAINABLE IN SUCH COURTS OR THAT THE VENUE THEREOF MAY NOT BE
APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN
OR BY SUCH COURTS. EACH PARTY HEREBY CONSENTS TO AND GRANTS ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE COURT
D-6
<PAGE>
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY
SUCH DISPUTE AND AGREE THAT THE MAILING OF PROCESS OR OTHER PAPERS IN
CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION
5.1 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND
SUFFICIENT SERVICE THEREOF.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OR ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 5.8(b).
Section 5.9. Headings; Counterparts. The headings contained in this
Agreement are for purposes of convenience only and shall not affect the meaning
or interpretation of this Agreement. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
Section 5.10. Capacity. Purchaser hereby acknowledges that the Stockholder
is entering into this Agreement solely in his or its capacity as a record and
beneficial owner of the Shares, and nothing contained herein shall impose any
obligation on the Stockholder in his or its capacity as a director, officer or
employee of the Company or limit or restrict any actions taken or to be taken
by him or it in any such capacity.
Section 5.11. Definitions; Construction. For purposes of this Agreement:
(i) "beneficially own" or "beneficial ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same
holder, securities beneficially owned by a Person shall include securities
beneficially owned by all other Persons with whom such Person would
constitute a "group" as described in Section 13(d)(3) of the Exchange Act.
(ii) In the event of a stock dividend or distribution, or any change in
the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall be deemed to refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for
which any or all of the Shares may be changed or exchanged.
Section 5.12. Termination. Notwithstanding anything in this Agreement to
the contrary, the obligations of the Stockholder pursuant to this Agreement
shall terminate upon the earlier of (i) the termination of the Merger
Agreement, in accordance with its terms, for any reason and (ii) the
consummation of the Merger.
D-7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NCP-SBG, L.P.
By: NCP-SBG GP, L.LC.,
its General Partner
By: /s/ Peter J. Shabecoff
-----------------------------------
Name: Peter J. Shabecoff
Title: Executive Vice President
By:
------------------------------------
Name:
Title:
Address of Stockholder:
D-8
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
STOCKHOLDER IS THE: CLASS A COMMON STOCK CLASS B COMMON STOCK
- ---------------------------------------------------- ---------------------- ---------------------
<S> <C> <C>
Record and beneficial owner ........................
General partner of a limited partnership that is the
record owner of, and whose beneficiaries are the
beneficial owners of ..............................
Beneficial owner but not the record holder .........
</TABLE>
D-9
<PAGE>
PROXY SARATOGA BEVERAGE GROUP, INC. COMMON STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR SPECIAL MEETING OF STOCKHOLDERS
, 2000
The undersigned hereby constitutes and appoints ROBIN PREVER and
IRENE FONZI, and each of them, with full power of substitution, attorneys and
proxies to represent and to vote all of the shares of Class A common stock, par
value $.01 per share, of SARATOGA BEVERAGE GROUP, INC. that the undersigned
would be entitled to vote, with all powers the undersigned would possess if
personally present, at the Special Meeting of the Stockholders of SARATOGA
BEVERAGE GROUP, INC., to be held at , on ,2000 at
11:00 o'clock a.m., local time, and at any adjournment thereof, on all matters
coming before said meeting:
1. PROPOSAL TO APPROVE THE STOCK PURCHASE AGREEMENT AND AGREEMENT AND PLAN
OF MERGER, DATED AS OF JANUARY 5, 2000, BY AND AMONG SARATOGA BEVERAGE
GROUP, INC., NCP-SBG RECAPITALIZATION CORP. AND NCP-SBG, L.P., AND THE
RELATED TRANSACTIONS, INCLUDING THE RESULTING RIGHT TO RECEIVE FOR EACH
SHARE OF SARATOGA CLASS A COMMON STOCK, $6.00 IN CASH, WITHOUT INTEREST,
OTHER THAN CERTAIN SHARES OWNED BY THE CONTINUING STOCKHOLDERS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Should the undersigned by present and elect to vote at the Special Meeting
or at any adjournment or postponement thereof and after notification to the
Secretary of the Company at the Special Meeting of the stockholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSAL.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSAL LISTED ABOVE IF NO SPECIFICATION IS MADE. IF ANY
OTHER BUSINESS IS PRESENTED AT THE SPECIAL MEETING, INCLUDING MATTERS RELATING
TO THE CONDUCT OF THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGMENT. NO OTHER BUSINESS MAY PROPERLY COME BEFORE
THE SPECIAL MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
The undersigned acknowledges receipt of the accompanying Proxy Statement
dated , 2000
DATED: , 2000
-------------------------
--------------------------------------
Print name of Stockholder(s)
--------------------------------------
Signature of Stockholder(s)
(When signing as attorney, trustee, executor, administrator, guardian, corporate
officer, etc., please give full title. If more than one trustee, all should
sign. Joint owners must each sign.)
Please date and sign exactly as name appears on your stock certificate.
I plan [ ] I do not plan [ ] to attend the Special Meeting.
